2020 was rather a unique year for most companies. How would you summarise the year for DL and the first few months of 2021?
2020 was a demanding period for DL Invest Group, not only because of the pandemic, but also due to our dynamic growth based on the development strategy that is being consistently implemented for 2019–2024. Our business plan involves expanding our internal structures and the competences of our employees. Particular emphasis has been placed on expanding our land bank, which comprises 160 ha designated for warehouse development. Together with the current economic situation, this has accelerated our growth on the logistics market. At the same time, having noted significant demand for office space, we have been able to take advantage of this to substantially expand our operations in the office segment, namely mixed-use office and service complexes, as well as in retail park sector. We carefully analyse each project and then develop through our internal structures based on the expertise of more than 139 specialists with unique experience and competences from the planning and implementation stages to the leasing and property management of projects. In addition to this, when planning our investments, we make sure that it’s possible to expand them: as our clients grow in a given location, we can then enlarge the project with new space, allowing our tenants uninterrupted growth. Our operational competences at the moment are DL Invest Group’s greatest asset, which is appreciated by key players on the current market, as has been confirmed by the fact that DHL Supply Chain has chosen us as a partner to manage the JV DL&DHL joint venture.
Your excellent results in 2020 didn’t just happen by chance. Tell us more about the company’s development over the last few years.
Recent years have been a period of hard organic work in the areas of structural development and operational competences. The value of these, for example, during a pandemic, is extremely important, such as when it comes to commercialisation or re-commercialisation activities to ensure that it’s possible to maintain over 97% of the level of rent from your property portfolio. The joint venture with DHL means a lot to us. This is one of the largest logistics companies in the world. The cooperation on JV DL&DHL’s project in Psary is another important step in the growth of DL Invest Group. We are preparing the first phase of this project, which will have more than 140,000 sqm of leasable space. One of the occupants of DL Invest Park Psary is to be Amazon. We will soon be able to reveal the start date of the construction of the next phase. In the warehouse market, in addition to signing the contract with DHL Supply Chain we have completed BTS projects for, among others, Hutchinson, GTX Hanex Plastic and InPost. In addition to this, we have also secured contracts for another seven warehouse projects for this year. In Teresin near Warsaw, where we can develop more than 100,000 sqm of leasable space, we are currently building the central warehouse for Stokrotka, one of the largest retail chains on the Polish market.
In mid-2020, we completed the DL Piano office building in Katowice, started the construction of the DL Prime office complex in Gliwice, and continued with the construction of another DL Tower office building in Katowice – altogether more than 50,000 sqm of usable space in total. Last year, we also continued with the redevelopment and re-commercialisation of a shopping centre purchased in 2019, in Zgorzelec, close to the Polish-German border.
Despite the unfavourable circumstances we find ourselves in due to the pandemic, we have managed to implement all our business plans according to our schedule, and the leasing levels in our existing buildings exceeds 97%, which provides further confirmation of DL Invest Group’s operational competence.
The warehouse and logistics sector has been undergoing a boom over the last few years, which has been given a further boost by Covid-19. Is this sector your main focus now?
The warehouse sector is very important to us. We have a land bank of more than 160 ha intended for warehousing. Of course, we are planning further development in each of the three commercial real estate sectors we are active in, in order to maintain revenue diversification, but the warehouse sector will be the main one for the next four years. Covid has certainly influenced the way we operate, but it hasn’t forced us to change the plans we are consistently implementing, which involve, in addition to the planned development of new office buildings by 2024, delivering more than 400,000 sqm of modern warehouse space to the market on the land bank was already have. The current value of DL Invest Group’s assets comes to more than EUR 300 million. Our plan is that by 2024 we will have increased this to at least over EUR 500 million.
In the office sector, we have identified the potential of the BPO / SSC segments. Poland is an important BPO centre, and the current changes in global markets mean that some companies that have located their organisational support offices in, for example, Asian countries, are considering returning to Europe in order to secure the supply chain for such services. For this reason, regional cities in developing markets – in particular in conurbations such as Silesia, which has a population of over four million – guarantee a high availability of employees while maintaining relatively low service centre operating costs compared to so-called developed markets. That’s why we are looking closely for new opportunities, mainly in regional cities, where we see great potential for the development of service centres due to the availability of employees and the significantly lower operating costs for companies than in the largest European or Polish conurbations.
One consequence of the changes to the e-commerce market and in consumer behaviour, which has been driven to a large extent by the pandemic, has been the growing popularity of retail parks. That’s why we intend to further expand our portfolio of smaller retail formats that allow retail chains to be closer to their customers. We are convinced that this is the right time to engage in this area, as has been confirmed by the performance of our twelve facilities.
The warehouse market is rather different from those for other kinds of properties, and customers’ demands and requirements can sometimes be very complex. What competitive advantages does DL Invest have over its competition, and what additional value do you offer your customers?
The key to the development of DL Invest Group lies in how we use our operational potential and our access to capital. We are preparing our first corporate bond issue, which will be addressed to qualified investors. We want to diversify the group’s financing structure and increase our involvement in a larger number of projects and acquisitions. At the same time, we want to prepare for our IPO in 2024/2025.
We have observed a great deal of interest in warehouse space from the e-commerce and automotive sectors. In this respect, Poland is the European leader in terms of warehousing. We are also seeing changes in supply chains and an increase in the importance of smaller ‘last-mile’ warehouses located in urban centres offering SBU (small business unit) space.
Last year’s successful agreement with DHL has certainly generated a lot of attention. Should we expect more such built-to-suit projects from you in the future?
In the warehouse sector, we plan to bring into use more than 400,000 sqm of modern warehouse space over the next 2–3 years. We are also in advanced talks with potential partners and investors, including international companies, for the implementation of more warehouse projects. We want to develop city (‘last-mile’) BTS warehouses – and currently have six such facilities fully leased, the completion of which is planned for the turn of Q1 / Q2 2021, while another seven are being prepared for 2021 / 2022.
Let’s end with some goals and predictions – what do you expect to achieve in 2021?
In the next few years, we want to focus on our expansion on the Polish market, to provide, among other things, international investors with a platform for investing capital in profitable Polish assets. Our plan is to seize the opportunities that arise, both in terms of acquiring existing facilities and building new projects on our land bank. Our previous activities and projects carried out for international leaders, such as DHL Supply Chain, InPost or Hutchinson, have confirmed our reliability and flexibility.
We have considered developing projects in neighbouring countries and haven’t ruled out that in the medium or longer term we will embark upon our international expansion.