Interview with Richard Wilkinson, CFO
GRID: Can you describe some of your responsibilities and what your targets are for the near future?
Through my experience at Erste I got to know CTP well from the outside, and it gave me a solid overview and good understanding of the needs inherent to growth and success for a company such as CTP.
CTP, as a market leader, will always provide above-standard service to its clients. Providing more than just commercial development, CTP is committed to full service, and this is important to me. It was easy decision to join CTP, as I have great admiration for Remon and what he has built here.
I joined the company with a desire to help achieve the next step in its growth phase: getting to a 10 million m² portfolio. To do that, one of my first responsibilities will be to implement new IT and accountancy systems which will help enable smooth growth. Second, I plan on improving—both broadening and deepening—the funding base required to finance this growth.
From my experience, the relationship between a bank and its clients is based on trust in the client’s successful future as reflected by their finan-cial key performance indicators. This relationship is not solely concerned with assessing risk and associated loan conditions. There is also an advisory role: sharing market know-how and expertise.
As Group CFO, my job is to support the continued growth and development of CTP and help us move towards our targets at full speed. This means managing relationships with our banking partners, so that we can fund our targeted growth of 1 million m² per year, and support the growth of our customers. Our LTV (loan to value rate) is 49% across an impressive 95 properties and with an increase in size also comes an increase in complexity. As the company grows in size and strength across or target markets, CTP will need to adapt its platform even better to local conditions. Drawing on our own breadth of experience from different countries and department in order to share best practices.
What are some of the trends you see impacting the countries where we operate?
If we look at CEE, the Czech Republic and Slovakia are favoured spots for production and warehousing for the adjacent developed economies of Germany and Austria. Aside from their proximity to these countries, the Czechs also boast fantastic technical schools and a solid infrastructure of roads and motorways. Hungary and Romania are more and more focused on the service economy. Hungary is performing over the CEE average. And Romania, a massive country, is transitioning from agriculture and improving its motorways. While the Czech Republic may have a relatively com-plicated legal and permitting process, currently Romania is more open to new projects and investment, and this is reflected in an unemployement rate decrease YoY, as well as GDP YoY growth expected to be better in com-parison with other CEE countries. Needless to say, this will have a positive reflection in the real estate business, and on CTP.
The unemployment rate in CEE continues to decrease, so people are more willing to spend money. Growth in the region, as a whole, was clocked at 4.4% annually in the first quarter 2018. Relative to the rest of Europe, CEE continues to offer a lower tax rate, with solid regulations and highly motivated and educated populations. On-line retailing is on the increase and this sector is seeing a comensorate increase in operational investment. Many international retailers are focusing on expanding in this region with both local production and logistics. Which for us means ware-houses and significant growth potential for both us and our customers.
Looking forward, what do you see as the main challenges facing CTP?
Well, our goal is to grow our portfolio to 10 million m². And with this growth the challenge I see is in maintaining our entrepreneurial spirit while at the same time avoiding the complexity that slows other companies down. Educated and experienced people using the right systems and tools are two crucial pillars of success. In short, my focus will be on these two: people and numbers. We need to empower our people and let them exercise their point of view. We want to promote, nurture and get the best from our people and let them give it back to the company. We want to ensure our processes and structures allow them to both take a certain amount risk and to make better decisions. We recognize the importance of learning from successes and mistakes. As well, we need to insure we are using the best new technology to improve the energy efficiency of our buildings and save our client’s money.
What do you see outside of the real estate world that might affect CTP, both positively and negatively?
Because the vast majority of our clients operate energy intensive industries—manufacturing, logistics, etc.—they are very sensitive to operational costs. CTP needs to respond to this and continually improve our buildings to reduce the total cost of occupation. Not just buildings, but our parks need to be designed and built in a manner which helps reduce their overall energy footprint. This will be a continuing challenge going forward.
Some have spoken about the expected higher interest rate environ-ment impacting our business. While all businesses currently benefit from the recent historically low rates, through conservative hedging opera-tions, we try to achieve fixed rates on approximately 80% of our portfolio.