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Volume 15 | Issue 9 | September 2009
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Riding the green wave Industrial developers
discover sustainability
4 September 2009 Editorial
Year 3 beginsIf you go by the stock markets around the world, the situation is certainly looking better than it did a few months ago. Of course, those who use stock markets to judge the economy tend to drive head-on into freight trains. Still, it’s started to become just a bit unfashionable to continue moan-ing in public about all the pain we yet have to go through. Two years of sailing into the teeth of an economic perfect storm has a tendency to leave people both gun-shy and at the same time, hungry for good news.
Think back 12 months, when there was considerable dread about what was coming, but when few had any inkling of the chaos that was about to unfold. Hours before CEDEM opened last Septem-ber, a major earthquake rocked the global economy when Lehman Brothers collapsed and AIG was bailed out. Bedlam ensued and it took months before the fear of a major economic collapse worked itself out of the system.
A great deal of deleveraging has taken place in the past year, but if you’re paying attention, it’s clear that a good deal more is yet to come. The impact of rising unemployment along with the loss of wealth (thanks to stock market losses and home value declines) is filtering its way through the system. In CEE, weak retail developments are being punished, poor residential schemes are being given a miss by buyers and developers in overbuilt office markets are scrambling to sign up tenants on desperate terms.
What’s changed from a year ago is that there’s now a flip side to all the bad news. We are arguably in the first phase of a recovery. It’s a fragile recovery at best, but after two years of misery, why not let some cheer into the room by acknowledging that technically, the German and French economies actually pulled out of recession over the summer? In the UK, capital values on property appear to have stabilized, and there are even reports of a slight rise. It’s not surprising, given the impressive speed with which that highly liquid and transparent market collapsed.
In private, the feeling one gets is that we’re in for a good deal more of the same run of bad news in this, the third year of the crisis. Of course, whenever a general consensus starts to take hold, it tends to be suddenly proved completely wrong. Predicting which way the economy is going to go turns out to be just as random as picking the right stock. Someone’s bound to get it right, but you never know who it’s going to be.
robert mcLeanEditor In Chief
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CONTENTS 7September 2009CIJ Journal
4 Regionaleditorial, 4 | real talk, 8 | Company News, 10 | euroNews, 12 | Industrial: riding the green wave, 13 | events, 55 | expert article: eC Harris, 56 | DbH pictorial, 57 | ten Years Ago, 58 | Appointments, 59 | Social Interview: Karel Doktor, Wilson & partners, 60 | Indicators, 62
16 CzeCh RepubliCDevelopers hope mortgage assistance will spur sales, 16 | Office deals break the investment ice, 17 | Football to benefit from retail investment, 18 | Jurys Inns scales back Cee expansion, 19 | Immorent reveals two new office schemes, 21 | Ikea to replace oldest Czech store, 23 | City Guide: pilsen, 24
26 hungaRyK3: A river ran under it, 26 | Q&A: mike Smithing, Colliers International, 27 | Club Aliga planned for balaton, 29 | Goodman delivers 27,000 sqm warehouse, 30 | Industrial vacancy rates skyrocket, 30 | retail space at Orco’s pDS now fully let, 31 | Auchan makes use of solar power, 32 | tesco warehouse deal completed, 33 | Zala park strengthens regional retail zone, 35 | IVG adds asset management, 35
36 polandAre auctions the answer to slow residential sales?, 36 | Slight improvement seen in Cre financing, 38 | Dom Development: profits down, confidence up, 39 | Can pacific residence be saved?, 40 | residential deliveries up, new projects down, 42 | polnord chosen by Gdańsk for island development, 42 | Q&A: marek Koziarek, bank pekao SA, 43 | Neinver inks deal with railways in Katowice, 44 | JLL rolls out LeeD advisory services, 44 | Hotel sector continues its slide, 45
46 Romaniamixed reviews for gov’t housing stimulus, 46 | Q&A: bogdan Georgescu, Colliers International, 47 | Sun plaza to come up in October, 48 | Cathedral plaza gets go-ahead from court, 49 | Q&A: Constantin Arsene, berthelot Hotel, 51 | palace Cotroceni firm on rents, 51
52 Slovakiaresidential: the pricing problem, 52 | Industrial construction slumping, 53 | Q&A: Victoria miller, Cb richard ellis, 54
CEO ...........................ROBERT FLETCHER • [email protected]
SALES dirECtOr Cr & SK ........................................................................
Ing. ZUZANA VODRÁŽKOVÁ • [email protected]
EditOr iN CHiEF .............................................................................................
ROBERT MCLEAN • [email protected]
CZECH EditOr ..NINA FIBIGEROVÁ • [email protected]
POLANd EditOr ........ WOjCIECH KOŚĆ • [email protected]
HuNgAry EditOr ..........................................................................................
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CONtributOrS ................................................. AMELIA TURP-BALAZS,MARcIn ŚMIETAnA, PARkER SnydER
EVENtS & EditOriAL COOrdiNAtOr ........... dUšAn kRnjAjATel: (+420) 222 220 800 • [email protected]
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EVENtS COOrdiNAtOr PL .............................MARTA nIEZgodATel: (+48) 22 848 60 21 • [email protected]
SALES & EVENtS MANAgEr rO...........................AdELA BALAnTel: (+40) 743 794 364 • [email protected]
OFFiCE MANAgEr CZ .............................................. PETRA šUSTováTel: (+420) 224 225 601 • [email protected]
OFFiCE AdMiNiStrAtiON PL ...............AnnA MIEcZkowSkATel: (+48) 22 606 39 73 • [email protected]
OFFiCE AdMiNiStrAtiON Hu .......................... ESZTER oSváThTel: (+36) 1 373 0429 • [email protected]
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8 reGIONAL Real Talk
WarsaW offiCe vaCanCies up; lease volumes halved
The Warsaw Research Forum, an analytical group set up by the city’s leading property agencies, has published a report on the capital’s office market in the first half of the year. According to the report the market is in limbo, with take-up of just 108,000 sqm, about 50 percent less than in the first half of 2008. The fact that the biggest lease transaction was only for 4,300 sqm is also telling. The current average vacancy rate for the city stands at 5.7 percent.The crisis has even hit the central business district, where vacancy figures had been hovering at next to nothing for quite some time before shooting up to 7.2 percent this year. The empty space isn’t due just to developers flooding the market with new projects, adding excess space that struggling companies are unwilling to lease. According to the forum, there is as much as 50,000 sqm available to be sublet at the moment. The increased supply coupled with reduced demand is driving prices down, with rents averaging €14 to €17 outside of the CBD and €23 to €25 in the CBD itself, an area that only recently was more used to prices in the range of €30 to €35.Somewhat desperate now, agents and developers are comforting them-selves with the standard phrase that the market’s longer run perspectives are positive. That’s fine, of course, but it’s the here and now that’s concerning most people.
retail developers leaving poland's seCondarY markets
For the last few years, the opportunities of the untapped secondary markets have been the guiding light for retail developers. Retail developments flooded not just secondary cities, but in many cases even the very much tertiary loca-tions, often fulfilling any definition of over-development.This is now coming to an end, at least according to Jones Lang LaSalle. The agency says developers are heading back toward the major Polish agglomera-tions, cities with greater spending power. Warsaw is one such mark, where large residential projects have been springing up in peripheral locations, often with no nearby retail whatsoever. According to JLL, the market will also see more mergers and acquisitions, as well as the expansion of retailers targeting lower and middle segments of the market. Low capital-intensive concepts – like uptown retail parks – are likely to be the most dynamic segment of retail development for the next while.“We expect the overall availability of shopping center space to grow as a result of structural changes on the market. This is likely to put downward pressure on rents over the next 12 to 18 months,” says Anna Bartoszewicz-Wnuk, head of research at JLL.
Centrum haffnera opens amidst ControversY
Sopot, Poland’s premier seaside destination and part of the Tri-City agglom-eration, has gained a new project.Centrum Haffnera comprises a five-star Sheraton, a conference center for more than 600 people, a multi-screen cinema, and a wellness center, as well as a winery, bar and restaurant. The scheme took three years to complete. The project’s special purpose vehicle was set up by the state-owned PKO Bank Polski, which had a 49.5 percent stake, the town of Sopot, with its 32 percent stake in the form of a land contribution, and the project’s developer NDI, which took 18 percent.It’s estimated Centrum Haffnera will add about €250,000 in annual real es-tate tax to the town’s budget. The success of the €100m project is marred, however, by an ongoing investigation by the prosecution office of Gdańsk. The issue of contention? Some of Sopot’s opposition councilors have ac-cused the city of undervaluing the land it brought into the SPV. Due to its popularity and alleged air of prestige, Sopot land and residential prices are among the highest in Poland.
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highlights
...the market is in limboWarsaW offiCe vaCanCies up | 5
...the availability of shopping center space will growretail developers leave poland‘s seCondarY markets | 16
...councilors have accused the city of undervaluing the landCentrum haffnera opens amidst ControversY | 14
tHe rOAD tO reCOVerY?
Source: dshort.com
dend for the year. It also admitted in June that it had breached financial covenants at its Moldova Mall and that it would be looking to offload certain assets to meet operational costs and loan payments.
ikea expansion planned in hradeC králové
Furniture retailer Ikea is considering further expansion in the Czech Repub-lic, bringing its fourth outlet to Hradec Králové in Eastern Bohemia.“We want to be on the outskirts of the city, in the direction of Pardubice. We are looking for a location that would be able to attract clients from both cities, as separately they do not offer [a] big enough catchment [area],” says Pavel Hradec, managing director of Inter Ikea Centre Group, a development arm of Ikea. “Also, Ikea shopping centers need a large area and good accessibility by car.”The combination of shopping mall, retail park and Ikea store is expected to open as early as 2012. Inter Ikea has not yet bought the land, and Hradec says the company is in negotiations with a local developer to do the land assembly. Josef Malíř, Hradec Králové’s deputy mayor for city planning, says the city welcomes the idea.“The whole region drives to Ikea in Černý Most in Prague. The shopping center is jammed, the Ikea store is too small and there is nowhere to expand in Černý Most,” he says. He says the new Ikea could potentially be located at the crossing of three important traffic arteries – the future R35, the planned road connecting Hradec Králové and Pardubice and the D11 highway near Bohdaneč.
german developer sues CzeCh state
ECE Projektmanagement has filed arbitration against the Czech state for €70m, as compensation for the failure of its shopping center, Galerie Liberec.The somewhat surprising amount is based on an analysis by Deloitte and includes compensation for alleged damages both direct and indirect, lost profit and damage to the company’s reputation, according to chief ex-ecutive Josef Tobek. The ministry has already called a tender to choose who will represent the state during conciliation proceedings and arbitration. Legal proceedings are expected to cost the state CZK 170m (€6.7m). Radek Šnábl, director of the law department at the Ministry of Finance, told Czech TV that the suit could take four to five years, which in his view justifies the stiff legal fee.Tobek insists that in the fiercely competitive environment of the Liberec city center, where four shopping malls were to be built at the same time in a city of just 100,000, city construction officials allegedly acted very slowly during the planning process. Multi Development, responsible for Forum Liberec across the street, appealed ECE’s original zoning permit, leading to the local development ministry blocking the ECE project.“We were 75 percent preleased by that time,” claims Tobek. “But as we were not able to guarantee completion, the tenants decided to take space else-where.” He says the Ministry of Finance was not willing to grant ECE any compensation, so the developer took the next step and filed for arbitration. ECE stopped work on Galerie Liberec in February, once it no longer made financial sense to continue with the project. ECE is strictly a retail developer, and as such Tobek says they are not considering the development of a different project on the site. Instead, the developer has challenged the students of the faculty of architec-ture at the Technical University of Liberec to find an alternative use for the plot in a competition. Once that has been decided, ECE plans to look for an investor.
equest disposal in targoviste
Equest disposal in TargovisteEquest Balkan Properties is believed to have sold its Targoviste shopping center for less than the reported €8m paid for it in 2007. The Romanian daily Ziarul Financiar reported that the 6,530 sqm center anchors are a Praktiker and a Technomarket store, and that Jones Lang LaSalle coordinated the sale, something the agency was una-ble to comment on. In late June, the listed property company announced it made a loss of €64.3m in 2008 and said it would not be paying a divi-
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9reGIONALReal Talk
highlights
...the tenants decided to take space elsewheregerman developer sues CzeCh state | 20
...it made a loss of €64.3m in 2008equest disposal in targoviste | 7
...We want to be on the outskirts of the cityikea expansion planned in hradeC králové | 4
equest disposal in targoviste
equest balkan properties is believed to have sold its Targoviste shopping center for less than the reported €8m paid for it in 2007. The Romani-an daily Ziarul Financiar reported that the 6,530 sqm center anchors are a Praktiker and a Tech-nomarket store, and that Jones lang lasalle co-ordinated the sale, something the agency was un-able to comment on. In late June, the listed property company announced it made a loss of €64.3m in 2008 and said it would not be paying a dividend for the year.
Cushman & Wakefield
Cushman & Wakefield has been chosen by in-vestor europolis as the exclusive leasing agent for Budapest’s Infopark A office project in South Buda. The building has about 6,000 sqm of space on offer, out of a total of 12,000 sqm. The class A office was built in 2000 and was recently upgraded.
eCho investment
echo investment will resume the construction of its Szczecin office project, Oxygen. The project, a standard class A building, was suspended in April due to “the necessity to comply with specific tech-nical requirements of potential leaseholders and the modification of the project connected with it.” Scheduled to deliver later this year, Oxygen will of-fer roughly 14,000 sqm of space. Echo is currently negotiating financing.
amadeus real
amadeus real will open its new shopping mall in the center of Hradec Králové in November. Atrium will offer 40 shops and restaurants over 6,500 sqm, together with 200 parking places, some of them on the roof. The CZK 500m (€19.7m) project is nearly fully leased, thanks to leasing agency labartt properties, and has at-tracted a few new brands to the city.
union investment real estate
Hamburg-based union investment real estate has made its first hotel investment in Central Eu-rope with the acquisition of the Radisson Blu four-star hotel in Kraków for its UniImmo: Europa open-end real estate fund. The €32m transaction was carried out by Austria’s ubm realitätenentwick-lung, at a gross yield of 7.5 percent.
trigranit
In July, Hungarian developer trigranit signed a €150m financing contract for Arena Zagreb, a 175,000 sqm shopping and entertainment cent-er in the Croatian capital. The investment repre-sents the largest direct foreign investment in the region’s building sector since the start of the financial crisis, according to a press release. Six international banks will fund the project, includ-ing intesa sanpaolo, erste group, hypo in-vestment bank, Cassa di risparmio della re-pubblica di san marino, mkb bank and Cib bank. Construction is underway and is expect-ed to be done at the end of 2010.
psJ
Czech contractor psJ has started work on CPI City Center in Ústí nad Labem in North Bohemia. The 24,435 sqm multifunctional project will con-sist of two separate buildings, connected by a small square and an underground garage. A Z-shaped building will offer 7,000 sqm of office space, with a supermarket, shops and services on the ground floor. The second 6,718 sqm building will hold a four-star, 83-room hotel with conference facilities. Costs will amount to CZK 535m (€20.8m), and the project is sched-uled to complete by the end of next year.
Charles vögele
Swiss-based fashion retailer Charles vögele opened its first shopping center flagship store in Hungary last month. The 1,460 sqm outlet
stretches over two floors at South Buda’s 10-year-old Campona Shopping Center. Charles Vögele has been present in Hungary since 2006 and operates 37 stores nationwide, most of them in retail parks. Cushman & Wakefield, Campona’s property manager, handled the deal. Campona is owned by ING Property Fund Central and Eastern Europe.
lC Corp
lC Corp has decided to buy back up to 20 million of its own shares. The company plans to earmark a maximum of PLN 30m (€7.3m), meaning the maxi-mum price per share would be PLN 1.5 (€0.37). Ac-cording LC Corp, the drop in the company’s stock price does not reflect the company’s real value, and the buyback will improve the company’s indi-cators and market perception. Meanwhile, the de-veloper has decided to restart one of its residential projects in either Łódź or Kraków, following a slight pickup in sales on new and resumed Warsaw projects. In the second quarter, LC Corp sold 45 flats -- a modest figure, but a major increase from 10 flats in the first quarter.
finep
finep has chosen property broker remax to sell its flats and houses. The aim for both com-panies is to take on more clients and expand market share. ReMax operates one of the most extensive trade networks in the Czech Republic, according to Finep, and can offer the developer an important distribution channel to boost its moribund sales.
ipd group
Hungary’s quiet industrial sector received a boost over the summer with the addition of a 13,500 sqm warehouse in Dunaharaszti, south of Budapest. The South Base logistics center is lo-cated less than a kilometer from the M0 ring road around the capital, and also offers a 2,700 sqm of-fice block. Austrian developer ipd group is com-pleting the project in two phases, with letting being handled by Colliers international.
10 reGIONAL Company News
11reGIONALCompany News
panattoni
panattoni’s results for the first half of the year have sustained the company’s leading position in the industrial development market. In the first six months of 2009, the developer signed contracts for about 108,000 sqm in Poland. According to a report from Cushman & Wakefield, Panattoni’s level of net take-up this year makes for a 45 per-cent market share. prologis’ share is 36 percent, while pinnacle comes in third at 5 percent.
orCo reports €199.9m net loss
orco property group’s net loss over the first half of 2009 grew to just under €200m as the value of its portfolio sank 12 percent. In 2008, the company re-ported a first half loss of just €14.1m. In late August, the company announced it would hold an extraor-dinary shareholders’ meeting on September 15, at which a proposal to do a share increase would be voted upon. Shareholders will have to agree as well whether to continue the company operations. In
July, CEO J.F. Ott out-muscled a move to oust him from his post at the previous shareholders meeting. Orco is currently under court protection.
hunguest hotels
The opening of one of Hungary’s newest spas, the Napfényfürdő Aquapolis Szeged, has been delayed. hunguest hotels has pushed the opening date of the spa, located in the country’s southeast, to February from its original Decem-ber. Construction on the HUF 8bn (€29.8m) project started in October and is now roughly half completed. CEO István Hulvely blamed the delay on a lack of financing.
dtz/Cbre/Jll/king sturge
Summer was a busy time for the agencies in Poland. dtz was appointed by pbW polska as the lead agent for the 43,500 sqm Good Point Puławska dis-tribution center, 15 km south of Warsaw. Cb rich-
ard ellis and Jones lang lasalle have been named co-exclusive agents for mermaid proper-ties’ office project in Warsaw, the 25,000 sqm Libra Business Center. king sturge will exclusively lease Brynów Center I in Katowice, a 5,600 sqm office project from holdimex, scheduled for late 2010. king sturge has also been appointed to manage Galeria Przymorze, a new Gdańsk shopping center, and will act as lead agent on quinlan private gol-ub’s 28,200 sqm Enterprise Park office project in Kraków, to deliver in 2011.
multi development Cr
multi development Czech republic plans to open its shopping and leisure center in Ústí nad Labem in the coming months. Adding yet more leisure, the developer has signed a lease for a lower cable car station with the city. The cable car will connect the centrally located shopping mall with a local tourist attraction, the Chateau Větruše on the opposite hill. The 27,000 sqm Fo-rum Ústí nad Labem will offer 100 shops, a multi-plex cinema, restaurants and coffee shops, with 640 parking spaces and a billa supermarket.
hoChtief maY list airport divisionIn mid-August, Hochtief said it was considering the flotation of a minority stake in subsidiary Hochtief Concessions in an effort to shore up the parent company’s weakened stock market rat-
ing. While it said publicly it would be “considering an initial public offering,” the company wouldn’t comment further on any specific details. Hochtief Concessions, with its subsidiary Hochtief Airport, runs six airports worldwide, including Budapest’s Ferihegy International, and is among the big-gest privately held airport operators in the world. “Hochtief considers the concessions business a core part of the Hochtief group and would in the event of a listing [of Hochtief Concessions] continue to hold a majority” in the unit, the company said in a statement. Hochtief, Germany’s largest construction company, has seen its market capitali-zation halve to €3.2bn since the financial crisis began in mid-2007.
european deal size doWnDespite signs that the downturn may be beginning to ease up, it’s certainly not all good news in real estate.A recent CB Richard Ellis report noted that the average size of
commercial property deals in Europe fell 59 percent in the first half of the year compared with the market peak in 2007, a sign of dropping values and a lack of bank financing.CBRE said in the first six months of the year, completed European property transactions had an average size of €18.4m, a dramatic drop from €44.4m in the first half of 2007.“The banks’ appetite for lending on large transactions has been very limited since the second half of 2007,” said Jonathan Hull, CBRE executive director of EMEA Capital Markets, in the report. “However, in recent months we have seen greater willingness to lend. It is now possible to find lenders willing to get involved in transactions up to €100m and this threshold continues to increase.”According to CBRE, the height of the European property boom in 2007 saw 115 completed transactions each worth €200m or more. That figure fell to nine deals in the first half of 2009. Of those nine, the UK sale of the former Dawnay Day portfolio for over £600m (€681.9m) was the largest.
