Tipping the scales

The Warsaw market surprised market players with extremely robust leasing activity last year. Jeroen van der Toolen, managing director for the CEE region at Ghelamco, talked to WBJ Observer about last year’s results outperforming analysts’ forecasts, Warsaw’s CBD expanding westward, and the firm’s plans for the future, given the changes in the country’s financial landscape Interview by Beata Socha WBJ Observer: Not so long ago, market analysts looked skeptically at large schemes, such as Warsaw Spire, being added to the already hot Warsaw office market. Meanwhile, last year saw a record volume of leases, including in the capital. Ghelamco closed deals for 80,000 sqm – the highest volume among all developers. How much of Warsaw Spire has already been commercialized? Jeroen van der Toolen: Truly, some time ago, many doubted our chances of success based upon short-lived market forecasts. Warsaw was not supposed to be able to absorb such a large-scale project. And also, few believed Wola could turn into what it is now becoming – a new, lively business hot spot. We decided to develop such a project because we could see the big picture, analyze the situation with a long-term, broad perspective. We aimed high because we knew that a well-prepared, coherent project would always triumph on the market. Now we have it almost 80 percent leased, two buildings – B and C have been commissioned, and the A tower building is in the final phase of finishing work. Everything is going accord-ing to schedule. The whole complex, along with the surrounding public square, will be ready and open in May. The lease with Samsung for 21,000 sqm was one of the biggest and most talked about deals of the past year. How long did negotiations take on that one? What do you think tipped the scale for Samsung in favor of Warsaw Spire over other locations?   In the case of Samsung, the company needed space to consolidate their R&D functions from three different locations into one single site. They were looking for a modern building that would allow for long-term expansion. Samsung also appreciated our landmark project for the fact that it’s equipped with state-of-the-art technical solutions. The company became our partner in this field and applied its latest air-conditioning system in the tower building. It is the largest implementation of Samsung’s DVM S Water system in Europe. We are also proud to hear from our tenants that they enthusiastically await much the opening of Plac Europejski, with all of its unique amenities. It’s a one-of-a-kind place in Warsaw, coherently designed by experts, combining greenery, much needed in Warsaw, with great places to eat and art facilities. Besides, with our project we have set a new trend in Warsaw. There is huge interest in this location, and many companies are now eager to create their headquarters here, in the neighborhood of Rondo Daszyńskiego. [caption id="attachment_90110" align="alignleft" width="300"] Image: Ghelamco[/caption] Isn’t it somewhat surprising that companies that used to be located right smack in the city center are choosing locations outside the central district? With the second metro line, the border of Warsaw’s CBD is redefined and is moving westward, and Rondo Daszyńskiego in particular is becoming the new business hub of Warsaw. This area is something more than just an office district though. It’s an emerging, multifunctional part of the city, with modern housing estates, hotels, shops and quality public spaces such as Plac Europejski. We noticed the potential in the Wola district before other companies did, secured many plots there and started the transformation process of the whole the area. We developed Crown Tower, Crown Point, Crown Square, and Prosta Office Center there in the past, and currently, Warsaw Spire office complex and Wronia 31. Sienna Towers and Spinnaker are also in the pipeline. We had a vision to bring change to the district many years ago, and now Ghelamco is still responsible for a great part of what is built in Wola. At the end of 2015, the company issued bonds worth PLN 320 million. What are the funds earmarked for? Do you plan more bond issues in the future? The Ghelamco corporate bond issue stemmed from the plans we have for 2016. We wanted to obtain financing for initiated and planned investments. This instrument works well for us and we do not rule out further issues in the future. We see great potential in the commercial real estate industry in Poland and we want to be prepared with the necessary resources to actively participate in this development. Is debt financing going to be Ghelamco’s primary source of financing now that the new bank tax makes bank financing more expensive? We fund our projects both from corporate bonds and bank financing. Shifts in taxing don’t seem to be a problem that will limit the availability of resources for companies like ours. Even in bad times, such as the recent economic crisis, banks became more careful about granting loans only to smaller and less secure subjects. I believe this change can affect such type of companies, they will feel that the cost of financing, due to the tax imposed on banks, is a bit higher. In the case of bigger players, this is a small part of the costs that we have to secure in the development process, so I’m quite certain that this additional tax will not hurt the real estate industry too much. You have recently announced a new, smaller, 16,000 sqm project right next to Warsaw Spire. When is it due to be delivered? The project, Wronia 31 is to be built on the corner of Plac Europejski, near the intersection of ul. Łucka and Wronia. It’s an entirely separate building with 15 floors – 15,150 sqm of A class office space and 850 sqm of retail space. We provided an independent, underground car park with spaces for 195 cars combined with infrastructure for cyclists – 54 parking spaces and two changing rooms equipped with showers. Wronia 31 offers really great advantages for tenants in a moderate scale building and an excellent location at Plac Europejski. We started to work on the diaphragm wall last year, now the underground floors are being built. Completion of Wronia 31 is scheduled for the second quarter of 2017. What other projects are Ghelamco working on? Besides Wronia 31, we are finishing Wołoska 24, a 22,000 sqm office project in Mokotów, with retail functions on the ground floor. In Łodź we are developing a 24,000 sqm build-to-suit office scheme – Przystanek mBank. Besides these medium-scale office schemes, we are also commencing some large-scale projects this year, Sienna Towers and Warszawa Gdańska, our two largest developments. Sienna Towers is already under construction and is scheduled for completion in Q2 of 2019. Upon completion it will deliver 100,000 sqm of top quality space, distributed between three towers, providing the best location for office, retail, hotel and conference functions. It will also be one of the first commercial projects in Poland with a direct underground link to the metro station. We plan to implement unique, pioneering technologies in the buildings – it will truly be a project of the future. As for Warszawa Gdańska, phase one will begin in Q3 2016. In general, this project will include 165,000 sqm and will be completed in phases. The project consists of nine buildings: a train station combined with office, retail and hotel functions, all integrated with a multifunctional transport hub. It’s a visionary project that not only provides various transport services concentrated in one place (metro, railway, bus, tram), but also delivers green, resident-friendly public spaces. We hope it will be a model of a well-organized, modern city hub, where public spaces are harmoniously integrated with communication and a wide range of services. Apart from office projects, we will also be active in other segments of the market such as retail, and we will be entering regional cities with new projects as well.