Building controversy

In an article published last week in Gazeta Wyborcza, it was reported that a number of companies that worked on the building site of a JW Construction residential complex in Łódź claim they haven't received payment for their work and materials.

Back in 2004, the developer chose the general contractor of the project, NS Inwestycje - a very small company based in Ożarów Mazowiecki. All subcontractors for the project signed contracts with NS Inwestycje. Initially, work progessed without a hitch.

"Eventually, the subcontractors began to turn to us for payment for the work they had completed. At the same time, we also began receiving invoices [from NS Inwestycje] for the same work, and since we didn't know to whom to issue the payment, we froze payouts. Initially, NS Inwestycje said they had assigned certain projects to a subcontractor. Three days before payment for the work was due, they claimed to have done the work themselves," says Jerzy Zdrzałka, president of JW Construction.

Marcin Zatówka, president of NS Inwestycje, denies the allegation.

Subcontractors have tried to extract the money from NS Inwestycje. Tomasz Zarzycki, owner of subcontractor Tezet, says NS Inwestycje is now insolvent, so it is unable to make the payment. "This is a 'firma krzak' [phantom company], and we will not get money from them," adds Zarzycki.

Apparently, there are more companies to which NS Inwestycje (formerly New Standard) owes money. "We have altered the name of the company due to some ownership changes. Part of the money has already been paid," claims Zatówka.

Some of the subcontractors on the Łódź project who are owed by NS Inwestycje have now sued JW Construction. "Out of the four cases that have gone to court, we have won two with Jedynka. The other two are still being deliberated. We are not trying to avoid making payments. We have even asked the court to accelerate the process and we want to put zł.2.5 million on deposit with the court for future payments. We want the court to decide whom we are to pay," says Zdrzałka.

The media fuss came just before JW Construction's entry into the Warsaw Stock Exchange. "We have turned in the issue prospectus to the Polish Financial Supervision Authority and we are planning to debut within the next two months," says Zdrzałka.

The company wants to obtain up to zł.200 million from its IPO. This will help increase the scale of the developer's activity on the market. The company wants to spend the funds on new plots in Warsaw, Łódź, Tri-city and Katowice.

Last year, JW Construction's revenues from the sale of apartments reached zł.700 million and its net profit exceeded zł.100 million.