Bound to succeed

Refurbishing old office buildings is not an easy task, particularly in high-profile central locations, like Cedet in Warsaw, and neither is tackling projects that many have already tried and failed to complete, like the Granary Island in Gdańsk. WBJ Observer sat down with Bartłomiej Hofman, president of the board of Immobel Poland, to talk about the developer’s strategy and its bold undertakings Interview by Beata Socha WBJ Observer: Immobel is known for its outside-of-the-box projects, like the Okrąglak and Kwadraciak schemes in Poznań – two iconic office buildings, gems of Polish “Modernism.” After refurbishing them, you successfully sold them to Benson Elliot earlier this year. Were the schemes intended for sale from the get-go? Bartłomiej Hofman: In our business strategy we tend to focus on the sale of finished and leased properties. We focus on the areas where we have expertise and that bring the biggest added value, that is development and leasing. This strategy should not change in the foreseeable future. You are now in the process of refurbishing another iconic scheme from the Modernist era – Cedet in Warsaw. Was the experience gained from Poznań helpful with this complex project? We would not have taken on such an ambitious challenge if we did not have the experience from Poznań. The renovation of Okrąglak, a landmark building with a rich tradition and history, was quite a challenge but we believe that we passed that test quite well. The reconstruction of Cedet is somehow similar in terms of the challenges that we are facing. Once again we are working on a unique building with extraordinary architecture. In order to refurbish Cedet you had to demolish almost the entire building. What has been the hardest part so far? The works on the slurry wall and reinforcing the underground structure have been completed. At the moment we are working on the slabs of the underground levels. At the beginning of 2017 we should start the works on the facade, while the end of the construction works and obtaining an occupancy permit is scheduled for September 2017. I have to admit that up to the moment when we started construction works, we had not expected the structure of the building to be in such a poor condition. We were forced to remove a significant part of the structure in order to reinforce it and make sure it would be safe for future users and compliant with current construction legislation. Are you already in talks with prospective tenants? Interest from potential tenants is quite significant. We hope to finalize a couple of lease agreements for the office space by the end of the year and we are in quite advanced negotiations. We have already leased over 80 percent of the retail space in the building and there are only a couple of small units still available. Another of Immobel’s Warsaw projects – CBD One – is located right next to the Świętokrzyska subway station. Just like your other office schemes, it is in the very heart of the city. Location seems to be the top criterion for your projects. The three most important qualities of good real estate are location, location and location. For a potential tenant, such a unique location could be a great bargaining chip in attracting talent to the company. Being located in the heart of the city center not only allows excellent access to the building, but it also offers a whole variety of services, shops and leisure amenities. The location of CBD One is truly unique. There is no other place in Warsaw that can boast such a central location and accessibility. Aren’t you afraid of the competition from office projects currently under construction and at the planning stage in Warsaw’s Wola district? Rents are significantly lower there than in the CBD proper, despite the relative proximity to the city center. Although we can see a lot of construction activity, we do not see it necessarily as our direct competition as we are targeting different market segments. The quality of the environment and range of the services offered in the neighborhood are simply incomparable. We are confident that our tenants will be able to assess this on their own and make a sound choice for their future office location. CBD One will be developed in a unique spot – at the intersection of Warsaw’s two thoroughfares – ul. Świętokrzyska and ul. Marszałkowska, and at the same time at the junction of two subway lines, which will guarantee excellent access from every point in the city. What kind of tenants are you targeting? Our goal, similarly to the case of Cedet, is to attract companies which consider great location to be of the essence. Companies that are aware that the highest-quality office in a central location will help them attract and retain staff and clients by offering the full variety of amenities available in the city center. Taking into consideration the planned developments in the area, it is the only chance to secure an office in such a location. You are also in the process of revitalizing the Granary Island (Wyspa Spichrzów) in Gdańsk, right next to the city’s Old Town area. Several developers have tried and failed in this endeavor. What made you take on this project? As you can see we are not afraid of such complicated projects. The northern part of the Granary Island is a place with tremendous potential which has remained untapped since the end of the Second World War. We believe that projects in city centers are bound to succeed and that’s why we decided to restore the island’s functionality. We are in the process of developing the northern cape of the island. We’re working in a consortium with Multibud W. Ciurzyński and within a public-private partnership with the City of Gdańsk. The project, called “Granaria,” will include building a hotel and a residential/retail mixed-use complex, as well as improving the island’s infrastructure by building a pedestrian bridge connecting the island with ul. Długie Pobrzeże and redeveloping the Stągiewny Bridge and ul. Chmielna, ul. Pożarnicza, ul. Motławska and ul. Długie Pobrzeże. It’s a major challenge that, once completed, will result in the creation of a completely new neighborhood in the city. How is the public-private partnership model working out in practice? Although this is a new experience for us, it is very beneficial for all the parties involved. Through the mechanisms included in the PPP agreement referring to the transfer of the property, the city can be confident that the investment will be completed and at the same time it can have a say on the final design of the buildings. The city’s infrastructure will also be significantly improved in line with the construction of the commercial properties. Last but not least, the image of the city will definitely improve, as we are developing an area that is directly linked to Gdańsk’s Old Town. When is the project due to be completed? The project has been underway since the end of March 2015 and will be developed by 2023. It is divided into four phases. The first stage, which is due to commence in 2016, includes the construction of a hotel, apartments, retail units and a parking area. We believe that the project will breathe new life into the heart of Gdańsk, making this area attractive not only for residents, but also for tourists visiting the Tri-City. Do you expect apartment prices in the area to go up once the construction is completed? After all, it is next door to the Old Town and the current price level for apartments on the island is PLN 8,000-9,000 per sqm, which is relatively low. The improving image of the Granary Island will cause prices to increase. The infrastructure, which will be developed together with subsequent stages, will also add to this. The island’s accessibility, the range of amenities and the general appearance of the area will improve significantly. Do you think that the market will be able to absorb so many projects offering hotel services in one place? There are currently several aparthotel investments being developed on the island. Based on market research, we believe it will. The number of tourists visiting Gdańsk is definitely on the rise and the proximity to the Old Town makes it a natural location for such services. We can see it by observing the strong demand from hotel operators. U