Building on the bourse

However, there are fears that many of the firms are not mature enough to properly benefit from the trading floor.

Last week the Warsaw Stock Exchange had the largest debut this year. Dom Development, the second-biggest residential developer in Warsaw, entered the bourse with 24.05 million shares at a price of zł.85.

"It's an important debut, a very good public offer. It is understandable because the company represents a sector that has incredible development prospects," said Ludwik Sobolewski, president of the WSE. "The presence of this company on the WSE means that the sector is developing dynamically and that for further development the company needs a lot of money. I am sure that this will evoke the interest of other developing companies, which will not want to stay behind their competitors and will enter the WSE."

Satisfaction guaranteed

The closing price was zł.130.50. Jarosław Szanajca, the president of Dom Development, didn't hide his delight. "The share rating speaks for itself. The market has accepted us. Ahead of us is a long road and hard work to build up our investors' trust. I think we have proved that we are a well organized institution," he said during the debut ceremony.

Szanajca says the debut will open up new opportunities for the firm. "It's an opportunity to acquire further funds if necessary," he added. Agnieszka Dróżdż from Echo Investment, which has been listed since 1996, says the company has used the acquired funds well. "Now the value of the company is constantly growing," she adds.

Mariusz Kozłowski, a member of the management board at GTC, which has been listed since 2004, confirms Szanajca's expectations concerning the bourse and adds that when listed a company increases its brand awareness. "The company has a higher credibility and transparency as a public company," says Kozłowski.

Michał Sztabler, a real-estate market analyst at DM PKO BP, says that a bourse listing reinforces prospective customers' confidence in a firm. "Such a customer can always look into the company's financial status," he says.

Irresistible temptation

The advantages must be tempting if other companies want to enter the WSE, which currently lists 22 real estate-related companies. JW Construction will soon join their ranks. The company has recently signed a letter of intent with Sosnowiec-based Energopol-Południe to merge. The acquisition gives JW Construction a back-door entrance to the bourse. The companies will sign an agreement on November 20, assuming the deal successfully passes the required legal and financial audits and gains approval from the regulator and from shareholders.

Orco Property Group (OPG) is also aiming at the WSE and is sure of its success. "We have some symbolic projects in Warsaw, there is a real real-estate sector on the stock exchange, apparently there is a real appetite for our stock in Warsaw - these are all reasons we are pushing for a listing in Poland. The first half of 2007 is our target to get listed," says Arnaud Bricout, deputy president of OPG in charge of corporate finance.

Maciej Wewiórski, an analyst from CDM Pekao, says that although the developers' market is quite scattered, he is expecting other companies to enter the WSE. "Encouraged by DD's successful debut, other companies will want to follow," he predicts.

Landing the deal

DD's Szanajca says that the funds acquired from the public offer will be now designated for the purchase of plots for new investments in Warsaw. The low supply of new plots, due to a lack of spatial-development plans on the Warsaw market, could be discouraging but Szanajca is quite optimistic.

"It may not be easy with new plots in Warsaw but it's our company's specialty to search for and buy very attractive plots. Now we are negotiating a number of plots. The next planned investments will be located in many parts of Warsaw, which will allow us to maintain high sales. This will be popular apartments as well as quality apartments, the latter being situated near the city center," says Szanajca.

Tomasz Binkiewicz, an analyst for Bank Ochrony Środowiska, says the Warsaw market is very attractive for developers and sooner or later the authorities will have to prepare the spatial development plans. "Now in the local election campaign we hear the process will speed up. But I believe Dom Development will not restrict its activities to Warsaw only. The demand in other cities is also growing," he adds.

JW Construction already plans to go beyond the capital. The merger will enable the company to expand its activities in the south of the country. The company will also begin projects such as road construction, which fall outside its residential specialty.

Sztabler also notices that the plot accounts for only 10-20 percent of the future sale price. "Very often the funds acquired from the stock exchange will be designated for the construction of the developments. There are also companies whose strategies say that future residents don't finance the construction process, but [clients must] pay some 10 percent when signing a contract and the remaining amount once the project is completed," he adds.

Future plans

Many developers may look at Szanajca's company and envy the share price on the first day on the WSE, but not all of them are mature enough to be listed. Wewiórski says companies looking to benefit from the bourse should have a detailed vision for their future development. "There are many development companies but a lot of them are just one-project developers," says Wewiórski.

BOŚ' Binkiewicz believes the current investment climate favors new debuts since the sector is really attractive for speculators, who would welcome new developers on the floor. GTC's Kozłowski is confident that there is high demand for development stocks. "But, at the moment, the companies that could soon be listed can be counted on one hand," Wewórski warns.