ConWert immobilien revenues riseAustrian residential developer Conwert Immobilien Invest posted record revenues in the first half of the year. The publicly listed company achieved positive earnings in
both quarters, with revenues up 31 percent to €227.91m, earnings before interest, taxes, depreciation and amortization up 16 percent to €55.58m and cash earnings up 72 percent to €44m. Conwert attributes the improvement to higher rental income and increased proceeds from property sales, and expects the trend to continue for the rest of the year. Despite the generally negative business environment prevailing at the present time, Conwert said in a report it expects stable development in the residential property segment. “[The company] also expects the strong oper-ating development to continue in the second half of the 2009 financial year, featuring increases in rental income and further property sales.” noted the report. It expects growth to be predominantly organic in the rental business, based on new rentals and a drop in the vacancy rate. As for property sales, the company expects to exceed its target volume of €200m for 2009.
european ConfidenCe groWsWhile Europe’s economy shrank 0.1 percent in the three months through June, German services and French manufac-turing unexpectedly expanded in August, with business, in-
vestor and consumer confidence in Europe’s largest economy also jumping more than economists forecast. Italian consumer sentiment rose to its high-est since March 2007, a report showed yesterday.The raft of positive news prompted Stephane Deo, UBS Ltd.’s chief European economist, last week to raise his forecast for euro-area economic growth to 2.1 percent in 2010, which would be the most in three years. “The recovery will gain traction in 2010,” Deo said in a note to investors. He predicts the upswing will be driven by companies restocking depleted inventories and exports as the global recovery advances.Volkswagen AG, Europe’s largest carmaker, this month raised its full-year sales forecast after governments’ “cash-for- clunkers” programs helped spur demand for its Golf and Polo compacts. Deliveries may fall 5 percent this year, half the drop previously estimated, the Wolfsburg, Germany-based company said. Voestalpine AG, Austria’s biggest steel company, today said it is ending short working hours at its Linz plant after demand for flat steel rebounded “significantly.”
Carrefour losses right on targetBad news gets taken as good news if it matches expectations. Carrefour proved this when it confirmed that, as expected, the company made a net loss of €58.1m over the first half of the
year. This was down from a €747m profit over the same period last year, and yet the company’s shares gained 4.6 percent on the news. Carrefour’s operating profit should come to €2.7bn for the year, and it ex-pects to cut another €500m in costs. €600m will be put towards discounts as the company attempts to rebuild sales. Its CEO Lars Olofsson has pledged to win back customers in Carrefour’s home market by concentrating its in-vestments in France, and he’s already taken the decision to pull out of stores in southern Italy. The axe could also come down on the company’s Belgian operations.
12 reGIONAL EuroNews
Hochtief Concessions runs the busy Budapest Ferihegy Airport
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Ask most anyone which property sector has the worst sustainability image and the answer is likely to be industrial.
In part, it’s a simple matter of aesthetics. Endless rows of concrete sheds now form the gateway to every major city in Central and Eastern Europe, something that playful paint jobs do little to help. The fact that they tend to store various consumer goods and are filled by exhaust-belching trucks doesn’t help matters.
And yet there’s a growing argument to be made that it’s the warehouse developers that are making some of the greatest strides in the greening of real estate. Degrees of commitment to the green idea vary widely, but a combination of tenant pressure and stricter regulations could now be bearing fruit.
“Contrary to my expectations, over the past nine months the green element of industrial shed design has become more important instead of less important in doing the deal,” says Guy Battle, a founding partner of the environmental practice Battle McCarthy Consulting Engineers. “The recession hit and
I thought it was the end of green in sheds because the green was always an add-on I associated with the good times.”
Bizarrely, the opposite has proven to be the case. The noose of stricter energy efficiency regulation has been tightening for years in the
UK, while in CEE, new developments have been required to undergo efficiency ratings tests since January.
Reducing waste energy in a standing building is one thing, says Battle, but some of the companies he works with, like ProLogis, are pushing the bar a great deal higher.
Graham Reece, regional director of project management at ProLogis, says energy efficiency is one pillar of the company’s environmental strategy, and it’s being tested
building by building by the new rating requirements for new projects.
“There aren’t too many components that are key for achieving a good rating,” he admits. “It’s all about insulation, good cladding systems, good air tightness, good lighting systems and an efficient heating system. So we’ve been focusing on those areas to make sure the ratings we achieve for our buildings are the maximum we can obtain.”
Filip Kozák, head of CB Richard Ellis’ industrial team in the Czech Republic, says efficiency can have a significant impact on the bottom line for tenants. “I’ve done comparisons between industrial parks and there are some that are much more efficient in terms of energy,” he says. “You can save 20 to 50 percent in new buildings compared to some of the buildings from, say, five years ago. The gas heaters are better, [as well as] the insulation on the roofs and in the docks. Developers didn’t used to care about these things.”
Reducing the level of carbon emissions from new buildings has become a mantra across Europe
Guy Battle
13reGIONALIndustrial focusEfficiency can impact the bottom line | 52A matter of aesthetics | 4
industrial: riding the green wave
With the credit crunch in full swing, and cost cutting now a way of life, the move to sustainable industrial schemes is surprising
robert mcLean
Contrary to my expectations, over the past nine months the green element of industrial shed design has become more important instead of less important
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Industrial developers of all stripes are beginning to look at ways to improve their carbon footprint, but much will depend on the approach of end users
and the United States, and some developers are implementing strict procurement guidelines to take into account the levels of CO2 emitted during the manufacturing and transport of construction materials.
In the UK, however, some clients are going further, asking developers to create “planet positive” solutions, which means their new
buildings should actually reduce the amount of CO2 in the atmosphere. This calls for renewable energy to be produced, on site.
“What that tells me is that these companies that are occupying new sheds have not let the issue of the environment recede,” says Battle. “It’s actually increased in importance because they’re serve the consumer market. Royal Mail and Marks & Spencer obviously have a visible corporate social responsibility strategy, and for them it’s essential to maintain that in terms of their property portfolio in support of their brands. So ProLogis is responding to that, as are developers like Goodman and others.”
It’s probably not fair, however, to compare projects in the UK, where environmental
sensitivity has been gathering pace for years now, to those in CEE, where societal pressure for sustainability is virtually non-existent. Fortunately, there is growing commercial pressure for green buildings from space-hungry tenants, so developers are now responding.
In the Czech Republic, market leader CTP Invest has selected 20 sheds in several locations on which it plans to install and operate solar panels. Director Remon Vos says the idea originated more than 18 months ago, but solving his company’s serious financial difficulties has absorbed most of his attention recently. Vos plans a €30m investment in panels
he believes can earn €5m with a generating capacity of 10 MW. In time, with its 1.7m sqm of roof space, he says his company could have a capacity of 60 MW, earning up to €20m per year.
In the UK, it’s tenant interest that’s pushing the green energy idea. “Companies like DHL and Tesco don’t want to be seen as polluters, and many would like to be able to say they use green energy in their production process. It’s a major benefit for them because they contribute to making this happen,” says Battle.
The bigger the developer, however, the bigger the solution. With its global footprint, but
without unlimited access to capital, ProLogis has had to think carefully about the most effective way to approach sustainability. The solution has been to concentrate on large investments in strategic locations.
“Rather than look at renewable energy on a project by project basis, we’re looking at it on a global basis,” says Reese. “Because we have such a global presence, what we’ve decided to do is look at energy generation in the most appropriate locations. So for solar energy, we’re now looking at investments in areas of the world where it’s most appropriate. For us, that would be places like California, France and
Spain.” For wind energy, he says, Poland looks to be an excellent opportunity.
Shed developer Pinnacle is considering the installation of solar panels on its roofs in the Czech Republic, with CEO Ian Worboys pledging that the company is also committed to the idea of sustainability. He says it’s often up to developers to convince tenants that environmentally friendly solutions can benefit their bottom line, as well as the rest of the world.
“The necessity for us as developers is to show tenants that by [adding] these features you
“These companies that are occupying new sheds have not let the issue of the environment recede. It’s actually increased in importance because they’re serve the consumer market.”
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14 reGIONAL Industrial focus
Remon Vos (CTP Invest)
Despite the credit crisis, developers are actually making sustainability part of the developmentprocess from the initial planning stages
can reduce [operating] costs,” he says. “If you tell someone you can save them €5,000 on electricity, they’ll say yes. If I told them their rent was going to go up 10 cents because of eco features we want to add, they’d likely say no.”
While he admits it’s a more difficult task on the Continent than it is in Britain, he says there are external factors that play into this. “In the UK, it’s not only being driven by the developers but if you want to get planning consent, you have to have a lot of eco features. It’s almost getting to the stage where you have to be carbon neutral, though not quite.”
There’s a different sort of bottom line, however, that he believes represents the ground level of modern development. “Any developer worth his salt is already putting in basic features, things that won’t cost the tenant any money but will benefit the environment.”
This is important, since the level of environmental awareness drops dramatically once companies, even the big ones, leave
the UK. Asked how important environmental considerations are in his particular country, one industrial agent who asked not to be named
says bluntly: “They don’t care here. Nobody cares, in fact. I’ve never seen a requirement for that.”
15reGIONALIndustrial focus
In July, ProLogis secured approval to use wooden frames in its facilites in Southern Europe, an option it claims provides a far more sustainable solution than the usual concrete
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With black rule to 210x110:Layout 1 18/8/09 12:09 Page 1
16 CZeCH repUbLIC Residential Monthly installments drop | 32Refinancing of existing loans | 11
developers hope mortgage assistance will spur sales
rather than dropping prices, residential developers are trying to lure customers by providing mortgage help
Nina Fibigerová
Along with headlines screaming that residential prices are falling across the board, a rather more specific (and more accurate) bit of news that has developers worried came via the daily Hospodářské noviny, which reported in August that the volume of mortgages issued in July was just CZK 6bn (€235m), less than half of what banks lent to homebuyers in July 2008.
Unfortunately for developers, the reality is even worse, as much of the total volume was achieved through the refinancing of existing loans rather than for new purchases. The concern is serious enough that banks and developers are coming up with new ways to reverse the curve. Not surprisingly, it appears developers will be the ones to take the hit.
The first to come up with what looks like a new solution is Lighthouse Group. CEO Tamir Winterstein has built his marketing campaign
for the Zelené město residential project around a special mortgage package he negotiated with UniCredit Bank that became available in June. “We decided to offer an advantageous mortgage for a period of two years, with clients paying back only the principle and not
the interest,” explains Winterstein, whose company will pick up the tab for the interest.
“On an average mortgage it means the monthly installments drop from CZK 20,000 (€800) to approximately CZK 7,000. This makes it easier for the client at the beginning, when the situation is tough as result of the crisis, but we hope that in two years it will stabilize,” he says.
For Czech developers, however, prices remain sacred. Those with quality projects insist their
prices were on the low end of the scale from the beginning, and they’ll go to great lengths to maintain these prices. While customers would save more money in the long run if they could simply knock 15 percent off the final cost of their home, developers are betting that immediate relief on mortgage payments will prove sufficiently attractive to restart sales.
At the beginning of September, Česká spořitelna began
offering clients of some of the projects it financed a variation on the scheme thought up for Zelené město. Rather than a temporary reduction in monthly payments, the bank will allow developers to pay for one percentage point of the interest for five or 10 years.
“Nowadays the prime interest rate is 5.19 percent, which means clients would pay 4.19 for the mortgages co-paid by the developer. For an average client it will be 4.49 percent [down from the standard 5.49 percent] and with the downward trend for interest it could be 4 percent by early autumn,” says Kamil Kosman, managing director of real estate business at Česká spořitelna. He adds that this will make mortgages for particular projects accessible to more customers.
Chip Caine, chief executive of Acred Group, says he broached the idea with the bank near the beginning of the year. “It occurred to me that in our Dolní Břežany project we could offer to buy down the interest rate,” he says. He explains Acred was willing to give 100 basis points and had hoped the bank would give away another 60 bps, to get the interest rate below what he sees as the magic 4 percent line, but the bank doesn’t seem prepared to do so.
“We were looking for something dramatic,” says Caine, who is trying to sell the last 30 flats in his project in Dolní Břežany, just to the southeast of Prague. “We don’t think offering discounts is the right way to do this as once the game starts, you never know how far down you’ll be forced to go.”
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Acred, the developer of a major residential scheme in Dolní Břežany, hopes to lure buyers by helping them with their interest payments
Two banks are competing for clients buying flats at the Zelené město project
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I would not call it a revival | 48Yields near 7.5 percent | 22
office deals break the investment ice
recent transactions have sparked excitement on the prague market, but observers believe a revival is still some way off
Nina Fibigerová
Two recent transactions broke the summer slumber on Prague’s investment market.
In August, ING REIM offloaded its Budějovická alej office building near the Budějovická metro station in Prague 4, while Invesco disposed of the Thámova 18 office building in Prague 8-Karlín. But though local media welcomed the deals as a sign of a commercial property market revival, careful market observers were more inclined to hit the snooze button.
“We are not going to see a tide of deals happening in the next two months,” says Philip Wood of Cushman & Wakefield’s capital markets group in Prague. “It takes 15 months to close a deal.”
While he claims the transactions have set a new office market pricing level, Wood could not comment more specifically on the yield figures.
“It’s probably in line with where expectations for the market are moving at the moment,” he hints.
Off-record sources suggest the yield for Budějovická alej is near 7.5 percent, and in view of the fact that the last deals done in the Prague 4/5 submarkets were sub 6, it could end up being considered as a new benchmark. The new owner, a local group that owns the retail supermarket/department store known as DBK in Prague 4 – Budějovická, paid more than €30m for the fully leased 11,600 sqm class A office building. In fact, it was the same group that originally sold the land to Skanska Property years ago, land on which the developer eventually built Budějovická alej.
A local private investment group is also behind the sale of the 6,500 Thámova 18
17CZeCH repUbLICOffice
office building, which is fully leased to Unilever.
These building sales, assisted exclusively by the Cushman & Wakefield team, mark just the second and third institutional office investment transactions completed in the Czech Republic this year.
“This investor activity clearly illustrates a demand for the best product in the marketplace, despite the underlying market conditions,” says Wood. But even with the respite from the gloom, market observers says no further deals appear near to closing.
“I would not call it a revival. The market is showing some signs of life, but it’s more that the projects that have long been on the market finally found buyers,” says Pavel Scháňka, associate director at CB Richard Ellis.
18 CZeCH repUbLIC Retail The hotel is not our priority | 41Half of the city’s costs | 14
football to benefit from retail investment
a deal with hradec králové means eCe’s next Czech shopping center, and football stadium, is looking increasingly likely to be realized
Nina Fibigerová
Hradec Králové has made the first step to getting a new football stadium and shopping center in its Malšovice district. The new project, to be built with co-investor ECE Projektmanagement under an agreement signed in July, will replace the existing Communist-era stadium that is both pointlessly large and impossibly outdated.
The deal calls for the city to sell ECE the land needed to build the commercial segment of the project, to be called Park Malšovice. The 25,000 sqm plot set aside for the shopping center will cost ECE CZK 250m (€9.66m) – money that’s expected to cover roughly half of the city’s costs of reconstructing the football stadium.
ECE has also promised to invest CZK 458m (€17.7m) into the construction of infrastructure in and around the site and act as a general partner of the local football club FC Hradec Králové at a cost of €700,000 per year. The city
hopes this will help promote the club to the Czech first league, reviving interest in football in the city.
The run-down stadium itself could be the cause of the sport’s flagging popularity. “Football currently attracts between 2,000 to 3,000 [spectators] per match,” says Josef Tobek, ECE’s chief executive. “It’s no wonder when you can hardly see the ball over the racetrack oval. Watching a game on television is much better.” The modern, UEFA-compliant arena, which will hold up to 12,000 people, should offer a radically improved atmosphere for football fans.
The city and ECE will form a joint venture to secure planning for the stadium, the Arkády Hradec Králové shopping center and a 100-room hotel, for which ECE will be responsible for finding an operator and investor. “Each component of the project can be built independently, and given the current situation
on the hospitality market, the hotel is not our priority,” says Tobek. “We have to focus on the shopping mall.”
ECE, however, has reserved the right to back out of the contract at any time before the construction permit is issued and the money for the land is transferred to the city, without giving a reason. This gives the city nearly a year and a half of uncertainty.
“If the investor were to back out, they will have to reimburse the city’s costs,” says Josef Malíř, deputy mayor of Hradec Králové and responsible for city planning. Securing the planning permit is expected to cost CZK 20m (€772,560), of which the city will pay up to CZK 6m.
“The city would then have to decide whether to look for another investor or try to rebuild the stadium on our own,” adds Malíř.
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In cooperation with:Organized by:
czech republic www.cijjournal.com
6 September 29 ‚09update on tax and accounting aspects of real estate financingpresented by richard Jones, director; pricewaterhousecoopers Štefan Falis, manager – Tax and legal Services; pricewaterhousecoopersRichard Jones and Štefan Falis of PwC will present an update on tax and financial issues relevant to the real estate industry. The session will focus on a broad discussion of the latest developments in tax and accounting, including financing issues arising from the financial crisis and foreign exchange risks.
all plp czech classes are held at Jalta hotel, Václavské náměstí 45, prague, on the indicated dates, starting from 5 pm. For further information and registration packages contact:
dušan Krnjaja | [email protected] | Tel.: +420 222 220 800
crestyl_ad_cij_dock_240x136.indd 1 26.08.2009 15:33:07
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Numbers are going down | 46Price-conscious business users | 25
Jurys inns scales back Cee expansion
the irish hotel chain makes landfall in prague, but says there’s no rush to open in poland, slovakia and hungary
Nina Fibigerová
Irish hotel chain Jurys Inns opened its first hotel on the Continent in September with a 214-room, four-star hotel in Prague. Located at the Florenc metro stop, it offers two conference rooms, a restaurant, a bar, a café, a fitness center and underground parking for 44 cars.
The opening is part of a wider expansion that flies in the face of the current panic over a deteriorating economy. It also contradicts pessimism in Prague over sagging room rates and falling occupancy.
Jurys Inns has already opened five hotels in the UK this year, with another to follow this month. Still, Johannes Schuschu, general manager of the Prague hotel, admits the original plan was even more ambitious, especially in CEE.
19CZeCH repUbLICHotel
“We are taking smaller steps,” he says. “We also planned hotels in Poland, Hungary and Slovakia and there are further [plans] of course, but it’s too early to mention them. Budapest is the most advanced, but as all of these markets have been hit hard by the crisis, we are in no rush.”
“Our positioning means we are competitive with price-conscious business users switching from the more expensive four and five-star hotels,“ explains John Brennan, Jurys Inns CEO.
Stewart Coggans, director for Central and Eastern Europe at Cushman & Wakefield Hospitality, is convinced increasing price sensitivity can help bigger midmarket four-star internationally branded hotels attract guests.
“We will achieve over 60 percent [occupancy] in September. We just have to wait until the corporate clientele returns from holiday and starts to book,” says Schuschu. The room rate – CZK 2,314 (€90) for a double – is competitive in the four-star market, he adds.
“Occupancy is not such a big problem. It’s the revenues that have been dropping lately, due to extremely low prices. Some of the hotels are panicking...dropping prices far in advance and going for half rates in September,” he says.
Coggans says international chains are able to accept €50 to €60 per night for larger groups. “[But] numbers are going down year-on-year; 2008/2009 revenues in Prague 1 will be down by 22 percent,” he says.
crestyl_ad_cij_dock_240x136.indd 1 26.08.2009 15:33:07
23–24 September 2009 | Prague Marriott Hotel | Czech Republic
Further information: robert Fletcher | CEO | +420 603 425 172 | [email protected]
Zuzana Vodrážková | Sales director Czech Republic & Slovakia | +420 603 264 921 | [email protected] Niezgoda | Events Coordinator Poland | +48 22 848 60 21 | [email protected]
Dalma mózes | Sales & Marketing Manager Hungary | +36 1 373 0429 | +36 20 239 6736 | [email protected] balan | Sales & Events Manager Romania | +40 743 794 364 | [email protected]
daY 1 daY 2
09:00 – 09:30 | Keynote Speaker
11:30 – 11:45 | Networking Break
12:45 – 13:45 | Lunch
It’s easy for people in property to focus on rents, vacancy rates, interest charges and yields. But these are all functions of the regional and global economy. This session will feature short presentations from two leading economists, a debate between them, and an extended period for discussion with the audience.
09:30 – 10:30 | The Big PictureIs development stuck because bank conditions are simply too strict? Or because developers aren’t willing to put more of their own money on the line? At some point, supply of office, residential and logistics space will begin to get scarce. When are we likely to get there? What do past crises tell us in terms of whether cranes move in before recessions end, or only after?
09:30 – 10:30 | Development: Tough luck, try again next year?
Debt resolution has virtually no history in Central and Eastern Europe’s property markets, but the financial and economic crisis has created a need for such expertise almost overnight. Consultants from a wide range of disciplines have been putting together teams and pulling together resources in order to meet the demands of banks, developers and investors who need guidance on how best to proceed, or how to prepare for eventual problems. This panel will bring together some of the top practitioners in the field of CEE debt resolution for a crucial discussion on how the property sector is dealing with this new problem.
