Hili Properties plc is aiming to increase its property portfolio from €66 million to €120 million, but chairman Margrith Lütschg-Emmenegger sees no reason why this could not grow even further by 2025.
“We have already identified €25 million worth of overseas property that we want to purchase in the near future. But if we can raise the funds, then there is no reason why the sky should not be the limit,” she said enthusiastically.
“Obviously the markets must be right and it will become more difficult with time to find the right properties. And of course, it depends on raising funds but we have innovative ideas on how to do that.”
Hili Properties is one of the six divisions within Hili Ventures, managing a property portfolio that has doubled in the last year alone. It started off quite logically. The group bought the office block in Floriana which housed the oldest company in the group, Carmelo Caruana Company Ltd. It also realised the added value that came from owning some of the properties used by McDonald’s across its licensee area.
“There were cases where it made sense to acquire, others where it made more sense to lease,” managing director Karl Naudi said.
However, it soon became obvious that the business model worked for third party tenants and Hili Properties set about acquiring buildings which were already fully occupied and managing them, a low-risk model which provides a steady cash flow. The company acquired nine retail complexes in Latvia earlier this year, adding 18,500 sq.m. to its portfolio, and also bought the Tower Business Centre in Swatar, which has a 4,600 sq.m. footprint and is also occupied by tenants with long-term contracts. Apart from the Hili Ventures headquarters in Marsa, the property division also owns the De Tigne complex in Sliema which houses McDonald’s plus 520 sq.m. of office space, and also a fullyoccupied office block in Psaila Street, Sta Venera.
The tenants in the portfolio of properties is now fairly equally split between Hili Ventures’ operations and third parties.
“There are always going to be properties up for sale, possibly because the owners want cash flow, perhaps because they want it to invest in something bigger or to liquidate their assets. And the yields in some countries are much better than others, especially when you buy at the right time of the economic cycle,” he said.
Going forward, Hili Properties will move tentatively outside the three pillars of offices, retail complexes and food service outlets.
“We are also looking at logistics and warehousing parks overseas.”
It is also spreading its risk by looking at different geographical markets, expanding beyond Malta and the Baltics.
Hili Ventures employs 3,500 people in 10 countries, with a strong focus on Eastern Europe so it is natural to explore these areas rather than places where we are not active
“Hili Ventures employs 3,500 people in 10 countries, with a strong focus on Eastern Europe so it is natural to explore these areas rather than places where we are not active,” Mr Naudi said.
“These are countries and cultures that we know and understand.”
Hili Properties is very clear about its business model: it is neither a speculator not a developer.
“We are property owners and managers,” Ms Lütschg-Emmenegger said. “We want to add value to buildings by improving the maintenance, the environmental aspects like lighting and air conditioning.
Tower Business Centre in Swatar.“We can also add value by expanding, as many of the tenants are growing and many of the sites we own have underdeveloped potential.”
Hili Properties is run from the Malta head offices, with a central management team looking after strategy and acquisition. It then has country managers who either engage full-timers or outsource maintenance contracts.
“The model is not only based on retention of tenants but also on acquiring new ones and we firmly believe that tenants look for a good property management company. It is critical that the needs of the tenants are seen to immediately,” Mr Naudi said.
Retail centre in Latvia.“Of course, they also consider other aspects like location, car parking, the quality of the property and its environmental footprint, and finally the logistics for access and connectivity.”
The tenants can be an attraction in themselves, drawing in new tenants just as surely as the building itself. They also provide fertile ground for Hili Properties’ future acquisitions. For example, the acquisition in Latvia brought it into contact with an international supermarket chain which uses seven of its locations – but which has 235 outlets in the Baltics.
The same applies to the Swatar building, which hosts well-established global brands.
One other change that it might consider would be to manage properties that it does not own, leveraging its experience and expertise.
“It is not part of our core model but it is something that we are considering, certainly in the Baltics,” Mr Naudi said.
Ms Lütschg-Emmenegger is one of the most passionate advocates for Malta as a centre to do business. In her role at Hili Properties, she still has that evangelical zeal, seeing it as not only something that will benefit Hili Ventures but also the island.
“We want to create something sustainable, with well-managed risks that will bring value to the shareholders, staff, and also tenants. But it will also help as it puts the name of Malta out there along with that of Hili Ventures.”
Hili Properties plc yesterday launched a €37 million bond issue, maturing in 2025. The unsecured bonds, at a nominal value of €100 per bond issued at par, bear an annual interest rate of 4.5 per cent. Proceeds from the bond issue will be directed to refinancing property acquisitions. The bond issue is guaranteed by Harbour (APM) Investments Ltd and Hili Estates Ltd.