11 - 17 May 2000

Sharing in the success of the Plaza

Anthony Manduca spoke to JOSEPH GASAN, the chairman of the executive committee of Plaza Centres plc, about the Plaza's decision to be floated on the Malta Stock Exchange

How would you describe the performance of the Plaza since it was set up in 1993?

We are very pleased with the performance of the company which was the result of a number of shareholders of what used to be the Plaza cinema getting together to set up the Plaza Commercial Centre.

The Plaza Cinema closed down in 1984 and we spent a number of years considering what to do with the site. Since we had an excellent site in the middle of Sliema's shopping centre we came up with the concept of creating a shopping mall which did not exist in Malta.

Just before we were going to start, Albert Mizzi and Alfred Calleja purchased the Majestic site and were going to do the same thing on a smaller scale. We got together, linked the two projects and built a bigger shopping centre. Initially a lot of people thought we were mad to come up with this idea, and this includes people who we spoke to about feasibility studies and funding.

We were told that people in Malta would not go into a shopping centre and preferred to go to the little shop next door. But we believed that if you have a well-run shopping centre in a central location, then it would be a success.

The Plaza consists of a shopping centre and offices. The performance of the shopping centre was excellent from the beginning. The offices took a bit of time to take off and in fact we were not pleased with the way we initially rented them out. In the last couple of years this has changed completely and we have now rented out all our offices.

What was the initial problem with the offices? Was it the pricing?

It was a question of demand. It took time for people to accept to rent an office in a managed building which entails paying common area charges. The Sliema car park was an added bonus to the Plaza as a whole.

Furthermore, we have been successful in renting out offices to various offshore-type operations which are relatively new for Malta.

I can say that the demand for both offices and shops has been so good that about four years ago we started to worry about how to increase the site. We purchased a house on Tower Road which fitted into the Plaza very well and linked it to all floors. That new area has already been leased out. In fact 95 per cent of the entire Plaza area has been leased out.

As far as the shareholders are concerned, we are very pleased with the performance of the Plaza. I would say that those who have rented out shops or offices are happy tenants. The number of people who come into the Plaza, which average two million annually, increases every year and we are very pleased with that.

Why was a decision taken to float the Plaza on the Malta Stock Exchange?

We believe that as developers of this site, we have basically done our job. We have developed the Plaza well, we manage it well, we have a good management team, we developed the second phase of complex, and now we want to consolidate the company situation and look to the future. When we look to the future, we will be looking at other projects of a similar nature, taking advantage of our experience at the Plaza, which will have shopping at its core and could include entertainment-type operations.

We wanted to go public because many of us believe that when a company can go public, like this company, then it should do just that. We have a good track record, it is showing a good return, we have agreements going forward another 16 years and clear rent increments every year.

By going public we will achieve two things. First of all we are going to pay off the bank and we complete this project. We can then look to other investments with this project as security.

We are also having some changes in shareholding: HSBC Bank for example, which holds just over eight per cent of the equity, is selling out because it is not their policy to invest in such operations.Two of the larger shareholders, CAM and the Gasan Group, are selling some of their shares to reduce their shareholding to come in line with the other shareholders, but will still maintain a substantial investment in the company.

So we are going public not because we need the money. We shall get rid of our overdraft, the job has been done, we are profitable and can pay dividends; so let's go public. When this happens we will be looking at a number of other projects.

When you speak about other projects, what exactly do you have in mind?

We are interested in managing, developing and/or owning similar centres. These may not necessarily consist of only shops; these may include entertainment centres.

This is the first time that a company involved in the retail business in Malta has gone public. What type of response are you expecting?

We are not only the first retail-type establishment to go public but we are also the first property-based business to offer shares to the public. We believe the response will be very good because there is a lot of money around but not enough investment opportunities.

We believe the offer is an attractive one. This is not a very big issue and we are not even going to sell the shares through the banks as they would probably be sold in a few days. Instead we will sell the shares through stockbrokers.

28.2 per cent of the company's shares are to be sold. How did you arrive at this figure?

First of all in order to list you need to float not less than 20 per cent. Second of all we did not go beyond the 28.2 per cent because we do not need the money. We are raising enough money to pay off the bank and to pay good dividends to all shareholders.

What are the future plans for the Plaza? How do you intend to grow?

Our plans for the Plaza are to keep working closely with our tenants and to keep the place very modern and attractive. The success of the Plaza is the success of our tenants and we have a very good relationship with them. As far as the company as such, we intend to look at good sites to develop similar concepts.

We will have an open mind. There will be some projects where we will develop the whole operation ourselves from scratch but we will even consider managing a project for somebody. Of course the site chosen is very important.

Have you ever been told that shopping malls like the Plaza threaten the survival of small shops?

No, not at all. We cannot stop progress in this country. I believe shopping centres are here to stay but I also believe that the small shops will also survive. Perhaps there are too many of these shops. In fact we have a number of tenants at the Plaza who also have a shop on the High Street.

Is the future of retailing to be found in complexes such as the Plaza?

I believe that shopping complexes will continue to grow because they have many attractions but I also believe that there is room for both High Street shops and shopping malls. I also think that in the future, shopping centres will focus more attention on entertainment. These will have to include things like restaurants, bars, cinemas, bowling alleys and games.

Do you think the Plaza going public will encourage other companies to do the same?

My personal opinion is that I hope it does. I have often been asked why some of my companies of the Gasan Group have not gone public. I encourage companies that I am involved in to go public at the right time.

You can't go public when the future is unclear or when a company is in its infancy. I think companies like the Plaza have done their job, have achieved success and can predict a future and therefore a listing makes sense.