11:45 – 12:45 | Current debt resolution practice in CEE
11:30 – 11:45 | Networking Break
12:45 – 13:45 | Lunch
With equity now at a premium and banks now sticking to strict conditions, securing financing has become almost the only thing that matters. Are these conditions here to stay, and if so, what are the implications for development and investment? Is there any prospect for alternative forms of financing appearing on the horizon?
11:45 – 12:45 | The new face of development finance
A comprehensive snapshot of Central Europe that will give three 20-minute overviews of the leasing markets in the retail, office and logistics sectors. These up-to-date presentations will look not just at demand for new space, but crucially, at the pressure that economic weakness is putting on existing tenants. A digital version of the presentations will be made available to audience members only.
13:45 – 14:45 | CEE’s Leasing markets – 20:20:20 vision
Banks have been in a rush to foreclose on loans, but it’s too early to tell whether this is a good sign or a sign of denial. There are great war chests of equity being amassed to take bad loans and troubled assets off the banks’ hands, but so far there’s been little to buy. Are loan agreements simply in better shape in CEE than elsewhere? Or will time and an eroding economy inevitably create the volume of opportunities investors are hoping for?
14:45 – 15:45 | Distress, real and imagined
Will a 100 – 150 bps fall for prime assets be enough? To listen to a lot of the media, investments in commercial property in CEE were little more than a mirage fed by overly enthusiastic bankers. There may be no market for secondary assets here, and a limited one for prime, but that’s the same the world over just now. What’s the reality for those with investments already in place in CEE? How seriously are rental streams threatened at the moment? And what’s the current thinking as to how far we are from hitting bottom?
10:30 – 11:30 | Investment: Is Central & Eastern Europe all subprime now?
The credit crisis hit the industrial sector first last year, and there’s been precious little evidence that things have gotten any better since. How much demand are logistics operators seeing for their trucks, and are there any signals of a significant rise in requirements for new space? Or are we in store for downsizing? How are park owners keeping their tenants on board? This panel will feature three major industrial developers and a trio of top logistics companies to discuss survival strategies.
10:30 – 11:30 | Logistical nightmare: Survival strategies for industrial developers and end user
www.cedem.cz
organizermedia partnerassociate partnersgeneral partner partners
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Supply will be limited | 42One of Prague’s strongest office locations | 37
immorent reveals two new office schemes
developer immorent no sooner closed out one phase at futurama than it announced schemes in pankrác and smíchov
Nina Fibigerová
After securing the occupation permit for the first phase of its Futurama office project in Prague 8 in July, Immorent is looking to launch construction of a further two office projects in two of Prague’s well-established office locations: an 8,000 sqm building in Prague 5-Smíchov at the corner of Strakonická and Moulíkova Streets and a 30,000 sqm project on a prominent plot in Prague 4–Pankrác between the Gemini office center and the D1 highway.
Both schemes are in planning, and Tomáš Velemínský, Immorent’s chief executive, believes the developer will be able to start construction of one of them on spec – a luxury usually reserved to those with in-house financing.
Velemínský hopes to start on the Prague 5 project, adding that his financing bank,
Immorent’s mother company Erste Bank, tends to be quite flexible once it gives a project the go-ahead. “Under current conditions our typical 1,000 to 1,500 sqm tenants prefer to sign only once construction is underway.”
Immorent plans to start construction in Smíchov next March, and Velemínský insists that by the time the shell is finished at the end of 2010 the situation should have changed for the better. Currently, the company is working on the project’s planning permit, a process Velemínský expects to go smoothly.
In Pankrác, Immorent bought the land with planning in place. Leasing, however, is not much of a concern, as he believes the project’s strong visibility and access from both the metro and the D1 highway will win it tenants. Pankrác
21CZeCH repUbLICOffice
has also proved to be one of Prague’s strongest office locations of late. Velemínský is hopeful construction could start at the end of 2010 or the beginning of 2011.
“Several significant relocations have been scheduled in this period, and the supply will be limited,” he says. For starters, Immorent is competing for the planned new Kooperativa headquarters, and Ernst & Young is looking to leave Charles Square Center after its lease terminates, potentially as early as 2011. Velemínský adds that there are a few more significant requirements on the market.
Jones Lang LaSalle has succeeded in bringing Media Vision and Otherm to Futurama, meaning that 2,000 of the currently completed 8,000 sqm have been taken. The asking rent there is €14.90 per sqm per month.
What’s behind your decision to re-brand your industrial parks? Why now?
Our business has grown and changed in direction over the past 12 months. We now have over 1.4million sq metres of ware-house assets under management with a value of nearly 1 billion euros. We now op-erate or manage warehouses in 10 coun-tries in Europe. The new name allows us to reflect both assets under management and our existing development sites that are in Central Europe
Does this impact just your Cee proper-ties, or will this be integrated with the company’s entire european portfolio?
There is no impact on our CEE properties, we will continue to brand our develop-ment sites as PointParks, which have a proven track record, whilst our individual assets across Europe will be branded with the full PointPark Prop-erties name. Our headquarters will remain in Prague.
Is your goal to be able to offer multiple locations around eu-rope to some of your corporate clients?
As our business has grown so we are now able to offer our cus-tomers a Pan European service so that wherever they need a warehouse we can provide them with one. We are lucky to have a parent company, Arcapita, who has the funds that gives us a competitive edge. As an example we are currently the only de-veloper who is building a build-to-suit in Central Europe, this is a 28,000 sqm warehouse for Möbelix in Bratislava.
How is pinnacle weathering this perfect economic storm? Are you seeing any reasons for optimism?
There are signs that someone has turned the light on at the end of the
tunnel!! In the UK, France and Germany there are the early signs of improve-ment in confidence in their economies. Investor demand is increasing in the UK and this will spread to main land Eu-rope over the next few months. Occu-pier demand, if the last three recessions are used as a benchmark, normally fol-lows some 6 months later. This would suggest that 2010 will be a year of a slow but steady crawl out of recession. So yes, I am optimistic that the market has bottomed out.
What do you consider your advan-tages in what’s obviously an intensely competitive sector?
As mentioned already we have several advantages. We are now able to work across Europe, we are able to offer build-to-suits where our competitors cannot,
we are not reliant solely on development profit to keep us go-ing and our increased income from assets under management together with the strength of our parent company mean that we are well positioned to take advantage of the market. We are also able to help banks and funds with the problems that they may have with distressed warehouse assets.
How attractive do you think Cee will be in as a distribution location once the economy turns again?
Working on the old adage that property is all about „loca-tion,location,location“ you cannot help but see CEE as the link be-tween the West and the East and therefore it is the centre of the trade lines between the two. For many occupiers, Eastern Europe
is still seen as a step too far and they see CE as a secure place where they can do business. We will continue to expand in CEE and look for oppor-tunities in the Eastern Euro pe as the market picks up.
pINNACLe CHANGeS NAme tO pOINtpArK prOpertIeS
Ian Worboys, PointPark Properties CEO
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23CZeCH repUbLICRetailPrague’s new master plan | 45Improve car access | 13
ikea to replace oldest Czech store
having outgrown its original store in zličín, ikea plans to build a bigger one next door
Nina Fibigerová
Ikea has revealed plans to open a new, bigger store in the Zličín district of Prague. To be located on the D5 highway next to the retail park where its current store stands, the new store will use the same motorway interchange.
With parking already tight at its current store, and its belief that greater revenues could be generated with more space, the company took the decision to build a standalone store 400 m to the west.
This will enable the furniture retailer to offer the full range of Ikea goods, and at the same time improve car access and parking capacity.
The new plot is 10 ha, much of which will be devoted to an extensive parking lot for at least
1,300 cars and new road infrastructure. The new building will offer more than 80 percent extra space compared to the existing 20,000 sqm store. Inter Ikea Centre Česká republika owns the entire retail park, so in the future it will be working on releasing the space including the existing Ikea store.
Inter Ikea managing director Pavel Hradec insists the existing parking lot will be sufficient for the whole retail park and the new tenants, as few retailers produce as much traffic as Ikea. “Moreover, Tesco has suffered a drop in shopper numbers, as have most other hypermarkets,” he explains.
Hradec says they are looking for big players capable of taking the entire existing building, or at least half of it. “It will further strengthen the
area. Sportswear, electric goods, other furniture retailers; this is where we look for the future tenants. There are not many names in fashion able to take such a large space,” he says.
The project is in the initial stages, and Hradec is not willing to discuss the time schedule. Financing, however, should not be a problem. Hradec says if he can secure at least one tenant for the current store, this will allow the project to draw on company funds. Still, a change in planning must be achieved, something which could take time, as the timing for Prague’s new master plan is up in the air.
Inter Ikea is also redesigning its Avion shopping parks in Brno and Ostrava. In addititon the developer plans to add 50 new retail units to the existing 150 in Ostrava.
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CIJ Golf Tournament 2009September 9th 2009 | Golf Resort Konopiště (gcko.cz) | Czech Republic
9 amRegistration & English style breakfast
11 amCannon start
4 pmAwards ceremony & late BBQ lunch
For further information regarding sponsorship or to register for the Golf Tournament please contact:Robert Fletcher | CEO | +420 603 425 172 | +48 506 074 042 | [email protected]
Zuzana Vodrážková | Sales Director CR & SK | +420 603 264 921 | [email protected]
Main Partners Partners
24 CZeCH repUbLIC City Guide It’s a tough time | 60Play to a location’s strength | 23
City guide: pilsennot so fast. or perhaps, not so new. the key to winning in pilsen could be to build on, while moving on from the city’s industrial traditions
robert mcLean
Like just about every other regional city in Central and Eastern Europe, Pilsen has been hit hard by the current recession. The reversal of fortune has hit its budding office market perhaps hardest of all.
Several developers currently have major projects in planning, and while this beats trying to fill space in a slow market, it has inevitably changed the nature of their expectations. Acred Group had no such luck, but with half of its Avalon Business Center now filled, the company looks to be out of the danger zone.
Just an hour from Prague’s Ruzyně Airport and on the main road to Munich and Nuremberg, Pilsen looks ideally placed to be a thriving business center. It has in fact done extremely well on the industrial side, thanks to early city support for the development of the Bory Fields industrial park.
Having filled up and spawned countless new industrial and high-tech investments, Bory Fields is an excellent example of what can go right when cities react proactively and play to a location’s strength.
It’s less clear, however, if the city will be able to translate this into creating an office worker class. With its working class background and
the existence of a stable blue-collar workforce, companies like Panasonic, Yazaki Wiring Technologies and Daikin couldn’t get into the city fast enough beginning in the in the mid-1990s.
But the young urban professionals who grew up in Pilsen or attended university there have had a consistent tendency to escape the town in favor of the glitzier world of Prague. It’s something back office employers have long been aware of, leading most to look to locations like Brno and Ostrava for their regional office requirements.
But Pavel Skřivánek, who focuses on regional offices at Cushman & Wakefield, argues that based on his discussions with potential clients, a classic chicken-and-egg dilemma is at work. Without modern space to move into, they’re unwilling to make the leap into a town where the most famous exports are the classic Pilsner Urquell beer and heavy machinery. Skřivánek says if developers had product ready to go, tenants would come. In these days of severe credit restrictions, however, the chances of banks backing a speculative project in a regional city are limited.
As Tomáš Velemínský is finding out, preleases are a rare commodity at the moment in Pilsen.
The managing director of Immorent is in charge of finding at least 2,500 sqm worth of commitments for the 10,000 sqm first phase of the company’s office project, Fabrika Business Park. The demand just isn’t there, however. “It’s a tough time for the project, but I believe it will get going,” he says. “We’re trying to promote the project and the city.”
Not everyone agrees that shiny new class A space would suit the city. Chip Caine, Acred Group director, says the market is neither used to the type of space now standard in Prague, nor does it seem particularly hungry for it.
“Pilsen is not a market that puts a high priority on representational space, and I think this is an important consideration for our future competitors like AIG/Lincoln and Immorent who have been looking to do class A office in Pilsen,” he says. “At first we thought we made a mistake by making A– rather than A+. Now we’re quite happy about it.”
Another developer with a non-traditional approach to office space in Pilsen is UBM, as seen by its centrally located scheme Hamburk. Rather than building huge open plan class A administrative spaces, it’s begun selling not just flats in the building, but smaller office units in what will be a mixed-use building.
While unusual it’s not unheard of, says director Margund Schuh, who has sold offices in a previous development in Prague at Anděl. The company hopes to attract strong, established local companies that are committed to Pilsen but need modern offices.
The guiding logic that now seems to be taking hold, in fact, seems to be to expand what’s already been established, rather than trying to import armies of completely new investors.
“Traditionally Pilsen is an industrial city, and it doesn’t make sense to change that,” agrees Irena Vostracká, director of Pilsen’s department of planning and development.
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population: 570,355 unemployment: 7.3% region’s percentage of total Czech gdp: 5.1% modern office stock: 27,000 sqm industrial space vacancy: 22% (end of 2008) industrial rents: €3.30 - €4.00 mayor: Ing. Pavel Rödl deputy mayor: Ing. Vladimír Duchek, Ph.D. (economy) deputy mayor: JUDr. Marcela Krejsová (culture and tourism) major investors/employers: BRUSH SEM, Daikin Industries CZ, Pilsen University Hospital,
Lassellberger, Panasonic AVC Networks Czech, Plzeňské městské dopravní podniky, Plzeňský Prazdroj, ČEZ, ŠKODA HOLDING, Yazaki Wiring Technologies Czech, Western Bohemian University in Pilsen
pilsen Facts
At the same time, she’s convinced the city needs to encourage new types of investment opportunities that build upon its strong points.
There’s been a concerted attempt to support research and developments focused on the health industry and high-tech, to exploit the presence of the city’s medical university and the University of West Bohemia. A technology park has been established near the latter, while investments near the medical faculty are also being supported.
Vostracká says the city is also looking to support its standing in the business world by submitting an application for the right to use the World Trade Center brand name. She says the process appears to be proceeding favorably, with acceptance possible by the end of the year.
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A few office buildings were developed in Pilsen before recession hit, but the city knows it will have to work hard to turn the city into a serious business destination
Support the knowledge economy | 9
supporting the knowledge economy
irena vostracká, director, office for development of pilsen
25CZeCH repUbLICCity Guide
one comment that’s pretty common among property people is that pilsen needs to do more marketing. they feel like they have to market the city as well as the project they’re working on. When Borská pole ended, the first thing the city did was try to create a new strategic zone, meaning essentially just a new Bory Fields. It took a while for Pilsen and the region, and even CzechInvest, to clarify the approach. Now the main goal of the city isn’t to make a new development zone for logistics and rental halls.Instead, we’ve been searching for ways to support the growth of the knowledge economy, to prepare material for it, and the question was to decide upon crite-ria according to which the city would choose whom it would support.
You haven’t been taking part in events like mipim and expo real. Will this be changing? We’re looking at how to market the city in order to make more visible what we’d like to do. The problem is that the city is currently vying to be a Euro-pean Capital of Culture, and I’d say most efforts have gone into that. That’s taken priority over efforts to promote the city’s economic growth.At the moment we’re negotiating about taking part in MIPIM, but we haven’t even been at Urbis [a property exhibition in Brno] for a few years. When you look back, these exhibitions have stagnated somewhat. You have to see some kind of effect from these types of activities.
What are some of your current activities to help pilsen become more of a business destination? One of the projects we’re working on is that we’ve applied for a license to use the World Trade Center trademark. We should get this sometime in 2009. This would put us on a different level and it would mean we can attract not just science and research, but also more standard businesses. So we have to decide which building to put it in. It’s not an issue when you’re dealing with scientists; they can do their work anywhere. But businessmen want to be in the center of the city. Japanese and Russian companies like such buildings, for example.We have a large former army barracks of 30 ha on the road to České Budějovice, which is one of the biggest development zones in the city. It’s now in the hands of the construction machinery company APB. There should be apartments there and a mixed-use zone with complementary services, [a small] shopping center and maybe new schools. It’s a place where you could get a lot of people to live in a fairly small amount of space.There’s also the Svoboda Barracks, formerly the Světozor Brewery, where several of the old buildings are still standing, and four of them are cul-tural monuments. Two-thirds of the complex belongs to the city, and it should eventually be turned into a mixed-use zone that’s open to the public.
Rents between €12.5 and €14 | 39Preleases will pick up next year| 27
k3: a river ran under it
Wing’s k3 may be delayed, but leasing is still going well at millenáris
martin Kuebler
The completion of Wing’s K3 office development in Budapest, originally expected in the next few months, has been shifted by about half a year.
Construction is still underway on the 17,000 sqm building in District VIII, and initial structural work is expected to be completed this month. Plans to finish by the end of the year were swept away by the discovery of an underground river, which led to a redesign of the underground garage. Gergely Árendás, Wing’s deputy CEO, says the revised schedule will now see handover in the second quarter of 2010.
Earlier this year, Wing added two buildings, called Modern and Avantgarde, to another of its scheme, the Millenáris Office Building complex. Leasing has so far gone well for the speculative projects. The 1,200 sqm Avantgarde was fully let before completion, and the 1,600 sqm Modern building has one floor leased out to Energizer. Gergely Árendás, Wing’s deputy CEO, expects
the remaining space to be let in short order. “Knock on wood; I think we’re pretty close.”
As for K3, it had some early prelease interest for the entire building, but those discussions never
panned out. Still, Árendás is optimistic that the prelease market for large occupiers will pick
up next year, and he expects the market to see “numerous preleases” in 2010.
“If you’re a large occupier [looking for] space and you have special requirements or want to be cost-effective, you won’t find that many solutions, so you need to turn to prelease discussions,” says Árendás. He says rents at K3 will be between €12.5 and €14 per sqm per month, also suggesting that various incentives will make the project attractive.
“You have to be realistic now. Our most important
goal was to lease it quickly without going into crazy deals,” he continues, referring to Millenáris, where rents dropped from the initial asking price of between €18 and €20. “Our estimation is that, at least within the
submarkets we’re active in, in the last six to nine months rents have come down maybe 20 percent.
“[Rents are also affected] by market perception, which needs to be managed by developers. We all know the €9 building story. It has had a tremendous effect on the anticipation of tenants,” says Árendás.
“Obviously, it’s a juggling act. You need to service your debt – that’s the bottom line for all developers and investors. Some people are more willing to take deeper cuts than others, but this cannot be a long-term process.”
Wing has a number of future projects on the docket, including the 13,000 sqm V17 at Lehel tér just off Váci út, and the provisionally named AP2, a 55,000 sqm follow-up to Átrium Park, also on the Váci corridor. But, like every other developer these days, Wing isn’t planning to start anything on spec.
“We’re active in marketing and promoting them, but we will not start until there is a sizable requirement,” says Árendás.
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Wing’s K3 will now be completed early next year
26 HUNGARY Office
The Avantgarde building at Millenáris was fully let by its completion in the spring
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Rents could double in a year | 61It’s not a popularity contest | 15
office vacancies in budapest becoming ‘dire’
in the spring, Colliers made headlines by marketing south buda business park at €9. CIJ speaks with managing director mike smithing to see how that has worked out
27HUNGARYQ&A
Your move in the spring to market south buda at €9 – was that a bit optimistic? At the time, €9 seemed very aggressive and I expected that at the end of the summer, it wouldn’t seem very aggressive at all. I wanted to be the first one on the market at €9. I didn’t want to follow the market and go down to €9, to €8, to €7. If the market’s going to go there because we’re so overbuilt, then I want to be there first.
What kind of reaction did you get? There was a lot of interest from tenants coming to look at the building. And there was a lot of resentment from developers who thought we would de-stroy the market by offering space at €9 – they’ve been building many, many buildings that they want to lease for more than €10. Many people don’t like me.
but you must have been expecting that. I was. It’s not a popularity contest; my job is to lease the building, not to be popular with the people responsible for starting construction on twice as much supply as we needed. What were they thinking? Did they think rents were going to really rise? There isn’t any economic sense behind that.
so rents would have gone down regardless. Vacancies would have gone up substantially, and rents would have gone down.
how is leasing going at south buda? We’ve actually got some momentum going. We’ve got some good tenant interest now.
but it’s still just interest? nothing confirmed? Actually, we’ve signed a contract with Atron Informatika for 1,200 sqm and we expect to sign the next contract within two weeks. We had a contract signed with another firm which didn’t get financing in the end and canceled the contract. We have negotiations ongoing with a couple of major interna-tional companies as well, which should get us up to about 30 percent oc-cupancy by the end of the year.
Would you consider using the south buda strategy at one of your other properties? Different landlords require different strategies, because of what’s driving them in the market. Some landlords will have already sold their buildings; they can’t go down in the rent. Other landlords have different needs entirely. With some buildings, it’s probably the best strategy to quietly do a good deal with the first tenant, not tell anyone and then sit and wait it out and plan on leasing up the build-ing in 2011, when maybe the market begins to firm again.
