Katowice developer vies for piece of multiplex pie
When Wojtek Szczerba acquired a 22,000 square-meter site partially occupied by a park in the center of Katowice two years ago, he thought there was no better place in town to build a multiplex cinema.
Katowice, a city of more than 300,000 residents, is surrounded by the industrial agglomeration of Silesia (population 4 million) and lacks entertainment facilities such as cinemas.
In addition, Szczerba's site on ulica Gliwicka, which had the charm of an old-style park, was just an 11-minute walk from the city's main railway station.
"I thought this place was ideal for an entertainment facility," he said.
Szczerba, who had lived in the U.K. for years, set up a company called Megaplex and began preparations for the development of a $17 million entertainment center that would have 5,500 square meters of cinema space and another 5,500 square meters of retail space. Szczerba owns enough land to potentially expand the project by another 10,000 meters of retail space for a total of 100 stores, he said.
But a year later, Szczerba learned that British developer Chelverton was planning to invest DM 300 million to build a massive 90,000 square-meter shopping mall on ulica Chorzowska, about one kilometer from Szczerba's site.
Chelverton's shopping mall which would be one of the biggest built in Poland so far is to include "a very big entertainment center" with a 6,000 square-meter multiplex cinema and at least 14 screens, said Peter Long, country manager for Chelverton. Long said the company had already signed a contract with a cinema operator. While he wouldn't reveal the name of the operator, some industry sources said that Ster Century of South Africa is involved.
After Chelverton's plans became public, Szczerba began having difficulty marketing his project, as potential multiplex cinema tenants were concerned about the presence of a big shopping mall nearby, he said.
Finding an operator for the cinema is crucial for Megaplex to close financing and start building.
"We are not going to start building on spec," Szczerba said.
Megaplex plans to start construction as soon as next January, when the city completes road redevelopment in the area.
By that time, Megaplex needs to find a cinema operator. Szczerba believes that despite its proximity to Chelverton's mall, there is enough room for his project.
"I absolutely believe there's room for both," he said.
Szczerba believes that his Megaplex, located closer to the city center, will appeal to people going out for dinner and a movie, while Chelverton's shopping mall is suburban and attractive for those who want to go to the cinema before or after doing their shopping.
"We are just a completely different center, catering mainly to leisure and entertainment," Szczerba said. "If you think Janki is a good location, you should go with Chelverton. If you think Europlex is good you should go with us." Janki is a shopping center on the southwestern outskirts of Warsaw and has a Ster Century-operated cinema, while Europlex is a centrally located building with a cinema operated by Silver Screen.
Even Long believes that Katowice can accommodate more than one multiplex. "The Katowice area is so big that I don't think our project will satisfy demand," he said. "There will still be room for one or two (more)."
So far, there is no multiplex cinema in either Katowice or the Silesian region, Szczerba said. Developer Multikino plans to open one cinema in the city of Zabrze later this year.
Before Chelverton can open its multiplex, however, it needs to tackle infrastructure problems.
Chelverton, which earlier this month obtained a planning permit called Warunki Zabudowy i Zagospodarowania Terenu crucial to obtaining a building permit from the city plans to start construction in March 2001 and finish by November of that year.
But some sources said the city needs to upgrade the local road network before the mall is finished. "We have to build a quite complicated junction," Long said, adding that the junction would be completed before the shopping mall opens.
Megaplex, for its part, could have problems finding a cinema operator. "Cinema operators are suffering from overexpansion in the (United) States," Szczerba said, a situation that affects the local market as many operators now present in Poland are U.S. based.
In the longer term, however, cinema operators can look forward to a happy ending, Szczerba said. There is currently one screen per 50,000 residents and one modern screen per 150,000 residents in comparison to the 1/15,000 ratio found in the West, he said.
Heitman to expand
Heitman International, a U.S.-based company specializing in real estate financing, plans to invest as much as 60% of its new Central European Fund in Poland, the company said. The fund is worth more than $500 million.
"We are pretty pleased with Central Europe," said Chris Merrill, director of European investment with Heitman, which earlier this month closed a $525 million fund to be invested in properties in Poland, the Czech Republic and Hungary.
Heitman said it had identified about 65% of the total properties that the fund will invest in. Investments already carried out include the joint purchase of three office buildings in the Wisniowy Business Park with GE Capital, and the co-financing of the Warsaw Financial Center with U.S.-developer Golub. Investments that have been identified but not yet implemented include the purchase of unnamed property in Warsaw and the development of the International Business Center, to be built on ulica Polna in Warsaw jointly with Golub. Construction of the 35,000 square-meter, twin-tower building is planned to begin by the end of this year, Merrill said.
As much as 60-80% of the fund will be invested in the acquisition of existing buildings, with the remainder put toward the development of new properties, Merrill said. Heitman will focus on office and warehousing properties but isn't ruling out investing in retail and residential sectors, he said.
Heitman said that investing in Central European properties is attractive because the yields are 3-4% higher than in Western Europe. But such investment also carries a risk, primarily due to the lack of liquidity and transparency here, Merrill said. That opacity has so far kept Heitman from investing in the retail sector, for example. "Sales figures from tenants are not available," Merrill said.
Another element that makes the acquisition of properties difficult in Poland are landlords' high price expectations.
"The (expectations) are unrealistic," Merrill said.
Merrill said Heitman believes that office rents will continue to fall and thus lower revenue from office buildings in the future. "As buyers, we are looking at the future market," he said. "There will be some pressure on rents. They won't stay at the current level."
Euro Medical eyes
construction of two hospitals
Euro Medical, a medical services company, plans to build two hospitals in Warsaw that will have some of the first Western-owned inpatient facilities here, said a consultant with the company.
Early next year, Euro Medical plans to start construction of an oncology hospital and a general hospital in Warsaw, said David Kaiser, a consultant with Euro Medical.
Kaiser said the company already secured "two distinct" locations for the project but wouldn't give further details. "It's premature," he said, adding that the company is planning to release more information about the projects in the coming months.
Private medical healthcare is booming in Warsaw as the ailing public healthcare sector fails to meet corporate needs, sources said.
So far, however, most private medical services in the city have focused on outpatient clinics. One exception is the American Medical Center, which plans to open a 400 square-meter inpatient clinic in the residential district of Ursynow later this year, the company said.
On the move:
Knight Frank Nieruchomosci hired Magdalena Zakrzewska to head its new residential agency unit, the U.K.-based real estate consulting company announced earlier this month.
Zakrzewska joined Knight Frank in June, but the company only officially announced that it would start offering residential agency services in October. In Poland, Knight Frank has so far focused on its office agency, as well as on research and financial consulting services within the real estate sector. The residential agency will specialize in marketing newly built residential projects developed by its clients.
Before joining Knight Frank, Zakrzewska worked as a real estate broker in the United States for 16 years. Most recently, she was an associate broker with Century 21. She has a bachelor's degree in architecture from New York's Pratt Institute, Knight Frank said.
