Interview | Wednesday, 03 June 2009

The p.l.c. that grew in Q4

Plaza CEO Lionel Lapira says business in some retail outlets has gone down by as much as 30 per cent, but others are actually faring better. The recession flew over Plaza p.l.c.’s head as they were among the few companies witnessing a growth all throughout last year, including the dreaded Q4 2008. Not only have they distributed higher dividends to their shareholders, but in this time of uncertainty they decided to extend their rentable space the second time around within a matter of two years. Interview by DAVID DARMANIN

Back in the 1980s, Lionel Lapira’s career started in the leisure industry, working for the largest entertainment and leisure group on the island for a whole nine years. This was all when new cinemas, clubs and entertainment venues were mushrooming all along St George’s Street. Ironically, Lapira joined Plaza only a short while after its owners decided to shut down the cinemas located within the venue, to develop a new shopping centre occupying 7,000 square metres of floor space and recruit him on the management team.

When I decided to go for this move, my friends were telling me that I was stepping out from a goose laying golden eggs to get into a white elephant. But the success of Plaza proved to be a completely different story. I had started running the complex fifteen years ago with the late Julian Zammit, who at the time was managing director of Plaza. Also, the entire board of directors ensured to take this project to unprecedented levels in Malta. Plaza issued shares to the public at a time when shops in Malta were mostly family-run and passed from generation to generation. In retail, there was little or no marketing, branding or franchising those days. Plaza changed all this. Suffice to say that Bisazza Street itself nowadays has become like a small Oxford Street or Milan. There are also brands here which are not present in these huge shopping destinations.

Coming to Plaza from the leisure industry – specifically from a company most famous for its success in setting up cinemas, how did you find yourself entering into the management of premises in which a cinema complex had just shut down?
In the late 1980s, my previous employers were planning the construction of multiplexes, which they had eventually completed and these turned out to be a great success. The success enjoyed by this project is partly attributed to the location in which these cinemas were built – right in the heart of St Julians, an entertainment Mecca. But whereas cinemas worked well in this entertainment area, in a similar way, retail works well in Sliema. Why some cinemas succeed and others don’t is mostly a matter of location. But the closure of the cinemas in these premises was in part attributed to location, in part to the VCR boom and also because cinemas in Malta had come to a point where customers were not gaining a pleasurable experience out of them. Cinema theatres were generally dingy and did not provide an adequate enough service to meet customers’ demands and expectations.

How long has Plaza been in operation before it floated shares on the stock exchange? While it is known that financial services are very well received by the public nowadays, was it not strange for a private company to go public those days?
It happened after six years of operation, in 2000. I believe this was the right decision taken at the right time. I also personally think we could have issued bonds instead, but our financial advisors at the time thought otherwise. Issuing public shares for a commercial centre was unheard of then, and many thought of it as a white elephant. But we ended up being one of the most successful p.l.c.s in Malta. We were one of the few distributing higher dividends to our shareholders for the year 2008.

Was this attributed to a profitable first three quarters, or was there growth all the way through the year?
No, we still grew in Q4 of 2008. This is mainly due to an extension we made to the complex, by which we increased rentable area. Although the extension was ready by April 2008, we could have easily finished it by December 2007, but we had been asked to stop for the Christmas season in 2007, so works got delayed. This was not planned - it was a matter of goalposts changing. We would have done better had we been able to benefit from rents of the full year, but not withstanding the economic climate, we still performed well.

It is known that retail and leisure are very much intertwined. So much so that the Baystreet concept is built on allowing leisure services stimulate retail and vice-versa. How has this concept affected you?
Retail has always been a form of leisure. I would say that the merge of entertainment and retail proved successful in that particular complex because of the area it is located in. Because of where we are located, we compliment this by including restaurants within the premises. Besides, we must respect other stakeholders most notably neighbouring residents and other businesses.