Could that happen at south buda, if you achieve 30 percent? I think we’ll try to get it as full as possible, and then we’ll look at a sale toward
the end of this leasing cycle or at the very beginning of the next one. We’ll see if rents start to go up in the next three to five years, then maybe we can release it for more. Or we can sell it right before with the hope that there’s a lot of potential to increase rents.
What’s the budapest pipeline look like for the second half of the year? The market’s going to grow by 195,000 sqm and the demand is going to be 45,000 sqm, so my math says something like 150,000 sqm of additional vacant space during the second half of this year. I knew it was going to be bad, but if you look at it in absolute terms, it’s pretty dire. The vacancy rate will be around 25 percent by the end of the year. Even if the economy bounces back, it won’t be enough to eat up the over-supply. There’s still three years of vacant space. We’re going to have 450,000 sqm of vacant space at the end of this year. That’s a lot of empty buildings in our city. When this goes away depends on whether developers continue to build office buildings and whether banks continue to give them money to build office buildings. If they don’t give them any money and they don’t build any new buildings and the market bounces back, then in 2012 we could see a very rapid shift in the market. Rents could double in a year. When the market turns, I think it’ll turn very quickly – if they don’t start building.
OVerbUILDING tHe bUDApeSt OFFICe mArKet
Source: Colliers International
Invested upwards of €25m | 35The resort was abandoned in the 1990s | 19
Club aliga planned for balaton
lake balaton attracts another resort developer to its busy shores
martin Kuebler
Lake Balaton, Hungary’s most popular weekend escape, is already lined with summer homes, resorts, yacht clubs and beaches. But Zvi Frank, CEO of Pro-Mot Hungária, believes there’s room to add yet another resort to the mix.
“This place is extremely unique, [due in part to] its delicate natural resources … its future potential and its history,” enthuses Frank as he outlines his plans for Club Aliga, a top-class resort that will stretch along the nearly 2 km shoreline in the town of Balatonvilágos, 90 km from Budapest.
“This was where the general secretary of the Communist Party, the prime minister and the ministers of the cabinet used to spend the summer months,” says Frank. “The Hungarian ruling elite … ran the country from there for 50 years.”
The resort was abandoned in the early 1990s, and since then only the beach and park area, once strictly off-limits to the public, have been reopened. Much of the area remains fenced off due to the dilapidated state of some of the buildings.
Pro-Mot Hungária bought the plot from the Hungarian state in 2007 after four failed privatization tenders, sinking about €20m into the 47 ha of beachfront property. Pro-Mot, a 50-50 joint venture between SBI Real Estate Development and developer AFI Europe, now owns around three-quarters of the site. The company is leasing the remainder from the state for a period of 49 years, with the option to buy at a later stage.
Frank says they’ve already invested upwards of €25m in design work and zoning proposals, bringing in a chiefly British team to develop the final concept. UK architecture firm RMJM, known for its twisting glass spire design for the Gazprom headquarters in St. Petersburg, has joined with UK landscape designer Gustafson Porter and the engineering firm Halcrow Yolles to outline the master plan.
Hungarian architecture firm Pomsár és Társai Építész Iroda and other local consultants are also involved.
The design concept divides the site into two distinct areas, separated by a dramatic natural cliff that ranges from 40 m to 75 m in height. The upper level will feature a small city center with shops, a market, cafés, restaurants and two hotels – one for families and one taller landmark structure with conference facilities. All of this is likely to be developed in the project’s first phase.
A later phase will include a series of terraces and footpaths cascading down the cliff, featuring retail outlets along the way, ending in the lower waterfront. Frank says this lower area will be kept as open and as natural as possible, with public access to the promenade, beach and marina.
About 15 private plots will be available in this section, each around 600 sqm in size, for individuals to design and build their own
summer homes. The area will also feature a number of smaller condominiums and will be flanked by another hotel and a wellness
center, bringing total hotel capacity to about 1,000 rooms. Sport facilities, including an ice skating rink and tennis courts, are also in the mix.
The proposed resort won’t come cheap. Estimated costs are in the range of €400m to €500m, and Frank admits the project won’t be starting any time soon in the current financial setting.
“We are talking long-range,” he says. “This is not something that will happen over three to five years. This is something that will happen gradually over 15 to 20 years.” He says now is the time to work out the zoning plans and various permits, a process which he calls a “major effort” in itself.
“Right now, financing is not a major problem on this project.”
29HUNGARYDevelopment
Club Aliga will dominate the shore at Balatonvilágos
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An additional two buildings | 36Began construction on spec | 14
goodman delivers 27,000 sqm warehouse
rossmann consolidates into goodman’s custom-built shed at Üllő
martin Kuebler
Last month, the Hungarian arm of pharmacy retailer Rossmann moved in to its new 27,000 sqm custom-built shed on the outskirts of Budapest.
The move was intended to centralize its warehousing operations in the country, bringing everything under one roof near the airport. Previously, Rossmann was spread out in several locations across Hungary, including AIG/Lincoln’s nearby Airport Business Park.
Rossmann chose to locate its new distribution headquarters at the Üllő Airport Logistics Centre, a project that was started at the end of January. Developer Goodman initially began construction on spec, buying the land and going through the planning and permitting.
However, actual construction work was in doubt until Rossmann signed up.
“When we signed [with Rossmann], we were very happy because otherwise we probably wouldn’t have gone ahead with it,” says Zsombor Török, manager of Goodman’s Hungarian operations.
Rossmann signed on for a 12-year lease, quite impressive considering the standard lease term is three to five years. However, the retailer’s build-to-suit requests – an automated racking system and specialized German sprinkler set-up – led to Goodman securing the longer lease term. Rent details are being kept under wraps, but Török did say they were near the market average of about €3.5 per sqm per month.
Ten percent of the 27,000 sqm building will be used as office space. Török says Rossmann has the option to expand with a further 12,000
sqm in a future building. The site itself can still accommodate an additional two buildings, which will bring the total size of the Üllő project to about 115,000 sqm.
“We’re already negotiating with two serious parties for the second building,” he says, describing one of the potential tenants as an international company looking for a 20,000 sqm central hub. He hopes to successfully finish negotiations in the coming months. “The market is still there, and a few lease deals are still [happening], but it’s nothing like it was maybe two or three years ago, that’s for sure.”
Goodman has another nearby site ready to go on the M5 highway, in Gyál about 20 km southeast of Budapest, should the tenant interest present itself. Török says the plot, already set with all the necessary permits, could hold a 22,000 sqm facility.
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30 HUNGARY Logistics
Take-up reached 19,000 sqm | 6
Looking at the completion figures for Hungary’s industrial market so far this year, you wouldn’t think anything was wrong. The first six months of 2009 saw 123,500 sqm of new stock hit the market, just under half of the total stock completed in all of 2008. It’s only when you slide your eyes down the demand and vacancy side of the equation that the trouble becomes apparent. “If you just look at the take-up figures for the first half of 2009, it’s obvious that the industrial sector was heavily hit by the crisis,” says Éva Tamás, property adviser in the industrial and logistics department at DTZ. Compared to 2008, when take-up reached 325,000 sqm, 59,000 sqm over the total completion level for the year, the take-up in the first half of 2009 is a paltry 19,000 sqm. The vacancy rate has jumped to a seven-year high of 22.8 percent, according to DTZ’s data. “Developers have reacted quickly to the changing market conditions,” says Tamás, adding that only 30,000 sqm of industrial space will be handed over in the second half of the year. “Instead of starting new developments, owners will concentrate on letting existing space.She says rents have dropped between 10 to 20 percent in the face of strong competition for tenants over the last six months, to an average of between €3.5 and €5 per sqm. She stresses, though, that it’s not a situation unique to Hungary.Not much new stock is expected for the rest of the year – at least six projects have been put on ice – and Rita Tuza, industrial consultant at CB Richard Ellis, says it’s difficult to predict much into 2010, due to the short-term nature of industrial construction.“The vacancy rate will remain around 22 percent [for the rest of the year]… six months are not enough for the market to recover,” says Tamás. “Many companies are already planning their [space requirement] for next year, but before 2010 there won’t be much change in demand. On the upside, she says the development slowdown should ultimately have a positive effect. “Industrial stock remaining stable, coupled with the expected growth in interest from potential tenants, will help the industrial and logistics market regain its former balance.”
industrial vacancy rates skyrocket martin Kuebler
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Decreasing the office rent | 41Ahava’s first branded store | 25
retail space at orco’s pds now fully let
leasing of the retail space at orco’s paris department store is done, while office rents have been cut to match the market
martin Kuebler
Though it may look ready for business from the outside, the large, copper-colored letters across the glass doors of Budapest’s Paris Department Store say otherwise.
As of late August, the sign promised that the restored landmark would be opening soon, a deliberately vague announcement as developer Orco’s original plans called for the main retail tenant, book and multimedia store Alexandra to launch already in the spring. But whenever the doors do slide open to the public, the building’s latest leasing will ensure that at least the retail portion will be fully stocked.
Early last month, Colliers International,
the leasing agent for the Paris Department Store retail area, announced that it had completed the leasing of the lower two floors of the century-old department store.
Most of the space, around 1,700 sqm, will be taken up by Alexandra’s flagship store. The remaining unit, 40 sqm facing Andrássy út, will be filled by Israeli cosmetics brand Ahava. The store is Ahava’s first branded store in the city, though the line of skin care products has been available in Hungary for the past two years. András Kovács, Orco’s regional leasing
director, expects both stores to open later this month, once the occupancy permits have been sorted out.
Meanwhile, work continues on the leasing of the five floors of office space, 5,850 sqm in total. A contract for two floors was expected to be signed by the end of August, and Kovács says PDS is participating in several additional tenders for the remaining space, though at rents now significantly lower than initially anticipated.
“We are decreasing the office rent because of the current market,” says Kovács, adding that rents initially started at €20 but have now dropped to between €13 and €15 per sqm per month.
The PDS offices aren’t the only space the developer is looking to fill at the moment. Though decidedly less glamorous, Orco’s centrally located Szervita tér office block is offering about 4,000 sqm at €5.90 per sqm. Space at the former headquarters of Budapest Bank on Váci út, a 15,000 sqm building now renamed V188, is going for €9.90. Both buildings are sitting empty – or will be, once Budapest Bank moves over to the new GTC Metro building next year.
“We have companies interested [in both], but we’re not negotiating contracts at the moment,” says Kovács.
31HUNGARYDevelopment
Work nears completion at Budapest’s Paris Department Store
name size (sqm) developer Completion
dél-Pesti business Park d 4,350 wing Q3 2009
dél-Pesti business Park g 3,800 wing Q3 2009
diP 17,000 n/A h2 2009
Európa Center (b2/10) 8,488 Terra Invest h2 2009
Üllő Airport Logistics Centre 27,000 goodman Q3 2009
source: Cb richard ellis/dtz
INDUStrIAL pIpeLINe – H2 2009
name size (sqm) developer
Aerozone Logistics Park 17,000 Segro
Europolis Park budapest M1 (extension) n/A Europolis
Ozone business Park 9,000 Segro
gyál Logistics Center 20,700 goodman
M4 Anvil business Centre 3 buildings harbor Industrial development
Üllő Airport Logistics Centre 2 buildings goodman
source: dtz
INDUStrIAL prOJeCtS OrIGINALLY pLANNeD FOr 2009 – ON HOLD
Targeting industrial developers | 83The concept is simple | 34
auchan makes use of solar power in two new stores
Canadian technology is being used to green hungarian hypermarkets and, eventually, industrial sheds
martin Kuebler
One of the newest green technologies to appear in Hungary is, quite literally, a lot of hot air.
By adding a set of simple metal sheets to the outside wall of a building and hooking that up to the air handling system, air heated by the sun can be used to warm up the building’s interior, saving money and reducing CO2 emissions.
Hungary’s two newest Auchan hypermarkets, one in Miskolc and one in Maglód, a town 20 km from Budapest near the Ferihegy International Airport, are the first Hungarian developments to feature SolarWall. Gergely Pákozd, head of research at the non-profit Hungarian Development Institute (HDI), the
national distributor of this 30-year-old Canadian technology, says they learned of SolarWall while helping the retailer design their new schemes two years ago.
“We were working with Auchan, optimizing the use of energy for the building, and they were interested in using renewable energy to supply and lower the energy consumption of their building,” he says.
The retailer was sold on the simple technology because it was relatively inexpensive and would require no maintenance, while delivering a healthy return on investment – between three to six years – and easy green credibility. Pákozd adds that EU incentives can help small and medium-sized businesses make use of the technology.
The concept behind SolarWall is simple. Lightweight, wavy metal cladding, perforated with hundreds of pinprick holes, is attached to the exterior wall by simple scaffolding. In the case of the Auchan stores, the sheets covered 500 sqm in Miskolc and 1,000 sqm in Maglód.
Air is drawn into the 20 cm gap between the cladding and the wall and heated by solar energy to temperatures between 5 and 25 degrees Celsius in the winter. The air is then sucked into the building’s ventilation system, reducing the energy needed to heat the building. Pákozd says the life expectancy of the panels is at least 30 years.
He says the system also has other benefits, as it brings a steady stream of fresh air into the building and acts as an additional layer of insulation and shading. “Usually, these buildings are not well insulated and there is heat loss through the walls. But with SolarWall, we can bring back that lost energy,” he says.
“We have finished the test period in Hungary and got very good results,” he continues. “The first two installations were an important confirmation for us about this technology. We can now say that we offer the most most effective renewable [form] of air heating.”
Auchan is considering adding the technology to its existing and new hypermarkets in the coming years, but has asked that HDI find a way to make it useful in the summer months. Right now, the system is only used to warm air inside
buildings but HDI, along with the creators of the product, Conserval Engineering, are studying ways to use the air during the summer for other energy-generating purposes.
Ikea has also looked into using the technology, and Pákozd says HDI is targeting industrial developers for further installations in the country. These simple structures lend themselves best to the product’s installation, as the panels can easily be added without much concern for aesthetics.
Office and residential projects, on the other hand, are less likely to incorporate the cladding, though Pákozd says the technology has been used in such schemes in countries like Germany and Canada.
The challenge, especially in an economic downturn, is to convince customers that the overall savings are worth the extra expense of installation. “Right now, we don’t have any ongoing projects, but we are meeting with big mall operators,” he says.
“Environmental aspects are not really their focus right now.”
The retailer was sold on the simple technology because it was relatively inexpensive...while delivering a healthy return on investment and easy green credibility
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Auchan’s new SolarWall adorns the front facade
32 HUNGARY Development
Opportunistic buyers may debut | 75Yield information remains confidential | 21
tesco warehouse deal completed
hungary’s largest transaction of the year, so far, saw tesco sell off its logistics portfolio to us investor W.p. Carey
martin Kuebler
In what’s likely to be one of the largest deals on the Hungarian market this year, Tesco announced in late July that it had completed a €63m sale and leaseback transaction of its Hungarian logistics portfolio with US investor W. P. Carey.
“It’s great news for the market,” says Charles Taylor, managing director of Cushman & Wakefield, which represented Tesco. “It’s a major deal [and]…it’s going to show that there’s some liquidity in the market.” The transaction, already big news for Hungary, is also the largest sale and leaseback in Central Europe in the past two years.
The deal consisted of Tesco’s entire distribution network in Hungary, including a 45,468 sqm facility in Gyál, southeast of Budapest near the intersection of the M0 and M5 highways, and a 47,287 sqm box in Herceghalom, 30 km to the west of the capital.
Yield information remains confidential, though speculation places it between 8 and 8.5 percent. Part of the reason for the secrecy is that Tesco is still working to close a number of similar deals in nearby Poland, Slovakia and the Czech Republic, deals which will contribute toward the retailer’s goal to raise £5bn (€5.8bn) from the sale of real estate to improve shareholder value.
“Given our risk management-driven investment strategy and portfolio diversification criteria, we could not have asked for a more suitable counterparty than a market-leading company like Tesco for our first deal in Hungary,” said Jeffrey Lefleur, W. P. Carey’s director, in a press release. Tesco, the world’s third largest retailer in terms of sales, represents what Taylor calls a “quality income stream …15 years of guaranteed income.”
Even the country risk was slight, according to Richard Redfern, investment consultant at King Sturge, who represented W.P. Carey. “It’s the Tesco covenant,” he says. “There was a difference
between what they would have paid here compared to somewhere else, but when you’ve got a cast-iron covenant on a long lease, it’s less of a concern.”
The deal is a good sign for Hungary’s investment market. “What we’re seeing is investors starting to look [at Hungary again],” says Taylor. “That in itself is a positive step forward. When we were speaking to these guys [in March] at MIPIM, they weren’t even getting authorization to get a bus ticket here.”
He adds, though, that he thinks Hungary could see an influx of first-time investors, like W.P. Carey. “We might actually see more investors coming in who haven’t bought here before. People who might have looked at the market before and thought perhaps the pricing was
aggressive,” he says. “But now, seeing that [pricing has] bounced back quite a way and… the gap between the return and the risk has closed [somewhat], they have an opportunity to buy best-of-class assets whereas perhaps before they couldn’t compete.” He adds that opportunistic buyers, particularly German funds, could debut in Hungary in the next 12 to 18 months.
“It’ll be a question of how quickly their investment committees can get their heads around investing back into Central Europe and Hungary in particular,” he says.
33HUNGARYInvestment
The Hungarian Tesco deal is the largest sale and leaseback in Central Europe in the past two years
C&W renegotiated lease terms | 2
The Hungarian division of Raiffeisen Bank is staying put.At the end of July, Cushman & Wakefield announced it had renegotiated the lease terms for the bank’s 11,879 sqm space at the Akadémia Bank Center office building in Budapest.“This agreement proves that large corporates are willing to commit to high standard of-fice buildings at right locations, which meet their long-term real estate strategy,” said Gergely Pados, Cushman & Wakefield’s head of office, in a press release. The lease renewal represents the largest such transaction on the Hungarian market so far this year. Detailed terms weren’t made available.C&W is the exclusive leasing agent and asset manager of the District V property. The 13,200 sqm office was built in 2000, and is owned by RREEF Alternative Investments.
raiffeisen renews akadémia lease
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The best Real Estate News for Hungary, Poland, Czech Republic, Russia, Slovakia, Romania and Ukraine.
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Space for smaller local enterprises | 23About 80 percent let | 21
zala park strengthens regional retail zone
ConvergenCe launches regional retail scheme in zalaegerszeg
martin Kuebler
With larger, more impressive schemes like Eiffel Square grabbing the headlines, it’s easy to miss out on some of developer ConvergenCE’s lesser projects.
One such project opened at the end of August in the town of Zalaegerszeg, in western Hungary. Zala Park, with its 25 stores featuring brands like C&A, New Yorker, Deichmann and major anchors Aldi and Decathlon, is a joint venture between ConvergenCE and Europa Capital; the €35m project was financed by the Europa Fund II. Leasing was the responsibility of Boundary Partners, and by the opening last month, about 80 percent of the 17,800 sqm had been let out.
In addition to the big brand names, space has also been set aside for smaller local enterprises looking to establish themselves. The shops, 100 to 300 sqm in size, are located in the central area of the retail park and are intended for
coffee shops, opticians, florists, dry cleaners and other small businesses. Though light on details, the operators of the retail park have said they intend to provide financial support to any small enterprise choosing to locate its shop at Zala Park.
Construction on Zala Park began late last year. The 10 ha plot sits near a Tesco hypermarket and Praktiker, in a catchment area of half a million regional shoppers.
ConvergenCE plans to add to this developing retail area with a second 10,000 sqm phase, though a specific timeline remains unavailable at this time.
35HUNGARYRetail
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Zala Park plans to support local businesses in addition to the big brands
No new staff has been hired | 9
Over the summer, IVG Development Hungary announced that in addition to its property development arm, it would now also be undertaking asset and project management tasks. In Hungary, IVG will manage properties in its own portfolio and funds. These include three properties owned and developed by IVG Development – RiverPark, StefániaPark and Infopark Building E – and four properties owned by IVG Funds, three of-fices and the four-star Hotel Art’otel overlooking the Danube. No new staff has been hired to handle the asset management tasks, though IVG hints that this may be a possibility in the com-ing months as the developer takes on additional properties.Aside from property management, IVG will also buy and sell single properties and portfolios. In its offices across Europe, IVG manages around 5.7m sqm spread over 800 properties, a value of €17bn.
ivg adds asset and project mgt.
IVG’s Infopark is among the properties now managed by the developer
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Deal finalization | 62Heavy discounts | 35
are auctions the answer to slow residential sales?
Will auctions help developers restart the residential market in poland, or is Colliers pushing them too soon?
Wojciech Kość
The Warsaw office of Colliers International thinks it has found a way to boost residential sales in Poland. Together with US real estate auction company Rick Levin & Associates, the agency is preparing to launch residential property auctions in the coming months.
So far, residential developers haven’t been rushing to offer their homes up for auction, but the agency is convinced developers are anxious to increase the sales pace and reduce the carrying costs of unsold inventory – albeit at lower prices.
