Tishman Speyer moves ahead with Nowe Miasto

Tishman Speyer Properties (TSP), a U.S.-based developer, signed a contract last week with Polish State Railways (PKP) for 12 hectares of land next to Kraków's main train station, paving the way for the long-delayed, multimillion-dollar "Nowe Miasto" project. "We are pleased that we've finally reached the agreement," said Torben Nielsen, TSP's director for Central and Eastern Europe. TSP has been waiting to begin construction of the $300 million first phase of the retail, entertainment and office complex since December, when the project was cast in doubt due to problems acquiring land from PKP. Before TSP can break ground, however, it still needs to sign deals with state-owned bus carrier Pekaes and Poczta Polska, which own the remaining two hectares of property slated for the project. Nielsen would not say when he expected those agreements to be reached. "We've learned our lesson not to give any specific dates until all formal issues are finalized," he said. "But we want to start as soon as possible."

Both TSP and PKP declined to say how much the developer paid for the 12 hectares. TSP has suffered a string of setbacks since announcing its intention to develop the $750 million dual-phase project in Kraków more than five years ago. Last December, Infrastructure Minister Marek Pol blocked the investment a few days before signing the final contract, arguing that the price for the state-owned PKP's land was too low. In the end, PKP demanded an additional zł. 120 million ($30 million) over seven years for parking facilities and another zł. 60 million ($15 million) within five years for underground parking at the railway station. For its part, TSP had been looking to wrap up the deal last December in accordance with a May 2000 agreement. TSP had agreed to invest zł. 20 million ($5 million) in parking facilities.

Dreams to fulfill In Nowe Miasto's first phase, TSP plans to build 80,000 square meters of retail and leisure space, as well as 22,000 square meters of class-A office space. It is also looking to construct a four-star hotel with 240 rooms, a multi-screen cinema, sports facilities, and above ground parking for 2,400 cars. "It will take three years to complete this stage," Nielsen said. The timetable for development of the project's $450 million second stage depends on the success of the first one. Plans envision construction of a three-star hotel, 400 suites, office space and conference center. "We don't have any schedule for the second phase, everything will depend on market conditions," Nielsen said. According to Michał Kubicki, vice president of developer company PIA Piasecki Inwestycje, a Kielce-based general contractor, even Nowe Miasto's first phase will be too large an investment for Kraków. "It's a good project but the market there will not be able to absorb that much space," he said. "It will be impossible to rent the whole scheme out." Other projects, such as Israel's Plaza Centers, Germany's Metro or the Globe Trade Center (GTC), also promise to increase the amount of retail, entertainment and office space in Kraków. "True, (next to the train station is) a prestigious location, but (Nowe Miasto) would still be prestigious if it was one-third the size," he said. Kubicki said Tishman would not be able to build Kraków's version of Berlin's Potsdamer Platz because the markets are too different. "The second stage is even less realistic, maybe in five to 10 years it will be doable," he said.