Third time's the charm

The story of Złota 44, a luxury residential high-rise right smack in the middle of Warsaw, can be told as a cautionary tale against setting your goals too high, an example of bad luck and misguided decisions or as a tale of great opportunities and success where others have failed. What chapter are the new owners of the iconic tower about to write? BBI Development together with its partner Amstar have recently relaunched sale of apartments at the Złota 44 building. With prices between PLN 24,000 and PLN 40,000 per sqm (average price PLN 28,000 per sqm) the new owners of the distinctive residential tower in the center of Warsaw hope to sell the entire property within the next couple of years. This is the third time the project, designed by renowned architect Daniel Liebeskind, has been put on the market. The scheme has a long and troubled history. It was first launched in 2007, but after two years, construction and apartment sales were halted, in the wake of the global financial crisis. In 2011, when the first wave of the slowdown was over, developer Orco resumed construction of Złota 44 and topped out the 52-storey building a year later. In July 2013, the then owner decided it was time to re-launch the sale of units in the project, but at new price levels since the hiatus: at PLN 25,000-65,000 per sqm in place of the former brackets of PLN 18,000-40,000. The price bump would have offset the extra cost accrued by the developer during the halt, had it been successful. But the new marketing strategy of placing Złota 44 above any other luxury residential project in Warsaw backfired. Not only was the price point way above any other comparable project, but the building itself, particularly the scheme’s facade, was met with hefty criticism for deviating from original visualizations. After only six months, the developer terminated its deal with the general contractor and a few months later put the entire tower up for sale to a new investor. “There was a number of coinciding factors that led to the project’s problems. But the atmosphere that arose around it is a minus,” said Bartosz Turek, real estate analyst at Lion’s Bank. “The biggest problem was with the facade. The developer released visualizations where the facade was fully glazed. When it turned out it wouldn’t be, some of the buyers were disappointed,” he added. White knights Faced with a deteriorating financial situation (a €227 million net loss in 2013), Orco was determined to cut its losses. That’s where BBI Development, backed by US giant Amstar swooped in. The two partners purchased the tower, which had cost over €150 million to construct, for €50 million (after renegotiating the original deal of €65 million). Now, after reestablishing cooperation with the former general contractor, Inso, the project is back on track. It’s facade is nearly completed, and work is progressing on the interior. “We want to finish construction work next year and sell over the next two to three years,” said Rafał Szczepański, vice president of BBI Development. “It’s not a bakery. It’s a limited series and you must remember that there will be no such apartments available on offer for years to come,” he added. Złota 44 offers studio apartments of 62-70 sqm, medium-sized units of 90-120 sqm, large, 140-200-sqm three-bedroom apartments as well as “tailor-made” penthouses of 250 sqm and above. The most attractive apartment is a 400-sqm penthouse on the top three floors of the tower. The scheme will offer top-notch amenities, including a 25-meter swimming pool, a spa, a gym, a small private cinema with a golf simulator and a wine cellar. The residents will also have a full concierge service, which will allow them to order dry cleaning, shopping, a hot meal or baby-sitting service. Time will tell The level of luxury is beyond question. The only thing that remains to be seen is whether the prices set by the new owners are in tune with the market. “We believe our prices are adequate. We’ve researched the market and set the prices at market level,” said Szczepański. Market experts are cautious, given that some 160-170 luxury apartments are sold in Poland each year, according to data compiled by residential advisory REAS for KPMG, and that a competitive project, the Cosmopolitan, was delivered in mid-2014 less than a kilometer away from Złota. “Lowering the price was a good move. But time will tell whether it was lowered enough. Keeping prices above those seen in the Cosmopolitan is risky. Particularly given the myths about the project that arose over time and are not always favorable,” Turek explained. “The Złota project will likely sell over time, but whether as quickly as the Cosmopolitan remains to be seen. We should have some signals within a month or two of the sales that will allow us to make further projections,” he added. u