The idea is dead simple, says Paweł Hardej, head of Colliers’ new auctioneering department. Developers and individuals will offer their completed flats up for auction. Anyone who pays the necessary guarantee can take part in the auctions, with the size of the guarantee varying depending on what’s being offered. Then it’s a simple matter of awarding the flat to whoever bids the most. Auction winners will be assisted through the process of finalizing the purchase by the auction’s organizers, for a fee.
Hardej hopes the auction sales will prove more attractive to customers who are otherwise at the mercy of developers. “With auctions, everything’s clear about the price. A developer can offer a discount of 15 percent to one customer who, however, will never be sure if an identical flat wasn’t discounted by, say, 18 percent the day before,” he says.
This suggests, however, that asking price at an auction will start with heavy discounts, which he hints could be as much as 40 percent. Auction participants thus have much to gain, and nothing to lose but their time.
CIJ spoke to some Polish developers who had reservations about the new sales tactic, but Hardej says it’s too early for them to embrace the idea with full enthusiasm. He adds that Colliers is now talking to international developers who are experienced with auction property sales in other markets.
Colliers and Rick Levin & Associates will also benefit. Both companies will make money from commission paid by both the buyer and the seller, in return for assistance with deal finalization.
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Paweł Hardej, head of Colliers’ new auctioneering department
36 POLAND Residential
37pOLANDNews
leClerC buYs out billaThe first Western retail chain to appear in Poland, Billa, will sell its stores to French retail giant E.Leclerc after it agreed to terms with Billa’s owner, the German-based Rewe Group. The
transaction is currently awaiting the nod from the Office of Competition and Consumer Protection. Both parties agreed to keep the transaction’s value confidential.There are 25 Billa supermarkets in Poland, employing about 1,600 people. Billa’s net turnover in 2008 was about €100m, according to Polish daily Puls Biznesu. E.Leclerc operates 20 hypermarkets in Poland.Once the Billa chain has been offloaded, Rewe will concentrate on the cash-and-carry wholesale business in Poland, which is operated under the Selgros brand. Rewe will add three locations to its current network of 12 wholesale markets. Rewe Group introduced the Billa brand in Poland back in 1991 but sold it 10 years later to Auchan, which ran the stores under its Elea brand. Rewe Group gave the Billa doomed brand a second chance in 2006.
maYland takes share in Wzgórze Retail developer Mayland is the new partner of French invest-ment fund Fonciere Euris Group on the Wzgórze mall project in Gdynia. In a move that took effect in July, Mayland replaced
Apsys, the company with which Fonciere Euris had partnered with on Polish retail developments since 2004.Mayland’s plans include a refurbishment of the existing Wzgórze mall to be followed by an extension. Originally, when Fonciere Euris and Apsys were still working together, Wzgórze was envisioned as Tri-City’s largest retail development with 65,000 sqm of lettable space. ECE’s Galeria Bałtycka cur-rently holds that honor with its 39,500 sqm offering.Mayland now says it would like to refurbish the existing part of Wzgórze by the end of the year. It’s keeping details about the extension quiet, saying only that a “new concept” will be presented in the autumn. The Wzgórze project made headlines last year after Apsys failed to secure financing, and rumors persist that the French could still be toying with idea of selling the project altogether.Fonciere Euris has also announced that it will be disposing of its stake in the Manufaktura shopping mall in Łódź. The French fund controls 33.3 percent of Manufaktura directly, and holds a majority indirectly via another sharehold-er in the mall, Rallye Groupe, in which Fonciere holds a 57.67 percent stake.
polnord raises neW moneYHaving stated its intention to buy more land for future projects, listed developer Polnord has raised some of the equity needed to do so. In late July, the company carried out
a successful issue of 1.23 million shares, raising PLN 34.5m (€8.26m) in the process. In a similar move back in May, Polnord sold 1.5 million shares for PLN 42m (€10.16m).Polnord is one of the developers that’s been aggressively pursuing land pur-chases for future residential projects. At the moment, company officials say their eyes are trained most keenly on the Tri-City region, Lublin and Katowice.Polnord had a busy July, also issuing an additional 1.26 million shares to be taken over by the company’s strategic investor, Prokom Investments, which now has a 48.47 percent stake in the developer. In return, Prokom will cede
to Polnord the rights to a plot in Dopiewiec near Poznań, where the devel-oper plans to go ahead with a residential project of 2,000 flats.
eCho halts neW proJeCts for 2009 Listed Polish developer Echo Investment revealed in mid-July that it won’t be starting any new residential or retail develop-ments for the rest of the year.
The only development segment it wouldn’t rule out was office, where it cur-rently has two ongoing projects – the 33,000 sqm Park Postępu in Warsaw and the 15,600 sqm second stage of Malta Office Park in Poznań. Construc-tion on both is due to complete this year, while construction on Echo’s Oxy-gen should restart.
The pause in residential development comes at a time when the company has 20 schemes in the pipeline, with the first now expected to start in the first half of 2010. Echo hopes this will come just ahead of a market rebound it expects to begin in the second half of next year.Echo’s retail development division will also come back to life in 2010, with the expansion of Galeria Echo in Kielce. The company is trying to secure a €100m loan for that project. Neither has it given up on plans to build Arena, a shopping mall planned for Słupsk, despite an already substantial retail supply from developers Polimeni and Mayland in this town of 100,000. A lack of financing for the Arena project has delayed it until sometime next year.Echo also hopes to start its retail project Veneda in Łomża next year, along with an expansion of Galeria Echo R in Bełchatów. Both are towns with about 60,000 inhabitants.
developers fight for tenants It’s best to be wary when interpreting the news of recent de-velopment projects receiving bank financing (see p.38) as a symptom of an all-out reversal of market trends. Opposite ex-
amples are just as easy to find.The expansion of the Rank Progress retail project Zielone Wzgórze in Białystok is now on hold, following a “blocking of loans” from its financing bank. The news comes from the developer’s CEO Jan Mroczka, who was speaking to local media in Białystok. In Gorzów Wielkopolski, Caelum De-velopment has suspended the construction of its retail project Nova Park until next year, citing “prolonged talks with the general contractor” as well as what the developer enigmatically calls “partners.”It’s not just the banks that are to blame for the woes of Polish developers. In Kraków, demand for office space has decreased so dramatically that Quinlan Private Golub and TriGranit decided to hold off on the construction of their office projects. Awaiting better times are QPG’s 24,000 sqm Enterprise Park and TriGranit’s 32,000 sqm Bonarka 4 Business. Construction crews have also abandoned Pascal, GTC’s 5,000 sqm office building, though the company maintains no final decisions about the project’s short-term fate have been made.Bartosz Puzdrowski, QPG’s managing director in Poland, was quick to say that while construction wasn’t currently going on at Enterprise Park, there are intense talks underway to secure preleases. “I wouldn’t make a sensation just because cranes are not moving. Other work is going on instead,” he says.
Focus on refinancing | 81Improvement of the sentiment | 24
slight upturn seen in Cre financing
banks are looking to finance more commercial estate again, but fundamental differences persist in what they tend to agree terms sheets on
Wojciech Kość
The heat of summer tends to see a cooling off on the development market, but this year has been a bit different. Developers such as Ghelamco, GTC and Echo Investment have announced they’ve managed to sign financing deals with banks like Eurohypo and Westdeutsche Immobilien which, until recently, appeared to have no appetite for property exposure.
What’s changed? Bankers are now talking about something of a recovery market for mortgage bonds, for starters. In fact, their current approach depends primarily on whether they’re specialized property financiers or general banks.
According to Maciej Tuszyński, executive director at the Westdeutsche ImmobilienBank representative office in Warsaw, the first hints of investors returning to the mortgage bonds were visible in February. “It was the first sign of mortgage bonds market revival since September 2008, when news broke that some banks might be in serious trouble,” he says.
“Following the overall improvement of the sentiment on financial markets, it’s easier to sell mortgage bonds, which are then used to refinance property,” says Grzegorz Trawiński, head of corporate banking at Eurohypo’s Warsaw office.
Tuszyński and Trawiński, both representatives of property specialist banks, are focused on the mortgage bond market recovery because without investor interest, they’d be unable to raise money to lend. By contrast, less specialized banks with deep retail networks in Poland and a wider range of financial products are able to breathe more easily in difficult times.
According to Marek Koziarek, head of real estate financing at Bank Pekao SA , his bank never stopped lending. “That’s because, among other things, we never had issues with liquidity. As the interbank market froze up, we still had enough cash in deposits and we could
still finance,” he says. (See full interview with Koziarek, p. 43.)
There are differences, too, between what specialized banks and the likes of Bank Pekao tend to finance. According to Koziarek, his bank actually prefers development finance to refinancing, in part because it gets money into Poland’s economy
“We may be part of an international banking group [UniCredit Group] but Poland is our foremost focus. If we finance a development project, there’s a trickle-down effect from the developer, who now has the money, down to the subcontractors and tenants,” he says. “Refinancing doesn’t create that much value.”
While their respective banks did do some project development financing, Trawiński and Tuszyński have a different approach.
“The conditions to take on the responsibility to finance development are barely there. We’d rather focus on refinancing for the time being,” says Trawiński, complaining that each sector is currently weak.
“In these still uncertain times, financing that’s secured with existing property tends to be preferred by banks, which hurts
development projects. And if the latter are to receive financing, it’s not going to happen for speculative projects,” says Tuszyński.
Bartosz Puzdrowski, managing director of Quinlan Private Golub in Poland, confirms Tuszyński’s observations. He uses QPG’s office project Enterprise Park in Kraków as an example, as cranes are waiting to move in once the developer signs the right preleases. “It’s not a time to build on spec,” he says.
“Banks generally tend to deepen market trends that are dominant at any given moment, and there’s a great deal of risk aversion now. The attitude is still ‘when in doubt, run away’,” says Tuszyński, though wouldn’t rule out property lending on principle.
“There’s been a pick-up in development financing and refinancing. But it doesn’t mean all’s well now,” says Eurohypo’s Trawiński.
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Some say it’s development financing, not refinancingthat’s pushing the market forward
38 POLAND Finance
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Little pressure | 56An even stronger recovery | 27
dom development: profits down, confidence up
dom development will decide in september whether to begin its first projects in more than a year
Wojciech Kość
Dom Development reported falling margins and lower profits at the end of August, but its management insists it’s strong enough to weather the difficult conditions for some time to come.
The residential developer’s net profit fell 52 percent to PLN 64.2m (€15.8m) in the first half of 2009, while turnover decreased by more than 30 percent to PLN 382.6m (€94m).
“We’ve been wading through the crisis, but our financial foundations are sound enough to get past it fairly comfortably. On top of that, we can see the end of the crisis coming,” said Jarosław Szanajca, Dom Development’s CEO, at a press conference.
While sales are still far from what they used to be in 2006 and 2007, the listed developer has been selling flats at an increasing pace since the last quarter of 2008. In the fourth quarter of last year, customers bought 92 flats, marking the bottom of the market. In the first quarter of this year, sales went up to 106 flats and the second quarter saw a further increase, to 156.
Szanajca underlined that this increase has taken place at a time when customers are still having trouble securing mortgages. “That suggests an even stronger recovery once banks ease their mortgage policies,” Szanajca predicted.
While Szanajca said banks were making it tough on other developers, he wouldn’t comment directly on Dom Development’s ability to raise funds. He did say, however, that the company would have to make a decision by this month on whether to start construction on four projects totaling 800 flats.
“We have financing for all those projects so we would be able to launch sales immediately, if need be,” he said. It would be a significant step, seeing as Dom Development hasn’t begun a new project in more than a year.
Szanajca also said customers who are actually
in the market at the moment are looking for finished, or nearly finished projects. Such interest means prices have fallen only slightly, by 7 percent. With PLN 149m (€36.6m) of cash reserves on hand, and PLN 85m (€20.9m) in debts due by June 2010, Szanajca said there was little pressure on him to offload flats quickly.
He added, however, that if new projects got underway anytime soon, prices on them would
be far lower because of falling construction costs and the customer’s unwillingness to get involved at early development stages. “Discounts will diminish as construction progresses,” he said.
39pOLANDResidential
Szanajca: he might even start building this month
Public transit | 8
Spanish developer Neinver has launched the development of its second mall outlet in Warsaw. Factory Outlet Annopol, located in the Białołęka district, is scheduled to open in late 2010. Barbara Topolska, general director of Neinver Polska, says the project will be convenient for customers living on the right riverbank who will no longer need to cross the Vistula “to benefit from attractive prices.” Białołęka has become an intensively grow-ing residential area in recent years and Topolska hopes the new project will be one of the first to jump on the bandwagon to meet the increase in retail demand.Shoppers in search of a discount are likely to make use of public transit, and the mall’s location takes advantage of some of Warsaw’s important transportation lines. Additionally, Neinver will make 800 parking spaces available. Neinver is the sole investor in the Annopol Factory Outlet, with funding coming from the Irus European Retail Property Fund, a property fund it set up in 2007. Neinver introduced the outlet mall concept to Poland in 2002. Typically, brand-name items are offered at discounts and twice-annual sales events reduce prices even further. Among the stores who have signed agreements are Ecco, Gino Rossi, Lee and Levi’s. Neinver’s first outlet project in Warsaw was Centrum Outlet Factory, located in the western district of Ursus.
new outlet mall planned for Warsaw parker Snyder
8
Can pacific residence be saved?
uncertainty remains over the fate of pacific residence, with the developer denying it’s in financial dire straits
parker Snyder
On the banks of the Vistula River, in one of the most visible locations in Warsaw, the concrete shell of the Pacific Residence sits idle. For the past year, two cranes have been inactive, hovering over 11 storeys of unfinished apartment flats.
Originally planned for a 2010 opening, the residential development was put on hold when the developer allegedly ran into difficulties. The sales office declined to comment and developer Euro-City didn’t make itself available to speak with CIJ. However, Marcin Rasilewicz, the project’s sales manager was eager to debunk the negative publicity the project has received online, saying the company is not in financial trouble and that the project will be underway shortly.
Pacific Residence was being built on land owned by Warsaw’s premier Oriental art gallery,
the Asia and Pacific Museum. The ground floor and first floor, totalling approximately
4,000 sqm, will provide exhibition space for cultural artifacts from the Far East.
With a view of the river in the Powiśle district, the residential units range in size from 40 sqm to 170 sqm. Rasilewicz quotes prices beginning at PLN 14,900 (€3,600) per sqm and going up to PLN 29,500 (€7,100), adding that buyers can negotiate. He insists the project is soon to get underway.
Andrzej Wawrzyniak, director of the Asia and Pacific Museum, is less opaque when he said that the company ran into financial difficulties during the credit crunch. ”The problems have been overcome and new agreements have been signed,” he says, though he’s unable, or unwilling, to name the project’s financial backer.
Mikolaj Martynuska, residential director at CB Richard Ellis, says Pacific Residence was originally designed as office suites but changed to apartment flats. Citing high asking prices and an allegedly poor location for a residential project, he is skeptical about the project’s future and sees “no alternative but knocking down the structure and designing a proper office building.”
Martynuska adds Pacific Residence to the ranks of two other projects in Warsaw, Restaura Kameralna and Triton Park, which are also not likely to finish in 2010 as planned.
40 POLAND Development
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At least one transaction | 12
Following the recent news that Atrium European Real Estate was performing a “revision” of some of its Poland-based retail invest-ments, like the stalled Felicity scheme in Lublin and Stocznia in Gdańsk, rumors began circulating that the company was consid-ering a total pullout from Poland, or even CEE. AERE seems to be rebuffing those rumors, however, with an apparent repositioning and new expansion strategy.On August 19, the day AERE stock debuted on the Euronext Am-sterdam Stock Exchange, AERE general director Rachel Lavine said the company was looking for a retail portfolio to take over in Poland or the Czech Republic in the next six months, before commercial property prices rebound.“I hope to finalize at least one transaction of a portfolio,” Lavine told Bloomberg. “[After that,] the market is really going to stabilize and then it’s going to be even harder. Maybe there are going to be properties in the market, but not at the right price for us.”AERE says it has sufficient available cash to carry out a takeover; according to the company statement at the Euronext debut, it has “a cash position of €1.055bn against borrowings of €1.26bn.”
aere outlines new expansion strategy
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The problems have been overcome | 33Euro-City | 11
Originally planned for a 2010 opening, the residential development was put on hold when the developer allegedly ran into difficulties
7
AERE is eyeing a Polish retail portfolio to buy
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Polnord and Gant | 51Unsold stock continuing to grow | 14
residential deliveries up, new projects down
the most recent data suggests there’s no end in sight for the current downturn on poland’s residential market
Wojciech Kość
The residential market in Poland is now several months into a slowdown. While it hasn’t crashed, as many were warning a year ago, the latest statistics and studies indicate there’s no quick recovery in the cards.
Data covering the period of January through July, made available from GUS, Poland’s government statistics office, suggests the market is continuing to swell with flats from projects that began construction in 2007 and 2008.
According to GUS, 42,885 flats were delivered between January and July, representing an increase of 20.5 percent against the same period last year. With unsold stock continuing to grow, developers are being forced to rein in supply. In that same time period, developers started construction on 20,803 homes, a drop of 52 percent against the same period in 2008.
According to the Polish Association of Developers (PZFD), that drop is actually 70 percent because many of the projects that allegedly kicked off did so only on paper, with developers formally beginning construction
simply so construction permits wouldn’t expire. At the same time, the number of new construction permits issued dropped 36.3 percent in comparison to the first seven months of 2008.
Recent reports also indicate that a recovery in sales is nowhere in sight. According to residential broker Emmerson Real Estate, there are 8,705 new and unoccupied residential units available in the major Polish markets of Warsaw, Kraków, Łódź, Poznań, Wrocław, Katowice and the Tri-City.
At the moment, according to another report from Warsaw-based residential consultancy Reas suggests, it takes a full year for a developer to sell 25 percent of what it has on offer and to get financing. Customers would thus end up waiting three years to move in. That makes them turn to finished flats instead.
Having no option but to deliver projects begun earlier, some developers are at least putting new ones on hold. Dom Development recently announced it would “make decisions” about some of its new developments this fall, but few expect the company to take any out of the freezer.
It’s by no means a universal strategy. The likes of Polnord and Gant will continue to pursue opportunities to take over projects in situations where the original owners give in to bank pressure or cannot afford to wait out the poor sales period.
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Residential: still no smooth sailing in sight
42 POLAND Residential
Fragmented ownership structure | 22
In early August, the city of Gdańsk granted listed development company Polnord a 10-month exclusivity period in order to negotiate the development of the northern edge of Wyspa spichrzów, an island in the middle of Gdańsk’s historic downtown. If the nego-tiations prove fruitful, the project will be carried out by Polnord and the city in a public private partnership.The city and the developer are to set up a special purpose vehicle in which the city will provide the 2.3 ha plot while Polnord will develop it to host a mixed-use residential and services area, as well as the new Museum of Amber. Polnord will also take care of the pub-lic infrastructure. The project will feature 50,000 sqm of lettable and residential space, while the museum will cover 9,000 sqm. In its planning, Polnord will have to consider the fact that the area is subject to protection from the city’s conservation office which restricts, for example, building height.On the day the city made the announcement, demand for Polnord stock increased on the Warsaw bourse, driving the price up by nine percent. Usually rather talkative about Pol-nord’s ventures, CEO Wojciech Ciurzyński has restricted himself to diplomatic statements describing the project as a “challenge” and affirming his will to close negotiations with the city successfully. Should this not happen, another development company, Hossa, would be the city’s next negotiation partner.The history of Gdańsk’s attempts to revitalize the area in question isn’t exactly encourag-ing for Polnord. Incredibly enough, the area has been neglected since the Second World War. The city tried to attract investors a few times in the 1990s but to no avail, mainly due to the highly fragmented ownership structure of the land. In January, however, the city managed to take over the majority of the area, with just two swathes of land remaining in the hands of the companies Mostostal/Tonagro and Iberinvest.
polnord chosen by gdańsk for island development Wojciech Kość
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Impossible to predict | 36No need to do bailouts | 14
polish banks not feeling the pain
marek koziarek, head of real estate financing at pekao sa, says his bank prefers development finance to refinancing
the news from poland continues to be positive, at least relative to the rest of europe. is this slight optimism justified? how does the macro-economic situation impact your lending decisions? Poland does look better than the rest of the world. It never got indebted in foreign currencies to the extent that other countries did. No overly sophisti-cated financial instruments played any role in Poland. Also, Poland has been doing better because of two factors. One has been the internal consumer market which, even if a little shaky recently, never looked about to crash, as elsewhere. Then there’s exports, which of course have felt the impact of the recession, particularly in Germany, but on the other hand it was greatly helped by the falling złoty. We’re also taking advantage of the EU funds. Poland’s financial and banking systems are in relative balance. If there’s any disequilibrium between deposits and loans in banks, it’s nothing in com-parison to countries like the US. There’s no need to do bailouts, no need to pump money into banks. That’s not to say we can do business the way we did in 2007. We do have a more restrictive approach to commercial property financing. We require more equity and higher debt service cover ratio. We take into account the fact that real estate is worth less these days, and also the fact that rents are going down – in other words, we are more cautious.
but other banks certainly did wake up. The reason that other banks [woke up] is that the financial market in Ger-many has become a bit livelier, particularly the market for mortgage bonds. Secondly, whatever worries there were about the state of the Polish banking system, they never panned out.
how much less are you lending now? Our activity now is at about 40 to 50 percent in comparison to 2008 levels. It’s a drop, no doubt, but we didn’t come to a complete halt. That was be-cause, among other things, we never had issues with liquidity. As the inter-bank market froze up, we still had enough cash in deposits and we could still finance. We do finance development projects while avoiding refinancing deals. That said, if you asked whether banks in general like the property sector now, I’d say they still don’t. If there’s debt available, it’s generally refinancing, not financing of development projects.
is a return to pre-crisis activity in sight? That’s impossible to forecast because it’s impossible to predict how the development and property investment sectors will shape up now. I’m an optimist, though, at least about the Polish economy and the Polish property market. The crisis in Poland happened at the best possible moment. The vacancy rates were at their lowest, the ratio of deposits versus loans in banks was only at 1:1, very much unlike in Western markets.
