Ties with BPH give Mostostal start on new office project
The five-story office building will be the first real estate development project for Mostostal Export, a publicly traded construction conglomerate that also exports consumer items. Mostostal officials said they plan to develop $250 million worth of commercial real estate projects in Warsaw over the next three years.
"This (project) will form the beginning of a very ambitious move into the real estate sector. We want to do this quickly, and we want to do it right," said Wojciech Rzepka, vice president of Mostostal Export in Warsaw.
Normally, it takes 18 months to three years for a new developer to find a site and assemble the financing to launch construction of a new office project in Poland. But in this case, BPH already owned the site - a 12,000 square-meter plot of land on ulica Lubicz (just 300 meters from Krakow's main train station) - and was willing to provide half the equity.
What's more, BPH already owns shares in two of Mostostal's subsidiaries, insurance firm Compensa and leasing company Bankowe Towarzystwo Leasingowe in Poznan.
"It was an ideal arrangement. We already have a close relationship with (BPH), and they supported our move into real estate," said Karol Nachtlicht, director of investor relations at Mostostal Export, which received a building permit for the project last month.
The building, called the Centrum Biuro Lubicz, will contain 25,000 square meters of rentable office space and will cost $47.5 million to build. Mostostal and BPH will each contribute $3.1 million in equity. Mostostal officials said they would use bank loans and proceeds from a bond issue later this year to finance the remaining $41.3 million needed to complete the building.
Why did it take so long for Mostostal Export to make its entry into the real estate sector?
According to Nachtlicht, the firm considered venturing into real estate development as early as 1995, but it feared losing a generous tax break. In 1994 the Finance Ministry granted Mostostal a 100% exemption from corporate income tax, provided that 20% of the firm's revenue came from exports. "To keep our benefits, we had to focus on new export markets, not real estate," Nachtlicht said.
Last year the tax exemption saved Mostostal zl. 11.78 million ($4.36 million) on gross profit of zl. 41 million ($15.19 million).
That changed in October of last year, when the Finance Ministry said that Mostostal could keep the tax exemption without the 20% export condition. Soon after, the firm's shareholders approved a three-year plan to invest $250 million in office, retail and residential real estate projects throughout Central and Eastern Europe.
Same project, new design
ING Real Estate revealed a new design earlier this month for the Zlota Centre, a mammoth, 170,000 square-meter commercial project planned for the center of Warsaw.
The Dutch bank decided, along with the Centrum gmina government, that the original design, completed in November 1996, "lacked unity and cohesiveness," said Jaap Joldersma, managing director of ING Real Estate in Warsaw. The shops, multiplex cinema, office building, hotel and car park were divided into small rectangular plots between the Holiday Inn Hotel and Warsaw's Central Station.
The new design contains all of the same functions, but they will be unified under a single glass structure. "We wanted a unified city center. Now we're much closer to that target," said Jerzy Guz, director of economic development and promotions at the Centrum gmina, which has already agreed to contribute the property (31,000 square meters of prime city center land) needed for the project.
The Zlota Centre will cost an estimated DM 500 million to develop. ING Real Estate hopes to launch construction in 1999 and complete it by 2004.
Joldersma hopes the new, more unified design will expedite the planning process. Under the original design, ING Real Estate would have been required to receive separate building permits for each one of the eight buildings. Now that ING Real Estate is planning just one building, the company is betting that it may only have to obtain one building permit for the entire project.
Patience pays
Societe Generale signed the final papers last week on a long-awaited lease deal that will enable the French bank to take 80% of the first building of the Saski Business Center, a $70 million office project near the intersection of ulicas Marszalkowska and Krolewska.
The deal is particularly sweet for the developer, Bouygues, which has struggled to complete the project in the face of bitter protests from nearby residents. Last December, a local housing cooperative won a court order to stop construction by insisting that the new office project interfered with the historic boundaries of Saski Park along ulica Marszalkowska.
Officials with Bouygues held "at least a dozen meetings" from December to March trying to convince local residents to drop their appeal, said Jean-Yves Ebel, manager of real estate development at Bouygues. Local residents agreed on March 12, soon after the Society for Preservation of Public Monuments, a national agency that supervises historic landmarks, said the planned office project did not lie within the boundaries of Saski Park.
"My advice to developers is be patient. It's impossible to stop a project based on misinformation," Ebel said.
Once residents dropped their protest, Societe Generale agreed to lease 5,600 square meters in the first building of the Saski Business Park. Gilbert Hie, deputy general manager of Societe Generale in Poland, said the bank agreed to lease the space for 10 years, but he would not reveal price conditions.
Societe Generale has rapidly become the largest arranger of syndicated loans in Poland, and it badly needs more space. The company's 225 Warsaw-based staff are currently scattered among three separate office buildings, including the FIM Center on Aleje Jerozolimskie and the City Center next to the Holiday Inn Hotel. "Our target all along has been to put everyone under one roof," Hie said.
