Profile: ‘CEE’ what Pieter Prinsloo is up to …

You can also listen to this podcast on iono.fm here.

On the latest episode of The Property Pod, South Africa’s premier property investor podcast, we are talking offshore property.

We speak to the European regional CEO of a South African property counter that has expanded into the CEE market. The CEE, for those who don’t know, stands for Central and Eastern Europe.

Our guest is a familiar face in SA’s listed property sector who is now working offshore. On the podcast is Pieter Prinsloo, CEO of Redefine Europe – a subsidiary of JSE-listed Redefine Properties. As listeners and readers may know, Prinsloo is the former CEO of JSE-listed retail Reit Hyprop.

Redefine’s Amsterdam-headquartered unit invests in the logistics, and more recently, the self-storage property sectors in Poland – CEE’s largest economy.

Highlights of his interview appear below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts. 

Part of Redefine’s European Logistics Investment portfolio. Image: Supplied

Highlights

“Redefine Europe covers mostly ELI [European Logistics Investment]. That’s our logistics business located in Poland. But I’m also a director in EPP [previously Echo Polska Properties NV] and in some of their joint-venture companies since their delisting in March last year. So to that extent I am providing oversight and management support for their Dutch companies and for one of their joint-venture companies based in Luxembourg.”

Read/listen:
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“Redefine Europe itself has investments of approximately €325 million, or just over R6.5 billion. So its investment consists mainly in ELI, the logistics business – and that’s worth approximately €275 million. And then Redefine Europe also has an investment of around €50 million in one of EPP’s JV companies. So Redefine Europe, which is the Dutch entity, is 100% owned by Redefine Properties in South Africa.”

“And then in terms of our ELI, our logistics platform, Redefine Europe owns 45% together with Madison International Realty. That’s a real estate company from the US and they own 46.5%.”

“Then we’ve got Griffin, our Polish partners, and they own the remaining 5%.”

“Then in Poland we also have an arrangement with Panattoni, a developer that develops all our logistics buildings, and sometimes we do what we call build-to-suit projects together with them. That’s mainly single-tenanted assets on long-term leases. And in those they normally own 50% and ELI owns the other 50%.”

It will be five years in October since you left SA to head up Redefine Europe. How has the journey been for you in this role? I’m sure you don’t miss load shedding in South Africa.

“Definitely not – I’m not missing the load shedding, even though we did have very high energy costs here in the previous winter in Europe. But yes, for me personally it has been a very interesting and exciting journey, as you mentioned, for the past five years. I had to relocate my family here and also establish and set up Redefine Europe and all its relationships with the Polish teams.”

“Currently we are a small team based in Amsterdam, with very much a hands-on approach in the way we do things here.”

So we basically get directly involved from here in all the things we have to do. But we also have a very good relationship with some of our advisors, where we use Dutch advisors, and also have a very close working relationship with the people and the teams in Poland.”

“I travel on a very regular basis to Poland to meet with our asset managers and other stakeholders there, and also to go and see and visit the assets across Poland. So to that extent it has been quite exciting for me to be able to function here and to be part of this market, especially seeing what’s happened across Poland in the last five years.”

How has the Redefine business grown since you joined back in 2018 to now? 

“The logistics platform has been a very successful growth story for us, as you said, since 2018 when we started this venture. Initially we started [by] buying nine existing logistics buildings with a total size of approximately 300 000 square metres. And then over the years we’ve [undertaken] new developments. And if we look at where we are now, including the current developments we have, the size of the portfolio has grown to just over one million square metres.”

“The portfolio [ELI] now consists of around 34 logistics buildings spread over 10 logistic hubs throughout Poland.”

“Most of these buildings, about 50%, have only been developed in the past two years since we had Covid. So we’ve grown this portfolio over three times, and this despite selling some of the assets along the way. We’ve sold six of our original buildings plus three developments – in total approximately 360 000 square metres – over the years at very profitable prices. And then we’ve used these proceeds and reinvested in new developments.”

Under construction 

“So currently where we are, apart from the standing operational portfolio that’s performing quite well, we also have approximately 90 000 square metres currently under construction, all of which is 100% pre-let, and we are aiming to complete that in this calendar year.”

“And then we are also looking to do another development of around 35 000 square metres and that one is also 100% pre-let.”

“So if you look at the market size today, the Polish logistics market is approximately 30 million square metres in size. We now have more or less a 3.5% market share of logistics in Poland and about 80% of our assets are located in the prime nodes, as you mentioned before – in areas like Warsaw, Krakow and the Upper Silesia region, which is a large industrial region in the southwest of Poland …”

What’s behind the logistics property demand in Poland?

“In line with what happened globally during and post Covid, there was a big push for logistics assets for companies to increase their inventory, to look at their supply chains, and always make sure that they’ve enough stock in time and available to customers.”

“Also, during the course of last year, again post Covid, consumer spending picked up quite a bit, and there was a demand for more products.”

“This in part has driven quite a bit of the demand, especially in Poland for companies looking to increase their stock levels.

“Another big factor there is what they called ‘nearshoring’. That’s to do with shortening their supply chain. Products are manufactured or assembled [closer to the point of] delivery to customers. There we’ve seen quite a number of companies relocating closer to their customer base in Europe.”

“With Poland’s central location there are huge markets surrounding them in terms of Germany and Scandinavian countries to the north.”

“So a lot of these companies have set up base in Poland in order to shorten their supply chains to produce and distribute their goods from Poland because, when you compare [it] to Western Europe, Poland has still got an advantage in terms of pricing, cost of development and labour cost. All of that is giving them a kind of competitive edge when you look at Western Europe.”

“And together with the growing infrastructure in Poland – they are still building extensive new road systems – all of this contributes to a strong logistics market …”

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Redefine also announced its expansion in Poland, beyond logistics and retail property, to the self-storage market earlier this year. The group partnered again with Griffin. Are you involved with this new venture in any way, and if so, what are the prospects?

“Yes. I’m pretty much involved in setting up the self-storage platform. That’s something that we started towards the end of last year and it is becoming more and more a part of our focus in terms of looking at diversification and growth.”

“We see the self-storage business as another growth opportunity as the Polish self-storage market is still in its infancy and very fragmented, with significantly fewer facilities compared to other European countries.”

“Also there is no major pan-European operator currently in Poland. So we see this as an opportunity to move early into this new sector and see if we can establish and set up a platform.”

“To that extent Redefine owns 93% of this platform, and we are working together with Griffin as well, which owns 7%.”

“So currently we are in the process of acquiring an existing company which owns just over 20 000 square metres of self-storage space and facilities, and we’re looking to use this company to form a base or a core from which we will grow the platform and [undertake] new developments as they already have a management team in place and already have operating systems working.

“We will grow as this platform mainly through new developments as there are not many self-storage facilities currently available in Poland. We have already identified a number of new developments which we are working on and trying to progress further …”

Read: Capital flight: SA property companies invest billions more offshore

Besides the self-storage diversification, is Redefine Europe looking at any other markets beyond Poland in the CEE region perhaps, or maybe even in Western Europe?

“No, as I said earlier, we at the moment are focusing only on Poland. It’s a large country, it has a very sizeable economy, it still has very good investment fundamentals, and I think compared to Western Europe there is still a price and cost advantage.”

“We still see enough opportunity in Poland to keep us busy managing and growing our investments. So for now the focus is still on Poland.”

Listen to the full episode here.

You can also listen to previous episodes of The Property Pod here.