Warsaw Trade Tower has five serious suitors

At least five companies are shortlisted to buy the 42-story Warsaw Trade Tower (WTT), a source who asked not to be named told the WBJ last week. The interested parties - U.S.-based Tishman Realty & Construction International, Apollo Rida, a Poland-based joint venture of U.S.-developer Rida Development Corp. and Apollo Real Estate Fund II, Metropol Group, an investment company, as well as two Israeli investors - have been added to the list of potential buyers for the three-year-old building, located on ulica Towarowa. According to a source close to the deal, Apollo is the frontrunner in the bid. GE Capital Golub Real Estate had also been considering purchasing the WTT but withdrew its offer two weeks ago, according to a source close to the company.

The skyscraper is owned by Korean developer Dae-pol, a subsidiary of Daewoo, and Poland's Pol-mot, which according to the source have yet to pay back $80 million-$90 million they still owe for the building. The developers are under pressure to sell the building to avoid foreclosure by their creditor, BRE Bank. According to the source, the asking price for the tower is $80 million, $40 million less than the building's estimated market value three years ago, the source said. "A future buyer would have to inject at least another $10 million-$15 million for completion of the interiors anyway," the source said. Dae-pol refused to comment on the sale. "It's forbidden for me to comment about it," said Mun-gu Ahn, president of Dae-pol, who added that there might be an announcement next week.

Apollo Rida's Ira Mitzner, vice president of Apollo Rida, said it's no secret that his company has been interested in the building for more than two years. "Recently there have been discussions regarding the sale and we've been making progress," he said. "It's not an easy deal." Mitzner said the difficult economic climate and the number of unsatisfied parties involved in the deal have slowed negotiations down. According to the source, Apollo offered less than $80 million. Mitzner said the WTT has excellent technical specifications and that after taking it over Apollo would try to reposition the building on the market as quickly as possible. "Our goal would be changing the perception of the building," he said. Piotr Bojar, general manager of Metropol Group, confirmed that his company is on the shortlist but refused to offer any details. Tishman Realty & Construction International is not involved in any negotiations to acquire the Warsaw Trade Tower at this time, according to Piotr Wilk, head of project development and operations.

Not an easy sell Property insiders agree that the WTT is not a prime target for Western European and U.S. property funds, where the strategy is to focus on projects with stable returns. "It's definitely not a product for (institutional investors) because they usually look at 'secure' buildings with high occupancy and long-term lease agreements," said an executive at an international property consultancy who asked not to be named. He said the more money paid up front, the more risk in the future. What's more, due to stormy history of this project (rescheduling of the opening, changing agents, rumors regarding structural problems) an investor would have to come up with a clever way of changing the WTT's image. "It's going to take a long time to fix the faults made in the past, including the developer's attitude, marketing of the building, repositioning on the market and high vacancy," said a source who works for one of the bidders for the WTT.

The tower, initially scheduled for completion in September 2000, was finished a year later due to financial problems. It contains 34,000 square meters of net rentable office and 4,700 square meters of retail space. At present, 80% of the building remains vacant. When debt-ridden Dae-pol financed the project through an estimated $80 million bank loan from BRE Bank, asking rents hovered around $28-$29 a square meter per month, compared to $20-$21 today. Frequent switching of the building's agents and market rumors about the tower's poor construction weakened its image.

TKG warehouse project No. 3 The U.S.-based developer TKG International started construction of the Stolica Business Center (SBC) at the end of March. The warehouse project, located five kilometers south of Janki along highway E-77, will have at least 26,000 square meters. Messenger Service Stolica, one of the biggest domestic courier companies, has leased the first two buildings comprising 11,000 square meters. The second phase, which is expected to start after Stolica is finished in September, will have 15,000 square meters.