"This (project) will form the beginning of a very ambitious move into the real estate sector. We want to do this quickly, and we want to do it right," said Wojciech Rzepka, vice president of Mostostal Export in Warsaw.
Normally, it takes 18 months to three years for a new developer to find a site and assemble the financing to launch construction of a new office project in Poland. But in this case, BPH already owned the site - a 12,000 square-meter plot of land on ulica Lubicz (just 300 meters from Krakow's main train station) - and was willing to provide half the equity.
What's more, BPH already owns shares in two of Mostostal's subsidiaries, insurance firm Compensa and leasing company Bankowe Towarzystwo Leasingowe in Poznan.
"It was an ideal arrangement. We already have a close relationship with (BPH), and they supported our move into real estate," said Karol Nachtlicht, director of investor relations at Mostostal Export, which received a building permit for the project last month.
The building, called the Centrum Biuro Lubicz, will contain 25,000 square meters of rentable office space and will cost $47.5 million to build. Mostostal and BPH will each contribute $3.1 million in equity. Mostostal officials said they would use bank loans and proceeds from a bond issue later this year to finance the remaining $41.3 million needed to complete the building.
Why did it take so long for Mostostal Export to make its entry into the real estate sector?
According to Nachtlicht, the firm considered venturing into real estate development as early as 1995, but it feared losing a generous tax break. In 1994 the Finance Ministry granted Mostostal a 100% exemption from corporate income tax, provided that 20% of the firm's revenue came from exports. "To keep our benefits, we had to focus on new export markets, not real estate," Nachtlicht said.
Last year the tax exemption saved Mostostal zl. 11.78 million ($4.36 million) on gross profit of zl. 41 million ($15.19 million).
That changed in October of last year, when the Finance Ministry said that Mostostal could keep the tax exemption without the 20% export condition. Soon after, the firm's shareholders approved a three-year plan to invest $250 million in office, retail and residential real estate projects throughout Central and Eastern Europe.
Same project, new design
ING Real Estate revealed a new design earlier this month for the Zlota Centre, a mammoth, 170,000 square-meter commercial project planned for the center of Warsaw.
The Dutch bank decided, along with the Centrum gmina government, that the original design, completed in November 1996, "lacked unity and cohesiveness," said Jaap Joldersma, managing director of ING Real Estate in Warsaw. The shops, multiplex cinema, office building, hotel and car park were divided into small rectangular plots between the Holiday Inn Hotel and Warsaw's Central Station.
The new design contains all of the same functions, but they will be unified under a single glass structure. "We wanted a unified city center. Now we're much closer to that target," said Jerzy Guz, director of economic development and promotions at the Centrum gmina, which has already agreed to contribute the property (31,000 square meters of prime city center land) needed for the project.
The Zlota Centre will cost an estimated DM 500 million to develop. ING Real Estate hopes to launch construction in 1999 and complete it by 2004.
Joldersma hopes the new, more unified design will expedite the planning process. Under the original design, ING Real Estate would have been required to receive separate building permits for each one of the eight buildings. Now that ING Real Estate is planning just one building, the company is betting that it may only have to obtain one building permit for the entire project.
Patience pays
Societe Generale signed the final papers last week on a long-awaited lease deal that will enable the French bank to take 80% of the first building of the Saski Business Center, a $70 million office project near the intersection of ulicas Marszalkowska and Krolewska.
The deal is particularly sweet for the developer, Bouygues, which has struggled to complete the project in the face of bitter protests from nearby residents. Last December, a local housing cooperative won a court order to stop construction by insisting that the new office project interfered with the historic boundaries of Saski Park along ulica Marszalkowska.
Officials with Bouygues held "at least a dozen meetings" from December to March trying to convince local residents to drop their appeal, said Jean-Yves Ebel, manager of real estate development at Bouygues. Local residents agreed on March 12, soon after the Society for Preservation of Public Monuments, a national agency that supervises historic landmarks, said the planned office project did not lie within the boundaries of Saski Park.
"My advice to developers is be patient. It's impossible to stop a project based on misinformation," Ebel said.
Once residents dropped their protest, Societe Generale agreed to lease 5,600 square meters in the first building of the Saski Business Park. Gilbert Hie, deputy general manager of Societe Generale in Poland, said the bank agreed to lease the space for 10 years, but he would not reveal price conditions.
Societe Generale has rapidly become the largest arranger of syndicated loans in Poland, and it badly needs more space. The company's 225 Warsaw-based staff are currently scattered among three separate office buildings, including the FIM Center on Aleje Jerozolimskie and the City Center next to the Holiday Inn Hotel. "Our target all along has been to put everyone under one roof," Hie said.
