The bigger picture
In response to dwindling supply and soaring land prices in major metropolitan areas, a number of investors are exploring their options and buying up huge chunks of undeveloped terrain all over Poland. "Many companies have accumulated so-called land banks that they either develop themselves or resell to other developers at a substantial profit," commented Waldemar Oleksiak, director of Emmerson's research division
New ideas
Only a select number of developers on the Polish market are currently brave enough to take on the challenge of investing in a 50-ha or 100-ha residential development. The key issue with regard to large-scale developments, or "villages" as they are called, is not so much the construction of homes, but the need to develop a proper service structure for residents, which includes public utilities, retail, banking and transport infrastructure.
Additional services like healthcare, schooling, policing and municipal administration can also come into play in larger, more remote areas. The more expansive the project, the greater the risk of costs inflating to such a degree that they overwhelm a company's bottom line. Yet without vital facilities, developers are leaving their residents stranded, so to speak, and undermining the value of their investment.
"Very often a developer will deliver homes in an area where there are no pre-schools in the vicinity and schools are located a considerable distance away, not to mention shops and recreational facilities," remarked Warsaw's Deputy Mayor, Jerzy Miller.
In light of the capital's serious housing shortage, Warsaw authorities, including the Deputy Mayor and the district executive of Praga Południe, have begun inviting ambitious developers to the table this month to share ideas on a large-scale investment project in the city's Praga Południe district. The project would involve the creation of a fully-functional, independent community in the district. The development will accomodate some 20,000 new residents.
The project takes into account the need for public services, such as schools, to be built by the private developer and paid for by the city through a lease-back deal based on a public-private partnership. "Providing such essential services raises the standard of living for the residents, but it also raises the value of the properties within the development," said Miller. The arrangement also eliminates complications that can arise through the synchronization of various stages of development. "By indicating a single investor, it can harmonize the delivery of both the private and public phases," Miller explained.
Plot pioneers
Such big investment ideas have been encouraged by the successful implementation of creative housing solutions like Millenium Inwestycje's Bażantów complex in Katowice and AFI's Wilanów One in Warsaw. By 2012, Aura Park, the first investment in Wilanów One, will provide 2,500 upmarket apartments. Mill-Yon, AFI's co-developer, will deliver the first phase of Aura Park next March.
AFI anticipates that the construction of Wilanów One, in cooperation with Mill-Yon, BSR and various other developers, will provide homes for some 35,000 residents over the next few years. In the near future, the area will see the construction of a pre-school, a private Medicover hospital, a 40,000-sqm shopping center and various boutique retail and service outlets.
For its part, Millenium Inwestycje has already opened a preschool this month on the site of its Bażantów development, and will deliver a shopping and recreation center in December. The firm can be considered a pioneer among "village" developers, having initiated the Osiedle Bażantów project in 2000 with the purchase of 20 ha outside of Katowice - a plot which has since expanded to close to 40 ha.
The simple life
While remoteness from Poland's main urban centers is not traditionally a value-added point for most real-estate investments, many companies are managing to market this feature to their advantage. Companies like Millenium Inwestycje, along with TUP, Orco and Jakś-Bud, highlight the "green appeal" of their residential villages, which are located in lush, wooded areas surrounded by lakes and wildlife, a fair distance from a major city.
Jakś-Bud has already initiated the first phase of its Osiedle Natura project, situated 14 km from the center of Poznań. The 58-ha plot is located on the site of a former military base within the territory protected by the Natura 2000 program. Some 22 km outside of Katowice, in the town of Siewierz, TUP plans to build a major residential development on 122 ha of land. To demonstrate the scope of the Siewierz project, TUP's president Robert Jacek Moritz remarked, "the plot is large enough to contain Kraków's entire Old Town district, including the Wawel Castle."
Next month, TUP will get together with local authorities and urban-planning experts for a series of workshops to come up with a comprehensive plan for the area. Moritz expects to have the plan for the entire property ready by early November, including details regarding the layout, architecture, utilities and a social and commercial infrastructure for what will be a fully-functional community, complete with a town hall, municipal authorities, police force, town square, hotels, restaurants, shopping centers and more.
Big projects, big numbers
Financing such a project is certainly a big issue, particularly since, as Moritz puts it, "it took 25 years to build a city like Zamość, it could take just as long to build the town in Siewierz. We're aiming to create the best possible place for Silesians to live."
The company is evaluating the start up of a special-purpose vehicle for the project, which will manage both the investment and operational phases. The corporate entity will also be charged with managing the town, including the provision of services like utilities maintenance and energy. TUP would profit from revenues generated from the new company's activity.
"We are also considering the possibility of cooperating with other private investors - from other development firms to service providers, retailers and other businesses," remarked Moritz. He estimates infrastructure development will cost close to zł.8-10 million on top of the zł.45 million the company paid for the plot. Within three years, the first residential phase should be complete, along with the downtown square. TUP forecasts some 4,000 residents within four years, and as many as 12,000 within 10 years.
Big-plot developments are not just money-burners, however. Emmerson's Oleksiak notes that "the construction of a large-scale residential estate is very advantageous for the developer, as opposed to several individual projects." This is based on cost-effective consolidation of planning, construction, marketing, advertising and management.
Drawn in by the challenge of building an entire town from scratch and the exponential profits that such an investment has the potential to generate, the latest generation of developers gives real substance to the theory that bigger is better.