What’s your goal for this year in terms of financing commercial devel-opment – how much are you going to loan? We’re looking at a sum of about €500m.
developers complain that banks are making a killing on them these days. is this a fair complaint, or did they just get used to the easy money? Yes, those were the beautiful times when everyone thought it was so good and could only get better. On the other hand, we would never finance at LTV greater than 75 percent. We just didn’t want to compete in that respect. So developers that work with us are not shocked by, say, the sudden drop in LTV from more than 90 percent to 60 percent. Our restrictions weren’t so harsh in comparison to the top of the market.
there are estimates that capital values on commercial buildings have fallen by 150 to 200 basis points. are those realistic? Yes. We’re nearing, or exceeding, 7 percent on prime properties. But the op-portunistic investors looking for double-digit yields will not find them be-cause, as I said, the Polish commercial property market hasn’t deteriorated that much. Neither will it get that bad.
how concerned are you by the increase in subleasing activity, and re-ported drops in rents? Not much. Landlords can still absorb a drop in rents. I don’t see any loans in danger because of that. If lease deals don’t expire in the year of the crisis, then nothing bad is going to happen. Of course, there will be properties where those leases will expire during the crisis lasts and those properties might be affected. But they will only account for a maximum 20 percent of properties in total. There’s no systemic problem with the quality of com-mercial property in Poland.
43pOLANDQ&A
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Generating movement | 40Brutalist architecture | 17
neinver inks deal with railways in katowice
the redevelopment of katowice’s may finally move onto the fast track after a deal was signed with the developer
marcin Śmietana
In July, Spanish developer Neinver and Polish State Railways (PKP) signed a deal under which they plan to transform the Katowice railway station into a mixed-use complex combining rail travel with retail and offices, as well as an underground area designed for municipal transport services.
Neinver and PKP will set up a special purpose vehicle called Galeria Katowice to carry out the
PLN 1bn (€242m) project, according to PKP spokesman Michał Wrzosek. PKP will contribute the land in return for a 12 percent stake in the SPV, with Neinver holding the remainder.
Neinver angered architects recently, by saying it would tear down the station’s ferroconcrete cup-shaped supporting pillars, a fine example of Brutalist architecture. Neinver says it’s due to the pillars’ poor condition, but many fear it’s a prelude for doing away altogether with reportedly cumbersome feature.
The railway station will be reduced to a single-storey building, connected by a passage to a new building with five floors of retail and
services along Szewczyka Square in front of the existing station and seven storeys of offices on the western side. There will also be a standalone office building on the eastern side. Some urban planners and architects have criticized the current plans, under which the new buildings would all but eclipse the original station building.
The new commercial space will include 52,000 sqm of retail and 24,000 sqm of office. “The colors and construction materials, as well as the space arrangement based on a pre-war concept, should go well with the existing surroundings,” claims Wrzosek.
“We would like to create a representative as well as an accessible facility in the city center, generating movement rather than enclosing it within a certain area as is typically the case with shopping centers,” says Antoni Pomorski, design manager at Neinver Polska, rejecting at the same time concerns that the project will overwhelm the old station building.
Neinver is also working with transport experts from the Warsaw University of Technology and Katowice’s municipal transport company to move the bus hub, currently located at ground level in front of the station, entirely underground.
The rebuilt station and the shopping area will be ready by 2012, according to PKP’s Wrzosek. Construction of the standalone office building will start shortly afterward.
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44 POLAND Development
The station will be reduced to a single-storey building, connected by a passage to a new building with five floors of retail
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Reduce energy use | 11
Competition between sustainability certification systems has just stepped up in Poland. In August, Jones Lang LaSalle decided to add LEED advisory services to its skill set.Last month, JLL had two members of its Warsaw team, Paweł Warda and Bartłomiej Sze-jba, trained to become accredited professionals in LEED (Leadership in Energy and Envi-ronmental Design), an American building sustainability certification method. JLL will not offer consultations for BREEAM, a similar UK-based program, and claims to be the first property adviser to obtain this accreditation for LEED in Poland.LEED certificates play a “crucial role in the distribution of the added value of sustainability equitably amongst developers, investors and tenants during sales and leasing transac-tions,” according to JLL. The agency claims that using LEED methodology in the design and construction of buildings can reduce energy use from 30 to 50 percent, lower carbon emissions by 35 percent, and decrease water use and solid waste by 40 and 70 percent, respectively.Warda, head of project and development services, says his department will advise devel-opers and tenants on how to achieve LEED certificates in new and existing buildings. The company has already introduced the certificate system in markets like Germany and Italy. “Now it’s time for Poland to join them,” says Warda.“Sustainability has become the key issue for a growing number of companies. This ap-plies in particular to the demand for new office and retail buildings in good to prime loca-tions,” adds Szejba, senior project manager in the same department. “Existing buildings in these locations will come under pressure and their owners would be well advised – as part of their asset management – to start thinking about a ‘sustainability upgrade’.”Originally a certificate for new buildings developed for owner-occupiers, LEED has been extended to several variations such as core and shell, commercial interiors, existing build-ings and homes.There are no LEED-certified properties on the Polish market just yet, but several proper-ties have already been registered for that purpose.
Jll rolls out leed advisory servicesWojciech Kość
11
Adjusted to reality | 44Generate greater returns | 22
hotel sector continues its slide
new hotel development is falling in poland, as are the revenues being produced by existing ones
Wojciech Kość
The recent flurry of newly opened hotels in Poland will likely prove to be the last delivery of projects agreed to and financed when debt was still readily available.
Poland’s hotel development market is set to contract to PLN 1.2bn (€292m) in 2009, down from PLN 1.5bn (€365m) in 2008, according to a report from market research organization Instytut Hotelarstwa (Hotel Institute). The institute forecasts a continued downturn for next year when, according to the report, new hotel development will be worth a mere PLN 800m (€195m).
“The downturn results from the lack of debt in the market, yields moving out and dropping hotel performance,” says Stewart Coggans, CEE head for Cushman & Wakefield Hospitality. “It’s very difficult for developers and investors, who are reliant on debt to finance developments. Those who are not reliant on debt can place equity in other sectors. That perhaps in the short-term will generate greater returns and is perceived to be less risky.”
Alex Kloszewski, director of the hospitality department at Colliers International in Warsaw, maintains a more positive view. He thinks the drop in expected investment volume is only a revision that was bound to come, as many would-be investors rode the wave of enthusiasm following Poland’s selection as the co-host for the 2012 UEFA European Championship.
“Projects were announced on an unrealistic scale. Many of them were certain not to happen, ever. Now the plans for the sector have been adjusted to reality,” he says.
Coggans notes that the hotel sector is traditionally more volatile than others because of the non-
secure income flows. “A knowledgeable buyer/developer in the current climate could make a good return on hotel investments, but most perceive the risk to be too high in comparison to other sectors,” he says.
Cushman & Wakefield Hospitality estimates that hotel RevPAR (revenue per available room) performance in Poland in the first half of 2010 will drop, but to a much lesser extent than is expected for this year. The second half of 2010 should see the end of falling revenues.
45pOLANDHotels
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number of hotels
as of JulY 2008
as of JulY 2009 Change Change
(perCent)
5-star 27 35 8 29.63
4-star 94 136 42 44.68
3-star 615 752 137 22.28
2-star 572 608 36 6.29
1-star 206 214 8 3.88
tOtAL 1,514 1,745 231 15.26
source: instytut hotelarstwa
pOLISH HOteL GrOWtH: JUNe 08-JUNe 09
tenant spaCe in sqm building / CitY developer/landlord broker/s seCtor
roche Polska 1,450 Malta office Park / Poznań Echo Investment none office
Mazars&guerard 2,200 Zaułek Piękna / warsaw Invesco Real Estate king Sturge*/cBRE office
Novell 430 Park Postępu / warsaw Echo Investment king Sturge* office
Antalis 1,518 Adgar Plaza / Mokotów Adgar Postępu jLL* office
biogran 1,300 Panattoni Park kraków Panattoni Europe n/a industrial
dorum gP 5,400 ProLogis Park nadarzyn ProLogis cBRE industrial
idC 2,200 Panattoni Park kraków Panattoni Europe n/a industrial
Kermi 5,500 ProLogis Park wrocław III ProLogis cushman & wakefield industrial
Newell rubbermaid 5,950 Panattoni Park Poznań II Panattoni Europe colliers* industrial
LPP 1,675 galeria Sanowa / Przemyśl PA nova cushman & wakefield* retail
LPP 615 Solvay Park / kraków wP Investment dTZ* retail
H&M 1,400 galeria Łomżyńska / Łomża Idg dTZ* retail
* Represented landlord (no star indicates tenant rep)
LeASe DIGeSt
In cooperation with:Organized by:
For further information contact: adela balan | +40 743 794 364 | [email protected]
Romania www.cijjournal.com
7 22 September ‘09 | from 6 pmAsset Management: Do you have it under control?Presented by Laura Tiuca and Bogdan Papandopol – Managing Counsels and Leaders
of Salans’ Global Real Estate Group in Bucharest
More than 30 requests | 33Triggered the interest of thousands | 18
mixed reviews for gov’t housing stimulus
prima Casa has been getting a lukewarm response from developers and agents, though buyers and lenders have been more positive
Amelia turp-balazs
It’s been more than a month since the Romanian government officially launched its Prima Casa program (literally, First House), an initiative designed to help young aspiring homeowners get a roof over their heads while kick starting the country’s stagnant housing market.
Targeting first-time buyers by providing state-guaranteed mortgages, the plan offers advantageous credit terms. For example, the advance payment can be as low as 5 percent of the total property value, and annual interest rates are derived from three-month Euribor plus a maximum 4 percent premium, payable over a maximum period of 30 years. However, the state only guarantees loan values of €60,000 or less.
The program has triggered the interest of thousands of young couples around the country, and many have applied, but the number of those who have obtained credit continues to be low. Just 270 applications had been approved by press time.
“Even though developers of new properties had high expectations for the program, it’s unlikely that Prima Casa will relaunch the whole real
estate market,” says Nicu Dinu, Bucharest sales manager at developer Adama Holding Public. “The area where there has been an impact is on the secondary resale market for older apartments, where property prices are already going up,” Dinu adds. Adama currently has more than 30 requests for one-bedroom apartments waiting for approval through the Prima Casa program. The developer has four residential projects in Bucharest.
With the €60,000 price limit, studios and one-bedroom apartments are the most popular size for those hoping to qualify. Developers are therefore looking for ways to get units to come in at the right price. A summer fair especially organized for Prima Casa buyers saw thousands of visitors take a real interest in the offers from developers.
And there was plenty on offer. JQ Development was showing off the 700 apartments in villas that it plans to build in Tărtăşeşti, 25 km northwest of Bucharest. There, a three-bedroom apartment just scrapes by under the €60,000 limit. Those who choose to live closer to the city can do so at Oltenitei Residence, where studios cost €44,000 and one-bedroom apartments
€57,500. One development, Brancusi Residence, slashed prices by as much as €20,000 to €30,000 to make its one-bedroom 63 sqm unit qualify.
“The purpose of Prima Casa is to turn the mortgage tap back on for first-time buyers and to restart the residential market,” says Stefania Baldovinescu, a consultant at Colliers. But there are doubts as to whether this is working as planned.
“The first rebound in sales will be in the secondary market, as most properties selling for €60,000 are old apartments or studios in new compounds,” she says.
She goes on to point out that at best, the fund could only guarantee 17,000 mortgages. “At a national level, this number is small,” she says. “In 2007, in Bucharest alone, the number of property transactions was 24,000.”
“Our own statistics as well as those obtained from our partners, brokers and developers show that 75 percent of Prima Casa applicants are on the secondary market,” says Mihaela Stavrositu, branch manager at Credit Zone, a credit brokerage.
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46 rOmANIA Residential
We are just a victim | 21No new projects | 4
georgescu: even with preleases it’s tough now
CIJ speaks with bogdan georgescu, managing director of Colliers international’s romanian office about the current challenges
47rOmANIAQ&A
how badly is the romanian real estate sector being hit? The whole market is definitely much slower than we were used to in the past few years. All of the market sectors have been severely affected. Almost no new projects have started in the market, because without financ-ing from the banks, developers are unable to begin. So on the supply side there is also much less activity than there was. All market sectors are slow and the whole market has struggled for the first six months of the year.
is it your sense that there’s no finance available or is it no financing for projects with substantial preleases? Banks would normally say that if developers have a prelease they will look at the project. Market sources tell me, however, that now it’s even difficult when you have preleases. I think the system is improving slowly and eventu-ally we will see some projects start, but the banks will still have very tough conditions. Securing preleases right now is also very difficult when most companies are just looking to see if they can survive the next quarter. They can’t plan the next 12 to 18 months, which is what a prelease would require.
are you concerned that the general economy is going to get worse be-fore it gets better? I’m an optimist and I hope we will see improvements in the economy soon. The crisis in our country has not started internally; we are just a victim of the global crisis. With the US and China posting positive results and more con-fidence in those markets, I really hope Eastern Europe will follow with some good news and more confidence in the overall economy. That said, Romania is clearly still struggling and we’ll probably see a very dif-ficult remainder of the year. I hope that in 2010 we’ll see improvements in the economy because that would trigger more activity in the real estate market.
What are your priorities at the moment? You can’t hold on to everyone, so what’s your overall plan? We’ve been through a period in which reducing costs was the main focus and we did that a few months ago. I was happy to reach a level of cost that allows us to go on this year, even with a minimum of revenue. The focus now in the second half will be on revenues. All of our efforts will go toward pro-viding clients with new services and new ideas about how to serve the new economy. I’d say the focus will be on growing revenues and creating new lines of business to serve clients.
What’s the key to survival for agencies at the moment? To understand in each market what the new requirements are. In the past it was all about expansion, but now companies are looking at how to choose the right location, how to make the investments more efficient and how to reduce rent.
is the departure of monica barbu and horatiu florescu a big blow? how are you moving forward?
We parted ways back in December with Monica and it was mainly because we had different strategies and visions. I had a different idea about how I wanted to run the retail department. Horatiu was the number one broker in the office market; he left at the beginning of March to run his own business and run his own show. After 10 years with us, I understand that. They’re both very good brokers, professionals, but we’re a company with more than 60 people and both the retail and the office teams have 10 and six people now. So we were pretty well covered already. But again, they’re both very good people. They have their clients, I’m sure they’re going to do well. They simply made a personal strategy decision.
does it upset you when one company steals the people and teams of others?People move from one company to another all the time. Look at lawyers! But I don’t think we could talk about a whole team leaving us. We had to do some restructuring in March and we had to let some people go, and a couple of them were rehired.
once this crisis starts to recede, any guess which department will get busy for you first? What I’ve learned in the past six months is that busy isn’t the problem. If you want to work, you can be busy. We’re still very busy, but you have to work much more, providing more services to clients and unfortunately for less money than before. All of our teams are busy and they all say they need more people.
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Convincing tenants to come | 53€200m Sun Plaza | 17
sun plaza to come up in october
the first major mall to be built in southern bucharest will draw on a seriously undersupplied catchment area
Amelia turp-balazs
Bucharest will get two new malls this autumn, with the opening of AFI Palace Cotroceni at the end of September and Sun Plaza in October.
Taken together, the projects add up to 156,000 sqm of new retail supply for the city. Some would argue that the timing of these openings couldn’t be worse, coming at possibly the
darkest moment of the economic crisis. The developers, however, are confident that the city still has a gaping lack of quality, well-conceived retail projects.
“If you compare Bucharest to other European capitals in the region, you will notice that we are still behind the average when it comes to modern shopping space per inhabitant,” says Michael Richard, general manager and senior partner of EMCT, the developer of the €200m Sun Plaza for investor Sparkassen Immobilien.
“Even though many commercial projects have been built in Bucharest over the past few years, the capital still lacks authentic shopping centers with an adequate strategy for the market,” says Richard. “Some of these malls will simply disappear due to the lack of retailers and clients. The developers of these shopping centers have made some bad choices when it comes to location, tenant mix and accessibility.”
Located at Piata Sudului, at the crossing of several major roads in the heavily populated (but undeveloped) south section of town, the mall offers direct access from the city’s metro system via an underground tunnel.
Sun Plaza’s primary anchor, a 23,000 sqm Cora hypermarket, arrived in June to begin its fit out. “Approximately 85 percent of the commercial space is already leased,” says Richard. “Considering the advanced discussions we are still engaged in with some other tenants, this percentage could well be considered higher than 90 percent.”
He admits there is pressure in negotiations from tenants for lower prices, but adds that EMCT is being as fair as possible. “Our rents do not exceed market value, although given the fact that Sun Plaza will be the dominant shopping center in southern Bucharest, we could go higher,” he says.
Contract length ranges from five to 30 years for some of the major tenants. “Real estate market specialists say that Sun Plaza will be the last project of this size in Bucharest for the next five to seven years,” says Richard.
“There were no difficulties in convincing tenants to come here, since we have a desirable product. The issue is that some retailers have difficulties in obtaining financing,” he says. “Some retailers have made bad decisions over the last years, extending their retail chains everywhere without discrimination. As a result, they lost money. We are working with them to
find financing solutions to make their presence in Sun Plaza possible.”
Other anchor tenants include an unnamed major DIY retailer and a 15-screen Cinema City. Sun Plaza has so far attracted brands such as C&A, Sephora, Orsay, Motivi, Marks & Spencer, Gap and Douglas, along with many others.
In the second phase of the project, the developer plans to build 80,000 sqm of retail space and a class A office building with 8,300 sqm of lettable area.
“Some retailers have made bad decisions over the last years, extending their retail chains everywhere without discrimination. As a result, they lost money”
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Sun Plaza is part of the last generation of malls begun before the crisis really hit Romania hard
48 rOmANIA Retail
Lost €20m | 77A bitter enemy | 13
Cathedral plaza gets go-ahead from court
the developer of Cathedral plaza claims a dispute with the local archdiocese arose over a deal on office space
Amelia turp-balazs
Willbrook Management International has been working for years in Romania’s residential and office sectors, quietly gathering up roughly 10,000 ha of land before stopping its acquisitions in 2006. But recently it became well-known because of precisely the sort of difficulty all developers dread.
Cathedral Plaza, its 18-floor office building in Bucharest, has what in theory is an unbeatable location in the heart of the city. But there’s a catch, as the powerful owner of St. Joseph’s Catholic Cathedral next door, after which it’s named, has become a bitter enemy of the office scheme. Not only has the Roman Catholic Archdiocese of Bucharest not given the project its blessing, but it’s taken the developer to court on charges of endangering the church.
Construction on Cathedral Plaza has been delayed for three years due to legal wrangling and negative media publicity over the controversy. But at the end of June, the court of appeals in Ploieşti gave its final verdict in favor of the developer, which now hopes to finish it by the end of this year.
The story started 10 years ago, when Willbrook, through its development instrument MBD, approached Ioan Robu, archbishop of the Roman Catholic Archdiocese of Bucharest (ARCB), to discuss the details of the project that would maximize the cathedral’s importance.
“Archbishop Rabu personally got involved in the early stages of designing the building. Moreover, he recommended to us a structural engineer, Alexandru Cismigiu,” says Daiana
Voicu, general manager of Willbrook Romania.
The bone of contention which hasn’t come out in the ensuing controversy seems to be related to the archbishop’s alleged request for two free floors of office space, as well as parking and a private entrance in Cathedral Plaza. After giving the building his written blessing in 1999, Robu made the demands in 2001.
When its request was not accepted, he then withdrew his approval and began to raise concerns about safety. The developer then agreed to lease the church the requested office space for five years, at a nominal rent of $100 (€70) per month. The company says all documents pertaining to this are posted on Willbrook’s website.
Asked about its initial approval of Cathedral Plaza’s construction, an ARCB representative told CIJ firmly that “the ARCB has never agreed with this project,” adding that “the building is a public danger in case of earthquake and of fire,” citing as an example another Bucharest skyscraper which went up in flames at the end of June, damaging a nearby church.