You seem to have a completely different model to other shopping malls because of your location. Who are your competitors then?
I believe any retail outlet and office space put on the market is our competitor. When it comes to property management, each new player in Malta is not creating new demand – but eating away at an existing market. The local market is limited. This is why leisure and tourism play an important role in this business. That said, we believe that locals are the most important customers to us. Over the past 15 years, retail outlets have trebled in Malta and we have ensured our success by offering added value to our local customers.

Outlets in key shopping destinations, even traditional ones like Republic Street, seemed to have started subscribing to the model of uniting to compete with other shopping destinations. Instead of each taking a slice of their neighbour’s pie, they together invest resources in attracting more influx to the area. Is this also the case in Sliema?
Yes. The Sliema Business Community got together and formed an informal committee. It consists of a number of business representatives who share and seek common goals. We held informal meetings with government – particularly with George Pullicino last year. Thanks to these meeting, we have already seen noticeable improvements to the infrastructure of Sliema.

What is the committee planning to do on parking?
At the moment we are discussing with the relevant authorities the construction of an underground car park just opposite the newly refurbished St Anne Square. We are informed that this is physically possible, but we have to see whether this is doable in terms of funds or finding an interested investor on behalf of the authorities.

Why do people choose you and not any other outlet or destination to shop at? How are your customers loyal?
It is difficult answering that question, as customers tend to be unpredictable. It is virtually impossible to retain full loyalty towards a brand unless you run a football club. But we seek to meet the needs, wants and expectations of our customers – and this is why we succeeded over the past fifteen years. The Plaza is convenient, safe and very meticulous on its standards – which are comparable to international standards. As an example, our security offer personal assistance to customers in the event of loss of property or shop lifting, furthermore is staff member here is a trained first-aider.

You have a mix of restaurants, jewelers, fashion outlets and other shop types within the complex. Was the mix managed or did it occur naturally?
It is very difficult to design the mix of outlets within a shopping centre, particularly in a market of our nation’s size. In an ideal world, you will seek to attract a perfect mix. But in reality the mix changes as the years go by, more often than not dictated by market forces. We started off being the first centre in Malta managed according to international standards. At the time, we thought the demand was mainly for large shops – measuring 100 to 350 square metres. However, during the first few years of operation, the demand for smaller units increased and we had to adapt accordingly. As international brands started to invest in Malta, demand changed and nowadays we have turned a full circle to rent out larger units. Investors are now looking for larger spaces. It is really up to the market to determine what the mix will eventually look like.

You are planning a third extension to your property at a time when the world is going through a recession. Is this wise?
My opinion is that recessions offer opportunities for organisations to restructure, rethink their strategy, consolidate and decide on whether to invest in new opportunities or otherwise. What is really important is that the business community must not look at the negative aspects of recessions only. Our company has already generated enough demand to lease the majority of the rentable space of our next extension. Technically we are in a position to lease on plan if we like, but we prefer not to.

By how much do you reckon retail has gone down this year? Who is suffering most?
Some businesses experienced a 10 per cent downturn in sales, others claim the drop was closer to 20 per cent yet some state that it was as high as 30 per cent. However, other operators state that they are actually ahead. As always, the strong operators get stronger and the weak get weaker.

Back to your extension. How much space did the original Plaza building occupy? How much space do you rent out now? By how much are you extending? When will it be ready?
In 1993, Plaza leased out 7,700 square metres of rentable area and the company’s expansion was planed in three phases. The first expansion was completed before the company’s public listing in 2000 - when we increased our rentable floor area by 1,100 square metres. The second phase commenced in June 2007 and was completed in April 2008. This consisted of an eight-floor development covering 1,200 square metres of rentable area. We are now embarking on Phase Three of our expansion programme which will see the incorporation of four retail floors and five new office floors to the existing building, extending our rentable area by a further 1,600 square metres. It is being anticipated that the extension would be completed in time for Christmas 2010

What’s in store after that’s finished?
The company is looking at other projects in the immediate vicinity and in other areas whilst maintaining its position as Malta’s leading shopping and business destination.



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03 June 2009

Malta Today


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