Beyond Sales

Image: Tacit Investment

WBJ Observer sat down with Karolina Kaim, president of the board of Tacit Investment, the investor behind the Cosmopolitan residential tower, to talk about the luxury residential market in Poland, its size, potential and the difficult decisions an investor has to make when delivering a prestige product

Interview by Beata Socha

WBJ Observer: Cosmopolitan is one of the few finished luxury residential towers in Poland. What does “luxury” mean by Polish standards?

Karolina Kaim: We don’t like to use the word luxury. We prefer to describe our investment as prestigious, exclusive in a way. There are reports that define what elements a luxury property should have, which starts with a drive in, services for residents, etc. But in my opinion, Cosmopolitan is the first residential tower that is fully completed and at the appropriate standard in Poland. There is the Sky Tower in Wrocław, Sea Tower in Gdynia and Złota 44 in Warsaw, which has yet to be completed. There is of course a number of small tenement houses that offer truly beautiful penthouses. Unfortunately, the neighboring houses still require a lot of work to make the area presentable and nice to live in.

Do you always sell completely furbished apartments?

We do. When purchasing a luxury property, clients also look for safety. Not only in a physical sense, but also in terms of investment. Clients need to know and see what they are buying. There is no overpromise, you get what you see. We had clients a few weeks ago who asked for chairs to be put in two apartments they were considering. They spent some time in each of them to find out which one they felt better in. This is the kind of safety you are looking for when considering an investment of between PLN 1.5 million and PLN 7 million. It is also a long-term safety. Many people fixate on the date of purchasing a property and tend not too think beyond it. Meanwhile, a safe investment is also one that will ensure that the value of the property will only increase in time. Location is naturally the key aspect here. Just one look at more mature markets is enough to figure out that locations near parks and green squares are always going to be worth more over time.

Do you think that the luxury market is undervalued in Poland?

I wouldn’t say it is undervalued. We cannot compare Warsaw’s prime apartment prices to those in Tel Aviv, for example. Warsaw may be following a similar path to, say, London, but it is a different market. But well situated and well-executed prime projects will increase in value in their own markets. The wisest investors say that there are only two ways you can make money: on inflation and on the appreciation of land prices. You could say that a property is an “addition” to this land and that if this piece of land is unique and well situated, it will appreciate.

How big is the luxury market? The average time for a developer to sell a project in the popular segment is more or less five quarters. How long does it take to sell a project of this size and in this class?

For large luxury projects the selling time is counted in years, not in quarters. In some cases pre-sales are necessary, e.g. when you are undertaking a very large project, like Cosmopolitan, or when the bank that is financing the scheme does not believe in it and wants to see some results before releasing funds. We recently completed a smaller project – Park Lane and we didn’t do any pre-sales. When selling a premium property it is better to present the product once it’s finished – once it looks and smells the way it should, instead of visiting a construction site, putting on a hard hat and hearing about piping issues. We don’t need to see the “dish” being prepared, we come to see it beautifully served.

How many apartments have already been sold?

Some 60 percent of all our apartments in Cosmopolitan have been sold. The 42nd floor will be on offer at the end of the year. In Park Lane, which we started offering a couple of months ago, we’ve sold two apartments out of 12.

Do your clients purchase with cash or with mortgages?

Most of our clients buy with cash. Only a fraction of them use bank financing, even a smaller percentage actually needs it. Some of our clients paid 100 percent of the price within seven days of seeing the apartment for the first time. Some take months to think and negotiate, some come back after a year or so. We also have clients who purchase a second or a third apartment.

How many people buy this type of apartment only as an investment?

There are three types of buyers. The vast majority buys it to live in it. Another group of clients buys an apartment with a view to move in at some point, and rent it out temporarily.A third group, the smallest one, is people who buy an apartment purely as an investment. We’ve even had transactions where the buyer never actually saw the apartment, only the photos.

Do you offer your clients help if they want to rent the apartment out for a time?

We do. We have a specialized service called Cosmopolitan Home Advisor to make sure our clients’ apartments are well taken care of.

What do you think of selling such apartments to funds, who then offer long-term rentals?

Such transactions are not attractive to us. Our clients don’t want to live next to an aparthotel with tenants moving in and out. Once again, you have to think beyond the sale itself and think long-term. When you consider what the share structure will look like after a portfolio purchase, it’s clear that the fund will have the highest ownership share in the building and its interest will take precedence. You can’t have a prestige product without the caretaker always present to ensure all the tiniest details are in order. Tacit has its office in the building and we are constantly present on the premises, making sure the quality of the services here meet the standards we promised. Since the new management took over in December 2014, we have invested another PLN 5 million in the building, even though it had already been completed. They could have said: “Why are you nitpicking, apartments are selling after all?” Instead, they invested in the green areas around the building and on the fourth-floor terrace, they also agreed to rent some of the commercial space on the ground floor at 50 percent market rent to create a consistent environment.

Did the strategy pay off?

Absolutely. There is nothing more conducive to building a community than dining. We don’t have chains, instead we have a blend of culinary concepts. We wanted the residents to be able to have breakfast, lunch, dinner and go out for drinks here, to be able to listen to live music, to have the concierge bring them breakfast upstairs, etc. And it worked out well: we often see clients sitting at the Wine Taste eating dishes from Ceviche Bar across the hall. I had the pleasure of meeting Helmut Jahn, who designed Cosmopolitan, as well as numerous other towers all over the world. I was surprised that he could still remember all the street names surrounding the building. He is an architect with a background as a city planner. He designed the building to have a simple shape, because the shape is a secondary matter. What he paid enormous attention to was how the building would “live” later on. That’s why the patio is open both to the synagogue across the square as well as the church. The history of the synagogue is that it was rebuilt with the funds donated by the Jews who were sheltered in the church opposite during the war. This is a very emotionally charged place.

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