Willbrook claims to have lost €20m as a result of the delays and legal battles, despite having
been granted all the approvals it needed to build the project.
While the media campaign against Cathedral Plaza could discourage potential tenants, Voicu is confident the building’s quality will win out. “We are offering a green building, with cutting-edge technology, aimed at clients looking to present a certain image,” she says.
49rOmANIAOffice
Getting on the wrong side of the church is never a good idea
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The bone of contention which hasn’t come out in the ensuing controversy seems to be related to the archbishop’s alleged request for two free floors of office space
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A website with tourist attractions | 33We had to adjust the prices | 22
green is smarterdoes green pay? the general manager of the berthelot hotel, Constantin arsene, says it’s the best long-term investment there is
51rOmANIAQ&A
Wasn’t the hotel more expensive to build because of the sustainable features that were included? The investment was more expensive but the operating costs will be lower, so that the additional investment will pay for itself.
What’s the business plan – do you expect more visitors because of the green angle? does it make business sense to build such a hotel? If we take into account the long-term operating costs during the planning stages, then the investment is worthwhile. Those who don’t take into ac-count such things will pay higher pollution costs or fees later. But also, our decision to build a sustainable building shows our attitude toward the en-vironment.
What’s your target market for this hotel?For the most part, we’re targeting the business sector, but also tourists. The majority of our customers are foreigners who are looking for four-star hotels in the center of Bucharest. Through our pricing policy, we’d like to attract three-star hotel customers, and five-star customers through the quality of service we
provide. This strategy appears to have been correct, as we already have a high number of regular customers after being open just a few months.
how hard has the hotel business been hit by the crisis? All activities have been affected. We opened the hotel at the height of the crisis, so we had to modify the original business plan. We had to act very quickly, study the clients’ behavior and then we had to adjust the prices ac-cording to supply and demand.Our strategy is based on the belief that an empty room costs more than one taken at a discount, and the strategy has had results. In the last four months, our average occupancy rate was 73 percent. Those who decided to offer low quality services at high costs after previous crises are suffering the most.
What would help you the most? and bucharest’s hotel sector as a whole? At present each hotel must support itself. I would like for the hotel taxes to be used to tell tourists about what can be seen in Bucharest. [Marketing] materials should be made available at no cost. Also, it would be very useful to have a website with tourist attractions translated into many languages. It doesn’t cost so much.
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Romania’s only IMAX | 19
AFI Palace Cotroceni in Bucharest is scheduled to open in September, straight into the head-winds of a global recession, but its developer claims to be unconcerned by the prospect. “Re-member, we started the mall before the crisis, so once you are in the middle of constructing and the marketing and financing a project, you can’t just stop,” says Reuven Havar, AFI’s country manager. Of the roughly 80,000 sqm of leasable area, over 70,000 sqm has been signed. “Half of the tenants signed after the crisis started,” says Havar. “This means at least our tenants in Bucharest are evaluating my mall as a good one and despite the crisis they are making the ef-fort to sign up for the space, and put all the money in for the fit out.” He says he’ll leave around 5 percent of the space open, confident he can get last-minute decision makers to sign up, at a higher rent. Contrary to reports of tenants pulling out of lease agreements in some malls, or pushing for lower rents, Havar says he refuses to open such negotiations on principle. “Only a few people came back to us and tried to open the agreement to renegotiations,” he says. “We refused cat-egorically.” On the other hand, he doesn’t deny the impact of the financial crisis completely, saying that without it, he could have expected to raise the asking rent over the course of the last year of leasing. “Of course it has some influence, but when I’m looking at the business plan I put in front of the bank two years ago and I’m judging upon the results, the income, there’s not a big difference. Maybe I’m 4 or 5 percent less than I’d hoped.” Palace Cotroceni will feature roughly 250 retailers, including a 20-screen multiplex and Roma-nia’s only IMAX cinema, carting, an ice rink, a climbing wall and a lake with boats.
palace Cotroceni firm on rents
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Reuven Havar, AFI’s country manager
residential: the pricing problem
if you’re not selling flats right now, the market could be trying to tell you something
robert mcLean
If there’s one thing that real estate professionals complain about consistently, it’s that they themselves have a tough time finding quality flats at what they consider to be reasonable prices.
“I’ve been trying to find my parents a really nice place to live for the past three months,” says one source.
“They don’t have an elevator in their building, and I’d like to get them a nice place with a terrace and parking and everything else. I’m willing to pay good money for it, too. It doesn’t have to be luxury, but it does have to be good quality. And I don’t want them to have to wait a long time to move in.”
This is typical of what appears to be nearly mission impossible, and not just on the upper end of the market but all the way down the line, says Filip Žoldák, research manager at Lexxus. And it may explain why some projects are seeing a revival in interest, while others remain dangerously quiet.
“I’d say there’s a lot of supply that’s not meeting
demand criteria,” says Žoldák. “That’s why people are waiting for new projects or for discounts.” The irony may be that with not a lot of competition about, it seems better quality projects simply don’t need discounts.
“July was the best month this year and it was comparable to July a year or two years ago,” says Katarina Lindbergh, chief executive of Finep, which is getting close to completing its scheme Jégého alej. “I wasn’t expecting this, and no one else was. I don’t know how other projects are going but we have seen an amazing turnaround.
“Suddenly, people are calling and it’s really busy. They’re coming to see the apartments, they’re coming and they’re having a look.”
Objectively, the situation hasn’t changed
drastically in Slovakia, or in Bratislava. Unemployment continues to rise, albeit more slowly, and the economy hasn’t turned the corner for the better yet. So what’s going on?
Lindbergh is unsure just what’s brought on this different mood, but she sees it reflected in media coverage of real estate. “I would say what’s changed is the sentiment of journalists writing about the situation,” she says. “It was disastrous in January, but now it’s more positive. They’re writing that you should take loans now, that the market is bottoming, and that you shouldn’t miss the wave.”
She says the reasons she and her team hear for the current interest range from loan applications being approved to the need to move in soon. On a more fundamental level, she describes what sounds like a coming moment of truth for the city’s residential market.
“Maybe the market is evaluating the good projects and the bad projects and it’s starting to diversify. If people really want to start living somewhere new, now, they don’t really have much choice at the moment, at least not in the center of Bratislava,” she says.
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52 SLOVAKIA Residential A shift taking place | 67People are waiting | 25
“It was disastrous in January, but now it’s more positive. They’re writing that you should take loans now, that the market is bottoming, and that you shouldn’t miss the wave”
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A 7,000 sqm decrease | 6
According to the Bratislava Research Forum (BRF), vacancy in Bratislava’s office market rose from 8.7 percent in the first quarter of 2009 to 11.5 percent in the second quarter. The IT sector pro-vided the highest level of teak up (nearly 7,000 sqm), followed by manufacturing and construction (roughly 2,700 sqm). Just over half of all take-up was for units of between 1,001 sqm to 10,000 sqm. The only significant office transaction in the second quarter was the expansion of Lenovo’s space, in Digital Park II, by 1,880 sqm. Total transactions in the second quarter was 17,000, a 7,000 sqm decrease compared to the previous quarter and according to the BRF, a 10,000 sqm fall from the same period in 2008. BRF is made up of Colliers International, CB Richard Ellis and Cushman & Wakefield.
office vacancy rising
tOtAL brAtISLAVA OFFICe StOCK
Source: Bratislava Reserach Forum
6
Lindbergh says Finep hasn’t had to drop its prices, but Žoldák claims there’s a shift taking place toward cheaper flats.
“We can see that already -- for example, for apartments sold three months ago, the average price was €2,000 per sqm. For the last three months, apartments have sold for €1,800. That means people are looking for cheaper apartments.”
Which only seems fair, in a sense, because as he points out, construction prices have dropped. “That means developers who want to succeed in this market have to arrange the product in terms of the current demand,” he says. This shouldn’t be a problem for new projects that are just coming out of planning into the marketing phase, but weak projects built when construction prices were peaking could be out of luck.
Those who have money, and who need to move soon, are making their decisions and they’re unlikely to settle for poor quality projects at
old prices. Žoldák warns developers whose flats are ready, but aren’t selling, not to assume Bratislavans will eventually come around to their prices.
“It depends on the product, on the developer and the location. But if the price is really correct, if the price is lower than €1,500 per sqm excluding VAT, then they’re willing to wait [for new projects to get built].”
Clearly, there are developers today that are between a rock and a hard place on price, but the longer they hold out on discounts, the worse they’re likely to do, warns Victoria Miller, associate director at CB Richard Ellis.
“Developers might say they don’t mind if it takes a while to sell. But there are costs to that. It’s not just the obvious costs, as in the costs of marketing the project, but you’ve also got the cost of not getting your money back so quickly. You might not look at that as a cost, but if you had your money back out again you could probably do something rather interesting with it right now.”
53SLOVAKIAResidential
With work now nearly done at Jégého alej sales have jumped
Incentives are increasing | 10
According to CB Richard Ellis’ report for Q2 2009, the amount of industrial space has slumped drastically 33,800 sqm, marking a fall of 58 percent y-o-y. Just 33,800 sqm is currently under construction. The 63,865 sqm of take-up in Q2, however, marked a 40 percent increase compared to Q1 2009, thanks in large part to a 28,000 sqm deal completed by the developer Pinnacle. CBRE says that all space currently being built is being done so on spec, and that all of it is located in the Bratislava region.At the moment, Slovakia offers 984,345 sqm of modern warehouse space, of which 84 percent is located in and around the capital. Vacancy rose 2.1 percent from the first quarter to the second to 12.31 percent. Rents are currently stable at €3.40 – €4.50, but CBRE reports evidence that incentives have been increasing, while shorter lease terms are being agreed.The space currently under construction is 2,800 sqm at Profinal’s Logistic Center Brati-slava-Ivanka, and 31,000 sqm at PointPark Bratislava along the D2 at Lozorno.
industrial construction slumping
10
total greater ba area pan slovakia
Stock (sqm) 984,345 849,828 134,517
Space under construction (sqm) 33,800 33,800 0
take up (sqm) 63,865 62,865 1,000
Vacancy 12.31% 10.20% 24.90%
New completions (sqm) 35,050 12,550 22,500
Net effective rent (Eur/sqm/month) 3.00 –4.50 3.00– 4.50 3.80 –4.50
source: Cb richard ellis
Q2 2009 INDICAtOrS
67
None of it stacks up | 28A better deal | 17
saving money by selling cheaper?
victoria miller, associate director at Cb richard ellis in bratislava, talks to CIJ about the risks of waiting for the market to turn before selling
17
28
33
54 SLOVAKIA Q&A
Why sell now if the price isn’t right? Why not just wait for the market to come around? Developers might say, ‘We don’t mind if it takes a while to sell.’ But there’s a cost for that. If you’re planning to take longer to sell something, you’ve got not just the obvious costs, as in the costs of marketing, but you’ve also got the cost of not getting your money back so quickly. That’s a difficult cost to explain to people, but if you’re keeping your money in for an extra year, are you getting your returns? Because waiting an extra year to get the same money back means you’re getting less money.
Could investors actually do something with the money now? There’s not a lack of options. There are lots of different projects you could pick up. The problem is that it comes down to confidence. Before, people were running forward, full of confidence, paying 5.5 percent for an office building and laughing all night and smoking cigars, but they were actually in really sticky territory.Right now, if you’re looking at a property, everything is a bit more difficult but you’re definitely getting a better deal than you have done in a while here. You’re not running at the most aggressive price and you have some scope to negotiate with the seller, who probably doesn’t have a lot of op-tions. Now, you may struggle to tell your board that prices won’t drop im-mediately, so you might have to bring them something interesting, like a 10-year lease. But prices have dropped, so you’re making a better decision.
how will the market get unstuck?It’s like water: it will find a way. Take an industrial site. At the moment you can’t get much financing from the bank to build it in the first place, and you wouldn’t be able to sell it without a 10 to 15-year lease. In any case, your exit yield isn’t great if you’re running your figures off of what’s happening today, which you should be. So none of it stacks up. If none of it stacks up, and no one builds, then once the current stock is taken the rents will have to increase, and the leases will have to be longer to justify bothering to build it. Otherwise it won’t make any sense.Previously what we had was a scenario in which it also didn’t make much sense. We were driven by capital value change and by the prospect of being able to flip it, rather than rental growth. When you come out of a cycle it tends to be rental growth that drives things. That’s when you start to see your market fundamen-tals. If someone wants a warehouse in Slovakia and you’ve got a bit of land then you punch the figures so they make sense for you. That means the tenant will have to pay a 10 to 15-year lease or you won’t bother building.
and if you’re a residential developer sitting on completed units? If mysteriously everyone started feeling a bit more confident, then some of the units could start to sell more quickly. But what seems more likely is in order to realize the cash those developers have invested in their sites, they’ll have to look at their sale price to motivate people to buy.Those sorts of questions aren’t the easiest for people to accept. Maybe they’re sitting on a loan from the bank that is built off the back of selling each of these units for €2,000 per sqm, or their own internal figures count on a certain amount. If they go below that number then they’d be losing a bit of money. But you have to look at the longer term strategy of what you’re doing. You can decide not to react and you’ll wait to sell it later, but what if it’s going to take five years? And two years later you realize you have to sell something, but by that time the building next door has dropped its prices, so you’ve got to sell for even less. Plus, it costs you additional cash to keep that money borrowed from the bank. They aren’t exactly happy about it and they’ve perhaps renegotiated the loan midway through.
We were driven by capital value change, by the prospect of being able to flip it, rather than rental growth. When you come out of a cycle it tends to be rental growth that drives things
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55reGIONALEvents
Cushman & Wakefield Client regatta, hungarYIn June, the Hungarian office of C&W held its 5th client regatta. Held at Lake Balaton, the day featured yacht races, various sailor challenges and an open-air BBQ. A charity auction raised money for C&W’s School Around the World charity.
Charles Taylor (C&W)
gardiner &theobald’s sCore against pain, buCharestG&T’s football friendly took place at the FC Steaua pitch in Bucharest. Bouygues, Corporate Office Solutions, C&W, DTZ Echinox, Epstein Arch., MEP Constr., Procema Engineering, Summa Constr., and Tebodin helped raise funds for Hospice Casa Sperantei. The winners were C&W.
pinnaCle golf aCademY, slovakiaThe industrial developer Pinnacle held its second annual PointParks Summer Golf Academy in August at the Golf Club Pegas in Lozorno, Slovakia. Beginners as well as advanced players were able to get tips from golf pros on putting, chipping and other important golf tech-niques.
Cushman & Wakefield team Tim Wilkinson (DTZ Echinox)
Gardiner & Theobald team
rpmg events Calendar 2009
ro progressive learning program September 22 | Bucharest | cijjournal.com
Cedem Cee 2009 September 23–24 | Prague | cedem.cz
Cz progressive learning program September 29 | Prague | cijjournal.com
Cz progressive learning program October 27 | Prague | cijjournal.com
CiJ aWards poland November 4 | Warsaw | cijjournal.com
Cz progressive learning program November 24 | Prague | cijjournal.com
CiJ aWards CzeCh republiC November 25 | Prague | cijjournal.com
CiJ aWards hungarY December 3 | Budapest | cijjournal.com
CiJ aWards slovakia December 8 | Bratislava | cijjournal.com
James Niblett (Hospice Casa Sperantei) and Irina Gheorghe (G&T)
Vacancy rates have increased | 67A strong increase in manufacturing | 40
southeast europe bearing up against crisis
eC harris takes a look at how the economies of hungary, serbia and Croatia are faring in the worst economic crisis since 1989
Keith brooks
Central and Eastern Europe has seen a construction boom over the last decade – and significant levels of foreign investment. But what has the impact of the world recession been on the area? And where do the current and future opportunities lie? Our experts in the region have provided insight on the marketplace in Hungary, Serbia and Croatia.
Croatia is one of the few emerging markets weathering the global crisis well. There are still opportunities for developers and investors, in particular at the top end of the residential market where demand for homes continues to exceed supply.
Zagreb remains the largest residential market, with prices having risen on average 15 percent a year recently. Demand for good quality residential accommodation is expected to continue expanding. However, low-cost housing has suffered as a result of the economic crisis, with supply outweighing demand in 2007 when 25,000 flats were built.
In recent years, construction has made up
5.5 percent of Croatia’s GDP. However, most of this comes from public sector spending, and government cost-cutting is expected to put at least 8,000 construction jobs at risk. In the long-term, the goal is for the construction industry to grow to 10 percent of the GDP.
Over the past few years, Croatian industry has seen a strong increase in manufacturing and productivity. In the sector, 280,000 people are currently employed across 10,000 companies, accounting for 25 percent of total employment. The growth trend is expected to continue, particularly in industries associated with environmental protection and waste management, energy and energy efficiency. Substantial growth in direct foreign
investment and transfer of technology is also predicted.
Similarly, Serbia is showing little sign of recession, with the construction industry proving resilient. While the industry growth rate no longer stands at the 20 percent previously achieved, the current 9.5 percent growth rate looks set to continue. One of the fastest growing markets in Serbia over the past few years has been retail. 2007 witnessed an increase of 170,000 sqm of new space, a growth rate that’s expected to continue with estimates of an additional 340,000 sqm of retail space across the country this year.
Belgrade has seen a rapid growth in office space over the last five years – in 2008 this increased by 145,000 sqm, up 37 percent on 2007. An additional 297,000 sqm is estimated to be delivered in 2009/2010. As a result of the expansion, vacancy rates have increased and rents have eased.
In contrast, Hungary, originally considered a safe haven for investors, has rapidly slipped into recession with record negative growth and a devaluing currency. The downturn there is expected to last through 2009, with forecasts that the economy could contract by up to 3.5 percent.
Keith Brooks is an EC Harris partner and Head of Property
40
67
Along with improving access for tourists, infrastructure work in Croatia has kept the construction industry humming
56 reGIONAL Expert article
2006 2007 2008 2009 2010
Serbia 5.6% 7.5% 6.0% –3.0% 2.5%
Croatia 4.6% 5.6% 3.1% –4.5% 1.0%
Hungary 4.0% 1.2% 0.6% –6.3% –0.3%
Eurozone area 2.9% 2.7% 0.7% –4.4% 0.60%
source: eC harris
GrOSS DOmeStIC prODUCt
2006 2007 2008 2009 2010
Serbia 11.7% 10.1% 6.8% 9.3% 7.0%
Croatia 3.2% 4.5% 6.4% 3.3% 2.6%
Hungary 4.0% 7.9% 6.0% 3.3% 2.0%
Eurozone area 2.2% 2.1% 3.3% 0.4% 1.9%
source: eC harris
CONSUmer prICe INFLAtION
57reGIONALDBHDrinks before homenightDBH events sponsors
Poland
March 19
April 23
September 10
Event available for sponsorship
Event available for sponsorship
February 19
Romania
March 26
May 21
June 10
September 17
Hungary
March 5
April 2
June 4
September 3
October
October
October
November
November
November
We’d like to thank all the sponsors of DBH for their support during these turbulent times, as it’s created a monthly meeting point that is sorely needed in today’s marketplace. We’d like to encourage others to step forward to help maintain the tradition. In the event there is no sponsor, there will be a paying bar.
Event available for sponsorship
Event available for sponsorship
Event available for sponsorship
During the last three quarters, Polanowscy Nieruchomości has emerged not just as residential brokers, but also speicliast in commercial real estate. “The crisis has in fact let us broke through to a wider public with our commercial property service lines,” says Joanna Iwanowska, Polanowscy’s business development director.
Michael Lloyd, Chairman of Quintet Asset Management which is sponsoring the September’s Drinks Before Home event for the first time in Romania. Quintet is a real estate investment advisory and development group implementing tailored, innovative real estate investment and development strategies across Europe.
James Kinnell, MD of King Sturge, sponsor of the September DBH. The company released a report in August on the state of the Budapest office market. It noted that prime rents in the central business district are still around €20/sqm/month, but average asking rents are closer to €15.6–€16, with incentives representing a possible 15 to 20 percent discount.
Jay Joseph Fowles & Jeffrey Morris (F&R Worldwide) sponsored a Budapest DBH
Antal Pólya (P.G Limes), Stefan Günster (Horizon Development), sponsors of the June DBH in Budapest
Agata Miernik (HSBC Premier), Maciej Jancewicz (HSBC) & Robert Fletcher (RPMG) at the Warsaw DBH
Mihai Astratinei (GVA Asco Properties) sponsored two Bucharest DBHs this year
Piotr Bojar (PWC Real Estate), Adrian Karczewicz (Echo Investment) at a recent Warsaw DBH
Oana Visoiu, Andrew Jackson (First Title), Daniela Suteu (Private Wealth Manag.) at the Bucharest DBH
The Czech developer ECM surprised the real estate industry in Prague by winning a tender for the purchase of the Czech Radio building, the Czech Republic’s tallest build-ing and Prague’s biggest eyesore. Work began on the “skyscraper” more than 20 years ago but funding dried up, leaving a hulking, unfinished mass on Prague 4’s skyline. The building’s completion, however, is a linchpin for the development of the entire area and Prague 4 officials have long been frustrated by Czech Radio’s inability to sell it to an investor capable of finishing the job.
