Multico goes for homebuyer market - Polish entrepreneurial venture goes from consumer goods to real estate
Polish entrepreneur Zbigniew Jakubas is venturing into the property market. The reason is simple. "I believe that this is a good business," he said.
Founder and owner of Multico, Jakubas has focused more on building a treasure chest in consumer-goods operations such as production of mineral water under the brand Multi Vita and textiles for export. The company, established in 1989, also owns two printing plants and publishes daily Zycie Warszawy.
Now, Multico with a staff 3,800 employees is moving into residential property.
Earlier this month Jakubas started marketing and sales for his $16 million apartment complex, a high-end project on ulica Szenwalda in the central Warsaw district of Zoliborz. Apartments are scheduled for completion next summer. The nine-floor complex will contain 72 apartments.
"I personally enjoy construction," said Jakubas, who was educated as an engineer.
Multico is targeting an upper-strata clientele with apartments running $1,300-$1,900 per square meter, or an average $160,000 for a 100 square-meter flat. Price tags for modern, centrally located apartments run from $950-$3,500 per square meter, according to figures from Poland Relocation Services agency.
Multico's apartments will range in size from 80-260 square meters and will feature high-end finishings, including two standard phone lines and an ISDN line for electronic hook-ups, Jakubas said. Another emphasis will be space ceilings will be 3-3.10 meters high, 20-30 centimeters more headroom than is standard for Warsaw apartments, he said.
In addition, the building will have a hotel-like lobby, fitness center and around-the-clock security, Jakubas said. Security is key, he said. Jakubas lives in a house in the Warsaw district of Sadyba. But living in a house is difficult because of break ins, he said. Either your house is robbed regularly or you pay $4,000 a month for security, Jakubas said. Faced with those costs, multinational companies now prefer to rent flats in multi-apartment projects with 24-hour guard services, he said.
Although the Zoliborz apartment project is Multico's first commercial real estate venture, the firm is no stranger to development and construction, Jakubas said. The corporate resume includes development of four industrial plants as well as a 2,800 square-meter office building on ulica Ciasna downtown. These projects, however, never went to market and are used by the firm's various operations.
The residential project is a money-making operation, but Jakubas said he's not that interested in quick returns.
It could take some time before customers appreciate the quality of the building he plans to deliver. Jakubas, who has just started sales using two agencies Mansion & House and Foksal, said there will be nothing wrong if interest is low in the early phase. He said he is ready to complete the building from his own capital and give potential customers a chance to see the final product, which he believes would attract them to buy it. "I'm not in a rush to sell the apartments," Jakubas said.
Multico first bought the 4,750 square-meter site on ulica Szenwalda from a textile cooperative in the early 1990s and used the existing plant for Multico's own textile operations. But as land prices increased, Jakubas decided it made more sense to go residential. He wouldn't reveal the original price paid for the lot. Warbud is the general contractor for the apartment project.
Heitman pledges more
Heitman International has pledged to up real-estate investment in Central Europe and will make Warsaw its regional headquarters, the Chicago-based property financing firm with $9 billion under management said earlier this month. Heitman, however, was short on details and dollar targets.
So far, Heitman has invested $200 million into Polish real estate projects through either own capital or managed funds and is looking for more real estate investment opportunities in Poland and the region, said Lori Wittman, Heitman's vice president for business development.
Heitman, which worldwide has about $9 billion under management, to date has co-financed the development of the $115 million Warsaw Financial Center office building and the Warsaw Distribution Center warehousing scheme. Currently the firm is co-financing other warehousing projects Ozarow Distribution Center, west of Warsaw and also acts as a consultant to the $150 million Central European Retail Fund closed by French developer Bouygues, consultancy Jones Lang LaSalle and Lehman Brothers bank.
The fund has been working on three shopping malls in Central Europe, in Prague and Budapest and in Warsaw on ulica Gorczewska.
Heitman's investment horizon in Central Europe is short to medium-term, Wittman said. Heitman will focus mainly on warehouse projects in Warsaw and in other cities of Poland but will not hesitate to invest in retail, residential and office projects, she said.
Concerning the office market, the firm will rather look at smaller-scale projects than its Warsaw Financial Center. "We are a little bit skeptical about another high-rise building," Wittman said.
Heitman is looking to exit its investments in three to seven years. In Poland and Central Europe, the firm is hoping to see a 20% return in real terms over the period of the investment. It's more than in the U.S. market where the firm's return is in the mid-teens, Wittman said. "Our margins are slightly higher here," she said. "Because of the risk, our expectations are higher."
Heitman set up an office in Warsaw in the mid-1990s attracted by another Chicago-based developer Golub, which was already present here. Warsaw was Heitman's first office outside of the United States and the U.K. The firm will continue to manage Central European operations from Warsaw, which will feature as the company's regional hub, Wittman said. Warsaw was chosen not only because it's the capital of Poland, which is likely to be Heitman's largest market in the region, but also because of links to the company's headquarters in Chicago. "(From Warsaw) you can fly directly to Chicago," Wittman said.