The city’s oldest new build has been sold twice in recent years, once to the Czech com-pany Niko (1995) and once to Singaporean-based group Wells Holding (1997), but both backed out of the deal. Meanwhile, the price of the real estate has plummeted from over a bil-lion crowns in the first deal to CZK 750 million in the second (the money never came through). ECM is reported to have signed a contract in the neighborhood of CZK 280 million backed up with CZK 51.5 million in an escrow account.
The fact that its sale has dragged on for so long has meant good business for cost consul-tants, building surveyors and real estate advisers as hordes of potential investors com-missioned study after study to figure out
what, if anything, could be done with the building. Not only was it designed in a
different economic era specifically for the uses of the radio station, but planning is also incomplete for some parts and will have to be redone for the remainder. In addition, as has been widely reported, the building is laced with asbestos. ECM has said this will be one of its first jobs in completing the building.
While some who have been through the building claim that it makes for inefficient office space, Milan Scholz of ECM disagrees. “The building has got the ideal layout for offices, with the central core for elevators and technical facilities ad the possibility for open plan space or separate offices all around it,” he said. “It’s just right for a high-rise build-ing.” The property could offer as much as 50,000 sqm of rentable space, but this is dependent on studies on floor plans and lay-outs which are now being carried out by architects. Scholz added that there was even a possibility of constructing another high-rise building in addition to the partially built one.
Milan Janků, ECM’s chairman of the board, said he believed the deal would be completed (i.e. paid for) by the end of the year. He said they were currently deciding what mix of office, retail and entertainment would best suit the property as well as the wishes of Prague 4 authorities. Janků said the
building’s immediate access to the metro was one of its biggest advantages. “In our analy-sis, there are not many buildings at the pres-ent time suitable for large telecommunica-tion, information technology companies near the city center,” he said. “In view of the size of the population in the city’s largest district, Pankrác is an almost ideal location for offic-es, retail and entertainment centers.” ECM Radio Plaza is the name of the company cre-ated for the project and it is 100 percent owned by ECM.
Until recently, it actually seemed possible that the giant construction company Armabeton would actually succeed in rejuve-nating itself by turning into a dwarf. The plan in April was that the company would trans-form itself into a sort of engineering company with just 280 workers and would then be able to move into the black. The reality appears to be quite different.
According to a source that wished to remain anonymous, Armabeton will effec-tively end its activities August 1 as it plans to fire all but 70 workers who were to remain on as a “liquidation group” responsible for sell-ing leftover property. The source said this
group would also bring the company to its final stop in a process expected to take six to 12 months. Each worker was to have received three months notice, with one day per week to look for new employment.
Lenka Petroncová, the press spokesperson for Stella Group of which Armabeton is a subsidiary, termed much of this information as speculation and rumor saying the staff reductions would not be radical. “At the end of July, when the ‘dismissal period’ runs out, the company will be employing around 500 people but as of August, this will be around 120,” said Petroncová. She said that accord-ing to the original plan formulated in April,
the firm is reorganizing itself into an engi-neering company which manages subcontrac-tors, while performing certain specialties on its own. The company’s official line, then, is that everything is proceeding according to plan, besides the firing of 160 of 280 work-ers, a decision it says was taken in the interest of labor efficiency.
Armabeton, like virtually all the other con-struction companies in the country, has been going through a difficult period. Still, some companies are making profits, some are stag-nating and others are folding. For those expe-riencing natural (i.e. legal) departures from the construction scene, the reasons for their end are clear: their management was unable to come to grips with the unexpected test which came in the form of a recession.
58 September 1999 Ten Years Ago
Radio building sold again
Armabeton fires even more people
The old radio tower building looks better these days
In mid-July, andrékó kinstellar announced that katalin dévald, head of the Budapest real estate department, has been appointed as partner in the law firm, effective July 1. Katalin handles real estate development projects, acquisitions, construction financing and securities, and also has considerable experience in corporate law.
Colliers international has announced two appointments in Poland. magdalena kalisz, who previously worked for King Sturge and Sinclair Estate Agents, will be responsible for managing office properties. She is a graduate of the University of Wrocław and the Koźmiński Business School in Warsaw. Agnieszka Krzekotowska will be the property manager responsible for the Horizon Plaza office project in Warsaw. She joins Colliers from DTZ, where she also worked in the property management department. Agnieszka is a graduate of the University of Łódź and the Koźmiński Business School.
simon dunbar has been appointed director of the building consultancy department at Cb richard ellis in Poland. In his new role, Simon will focus on managing and developing his department to provide a broad range of technical services to existing and future clients. He previously worked with CBRE between 1999 and 2004 before moving to Australia, where he worked as a senior project manager at DTZ in Sydney. Simon graduated from the University of the West of England in 1998 and became a professional member of the Royal Institution of Chartered Surveyors in 2001.
Summer saw several promotions at Jones lang lasalle‘s Polish branch. tomasz puch has been named national director of the office and industrial investment department. A graduate of the Cracow University of Economics, Tomasz has more than seven years of experience in JLL‘s capital markets department. He is responsible for advising on office and industrial investments. bartosz mierzwiak will now act as national director in the office agency. For the last two years, he has led the office agency, advising developers on land purchases, the development of marketing strategies and actual office leasing. Bartosz is a graduate of Warsaw School of Economics and the law and administration faculty at Warsaw University.
Tomasz Puch
Bartosz Mierzwiak
59reGIONALAppointments
The European board of the royal institution of Chartered surveyors has appointed pál baross, chairman of the Hungarian board, to represent the region at the RICS Governing Council. The council is the highest level of decision-making power for RICS, and monitors the performance of some 140,000 property professional working in 146 countries. Pál has been working for ING Development in Hungary since 1996, contributing his professional experience to a number of successful ING projects in Budapest.
Over in Jll‘s retail division, Callum thorneycroft is now an associate director in the investment team covering the entire CEE region. He has worked in capital markets with Jones Lang LaSalle and LaSalle Investment Management for the past four years. Callum is an RICS member and holds a bachelor‘s degree with honors in economics and business management from Newcastle University and a master‘s in property valuation and law from Cass Business School, London. And finally, marta augustyn is now an associate director in the retail agency. She has worked in retail leasing for more than six years. Marta is a graduate of Warsaw University and obtained a diploma in business administration from the University of Łódź.
Callum Thorneycroft
Marta Augustyn
60 REGIONAL Social Interview
is law a family thing? or are you a black sheep? I’m a black sheep; no one in my family studied it. I studied in a French Lycée here in Prague and had a really good teacher. I did my leaving exam in French and then I went to the law faculty at the Charles University, and spent a year in France on an exchange program.
do you use your french these days in the job, or do you just do the or-dering at restaurants in Cannes? That was good fun there. I was speaking there after not practicing at all for a couple of years. You forget if you don’t use it in everyday conversation. You un-derstand perfectly, but it can take you a long time to remember the right word.
but why did you pick law? because you didn’t like mathematics? Kind of. Also because I like the humanities like history and politics. The Vel-
vet Revolution happened when people my age were teenagers, so we were affected by politics. But having a law degree is pretty useful.
do you actually like law, or do you enjoy the sort of situations you be-come involved in as a result of it?It’s both, actually. Theoretically there are very complex concepts about the law and how society functions, and how deals function. It’s a sort of reflec-tion of society. But it’s practical as well, so in real estate you see how build-ings get constructed.
the so-called rule of law wasn’t very well established back then, to put it mildly. do you really think things are improving in that regard? That’s true. You of course read all the stories in the newspapers about how peo-ple are bending the law and about corruption, but in practical life it’s not as bad as it looks in the media. People basically follow the laws, and they want them. There’s a sort of German side of Czechs that, despite the moaning about author-ity and rules, they still like the laws and they want to have things be predictable.
how do you deal with the problem of friends who want free legal advice? I usually do it, because my friends wouldn’t accept me saying I just don’t have time. Actually, they know I’m quite busy so they don’t ask me if it’s not serious and either I can help them or one of my other friends in law can.
it seems as if lawyers used to be at the center of big deals in the past here, but not so now. There were a lot of new people coming into the market back then, whereas nowa-days most of the players have been here for a long time, so they have their own ideas about who to deal with. They learn from the market about the deals, so they’re less dependent on the lawyers. Also, the lawyers are changing. They seem to realize more that they’re on the service side of the deals and they’re supposed to help their clients achieve something rather than put their ego into the deals.
If they couldn’t change this attitude, then they’re probably off the market now.
What’s the part of the job you like the best? The champagne at the end, at the closing when you’ve achieved something. It’s great to see that you’ve been able to put something together.
You like that better than the fight to get there? Definitely. I don’t really like fighting so much. I prefer to find a compromise, because people always have different views.
do you like certain types of clients? I prefer it when they’re interested in what I’m doing and what we suggest, and the ones that give you some discretion to decide some things by your-self, rather than consulting on absolutely everything. So I like clients who
are diligent and are interested in pushing deals forward, but also ones who aren’t too meticulous about every last comma.
What part of the job do you like the least? I suppose the long hours and the fact that you have to be available to the clients quite a lot. You don’t get as much time with your family as you’d like.
if you hadn’t been accepted by the law faculty, where might you have ended up? I don’t know about my job, but I probably would have done more traveling. I’d probably have taken a year or two off.
What would your destination have been? South America. I did a cycling trip in Argentina and I fell in love with it, and Chile and the other countries.
any plans to go back? Not yet, because we have kids and they’re quite young, but definitely I’d like to go back there. Chile and Argentina have great people, great food, moun-tains and beautiful countryside.
Would you go from nice hotel to nice hotel, or did you just go as far as you could in one day and find a place to stay? We’d just stay in hostels or local hotels. A friend introduced me to this kind of traveling a few years ago and it’s definitely the best way to find out about a country. [Biking is] faster than walking but you’re not isolated in five-star hotels. It’s the sort of tourism I like.
Where did you go for vacation this year? It was close to Zadar, in Croatia. It was good for the kids because we had a sandy beach.
karel doktorWilson & Partners
karel doktor, a partner at Wilson & partners, splits his time between his kids, biking in south america, and the law
It was a slow summer for rumors and wheelings and dealings, to be sure, which for fans of the property industry will be a bit of a disappointment. We
all seem to be waiting for the floodgates to open on the investment market, and it keeps not showing up. So besides closure, literally, on buildings in
Prague like the alley in Budějovicka and a detail in Karlín, there’s been little to report. The whole desert paradise situation seems to have gone up in
smoke again after the alliance of investors got cold feet. Who knows, perhaps a pair of stars in Pankrác really are on the market these days and the next
news will come from thereabouts. Shopping in flora, the story goes, isn’t making any headway.
The only excitement lately will come from tenants and the decisions they make (and the deals they ram through). Budapest is rife with conflicting
details about a recent deal that pushed the net rental numbers down to what doesn’t sound sustainable, in the opposite sense that’s usually
implied. But what’s a developer with various projects to do? Any deal must be preferable to no deal. It was also interesting to hear from a new
acquaintance how even the most praised office parks can start to look outdated after five years. We heard from someone who
doesn’t know this magazine that when overnight delivery companies suddenly find their building sort of old-fashioned
and they start feeling a bit cramped, they start thinking about other cities to move to where the labor is cheaper
and the office space is, well, newer.
MITZI LINKA
lying on a beach is a bit different than biking up unpaved roads in the andes... It’s true, but that’s the change you get with kids. You change your attitudes and your lifestyle. We still do biking with the kids; we have an extension pole and a seat for the younger one. We even did some biking in Croatia.
but will you go back there next summer? Probably not. It’s too far. We went to Austria after that, to a lake, and I’d go there again. It’s flat there and there are many bike routes and playgrounds for kids. So every few kilometers there’s another place for the kids.
Would you be disappointed if you ended up still in law when you’re 50? law seems like a life sentence. I don’t look so far ahead. I just look two or three years ahead and I’m really happy with the experience of setting up the firm. On the one hand, you’re independent and you can decide what you want to do, but you also have responsibility for your people. I like that mix.
it’s great when things are going well, but when times get tougher, you don’t sometimes wish you were working as an employee? That’s true, but on the other hand, you’re the master of your own fate. If you look at a lot of the international law firms here, they’re having to let a lot of people go. So you’d just be told what’s going to happen rather than being in control.
are you just a sports person, or do you get out for some culture some-times? We try to go to the cinema every month or so, and my wife pushes me to go to theater as well.
Can you deal with that, or does she drag you there? She drags me there. I’ve found it more and more difficult. I don’t know why, maybe because there’s lots of work, but it’s more and more difficult to push myself to go to the theater and follow the plots. Though it depends on the play.
What’s the last movie you saw? The Hangover. I thought it was amazing.
What did your wife think? She was away with the kids, so I went with a friend. Before that we saw Slum-dog Millionaire. We both liked that a lot.
What are you reading these days? I finished Fire Ice, by Clive Cussler. I discovered him last year and I’ve read three books by him this year. I’m almost not reading anything else, which probably isn’t very good.
Will you tell your kids to go into law? I’ll leave that up to them, I wouldn’t want to push them into anything.
61REGIONALSocial Interview
CUrreNCY exCHANGe rAteS, NAtIONAL UNItS per USD
month 10 11 12 1 2 3 4 5 6Canada 1.18 1.22 1.24 1.23 1.24 1.26 1.22 1.15 1.13Czech Republic 18.69 19.78 19.4 20.68 22.17 20.83 20.2 19.54 18.89Hungary 196.81 207.84 196.89 213.48 232.73 232.68 222.08 206.02 199.77Japan 100.07 96.86 91.31 90.27 92.83 97.8 98.9 96.53 96.63Norway 6.49 6.94 1.01 6.97 6.87 6.78 6.65 6.44 6.39Poland 2.69 2.93 2.97 3.22 3.63 3.54 3.33 3.23 3.21Russian Federation N/A 27.31 28.13 31.47 35.76 34.67 33.56 32.06 N/ASwitzerland 1.14 1.19 1.14 1.13 1.16 1.15 1.15 1.11 1.08United Kingdom 0.59 0.65 0.67 0.69 0.69 0.71 0.68 0.65 0.61
25. 8. 2009 | Source: OECD
LONG-term INtereSt rAteS, perCeNt per ANNUm
month 10 11 12 1 2 3 4 5 6Czech Republic 4.5 4.5 4.3 4.2 4.7 5.3 5.3 5.1 5.5Slovak Republic 5.0 4.9 4.7 4.7 4.8 N/A 4.9 5.0 N/AJapan 1.5 1.4 1.2 1.3 1.3 1.3 1.4 1.5 1.4Norway 4.2 4.2 3.8 3.7 3.8 3.8 3.9 4.1 4.2Poland 6.4 6.2 5.7 5.5 6.0 6.2 6.2 6.3 6.3Russian Federation 8.5 8.5 9.0 10.3 10.4 10.8 10.4 10.6 N/ASwitzerland 2.8 2.2 2.1 2.2 2.2 2.2 2.2 2.5 2.5United Kingdom 4.6 4.3 3.6 3.7 3.7 3.3 3.4 3.6 3.7Germany 3.9 3.6 3.1 3.1 3.1 3.0 3.1 3.4 3.5
25. 8. 2009 | Source: OECD
SHOrt-term INtereSt rAteS, perCeNt per ANNUm
month 10 11 12 1 2 3 4 5 6Euro area 3.8 3.1 3.3 2.5 1.9 1.6 1.4 1.3 1.2Canada 3.3 2.8 2.3 1.6 1.2 1.1 0.9 0.6 0.6Czech Republic 3.5 2.8 3.9 3.1 2.5 2.5 2.5 2.3 2.2Hungary 8.9 11.3 11.2 9.8 N/A N/A 9.6 11.3 10.6Japan 0.5 0.3 0.7 0.7 0.7 0.7 0.6 0.6 0.6Norway 6.7 5.1 4.6 3.7 3.5 3.2 2.9 2.4 1.9Poland 6.3 6.0 5.9 4.9 4.5 4.2 4.3 4.6 4.4Russian Federation 17.2 12.0 23.1 27.8 20.8 N/A 12.8 11.2 N/ASwitzerland 0.3 0.1 0.7 0.5 0.5 0.4 0.4 0.4 0.4United Kingdom 4.4 2.8 3.2 2.3 2.1 1.8 1.5 1.3 1.0
25. 8. 2009 | Source: OECD
CONSUmer prICe INDICeS, INDex 2000=100
month 10 11 12 1 2 3 4 5 6Canada 107 106.7 105.9 105.6 106.4 106.6 106.5 107.2 107.6Czech Republic 126.2 125.6 125.2 127.1 127.2 114.0 113.9 113.9 113.9Slovak Republic 113.7 114.0 113.7 114.2 114.3 114.1 114.0 114.3 114.9Switzerland 109.7 109.0 108.4 107.5 103.3 103.0 103.9 104.0 104.2United Kingdom 118.2 118.1 117.7 116.8 109.6 109.8 110.1 110.7 111.0Norway 118.9 118.2 117.9 117.5 118.5 108.7 109.0 109.2 109.9Hungary 159.3 158.8 158.1 159.3 160.8 121.6 122.5 124.3 124.3Poland 124.4 124.6 124.5 125.1 126.3 111.3 112.1 112.7 112.9Japan 100.4 99.5 99.1 98.5 100.4 100.7 100.6 100.6 100.4United States 125.8 123.4 122.1 122.3 123.2 108.9 109.2 109.5 110.4
25. 8. 2009 | Source: OECD
rOmANIA
month 12 1 2 3 4 5 6Unemployment rate 4.4% 4.9% 5.3% 5.6% 5.7% 5.8% 6.0%No. of unempl. (in th.) 403.4 444.9 477.9 513.6 517.7 526.8 548.9CPI monthly change 0.2% 1.2% 0.9% 0.5% 0.3% 0.1% 0.2%CPI yearly change 6.3% 6.7% 6.9% 6.7% 7.4% 5.9% 5.8%
25. 8. 2009 | Source: WS, MMSSF
HUNGArY
month 12 1 2 3 4 5 6Unemployment rate 8.0% 8.4% 9.1% 9.7% 9.9% 9.8% 9.6%No. of unempl. (in th.) 337.0 351.0 378.0 403.0 412.0 410.0 402.0CPI monthly change –0.3% 0.6% 1.0% 0.5% 0.8% 1.5% 0.1%CPI yearly change 3.5% 3.1% 3.0% 2.9% 3.4% 3.8% 3.7%
25. 8. 2009 | Source: HCSO
pOLAND
month 12 1 2 3 4 5 6Unemployment rate 9.5% 10.5% 10.9% 11.2% 11.0% 10.8% 10.7%No. of unempl. (in th.) 1,473.8 1,634.4 1,718.8 1,758.8 1,719.9 1,711.4 1,704.2CPI monthly change –0.3% 0.5% 0.8% 0.8% 0.6% 0.6% 0.2%CPI yearly change 3.5% 3.1% 3.6% 4.0% 4.3% 4.2% 4.2%
25. 8. 2009 | Source: GUS
SLOVAK repUbLIC
month 12 1 2 3 4 5 6Unemployment rate 8.4% 9.0% 9.7% 10.3% 10.9% 11.4% 11.8%No. of unempl. (in th.) 248.5 269.5 289.6 311.8 325.6 336.9 348.6CPI monthly change –0.2% 0.7% 0.3% 0.2% –0.1% 0.2% 0.5%CPI yearly change 3.5% 3.6% 3.2% 2.6% 2.3% 2.2% 2.4%
25. 8. 2009 | Source: ŠÚSR
CZeCH repUbLIC
month 12 1 2 3 4 5 6Unemployment rate 6.0% 6.8% 7.4% 7.7% 7.9% 7.9% 8.0%No. of unempl. (in th.) 352.3 398.1 428.8 448.9 456.7 457.6 463.6CPI monthly change –0.3% 1.5% 0.1% 0.2% –0.4% 0.0% 0.0%CPI yearly change 3.6% 2.2% 2.0% 2.3% 3.3% 1.3% 1.2%
25. 8. 2009 | Source: ČSÚ, MPSV
rAteS AGAINSt eUrO
Australian Dollar AUD 1.69Canadian Dollar CAD 1.55Czech Koruna CZK 25.73Danish Krone DKK 7.44Hungarian Forint HUF 269.2Japanese Yen JPY 135.61Norwegian Krone NOK 8.61Polish Złoty PLN 4.12Pound Sterling GBP 0.86Swedish Krona SEK 10.18Swiss Franc CHF 1.53US Dollar USD 1.43
25. 8. 2009 | Source: ECB
main eConomiC indiCators 2008/2009rates 2008/2009
62 reGIONAL Indicators
Dear American:
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large
transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly
transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised
me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and
grandchildren to [email protected] so that we may transfer your commission for this transaction. After I receive
that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully,
Minister of Treasury Henry M. Paulson
Even in tough times you can afford to laugh. Sponsor the Joke of the Month page for €1,000. To have your logo appear at the bottom of the page under the words “This month’s joke sponsored by”, contact Robert Fletcher at [email protected]
this month’s joke sponsored by
