Wejchert says profit not key for pricey refurbished palace project
Wejchert Investment, a company owned by media mogul Jan Wejchert, in October will complete the $10 million renovation of the Palac Sobanskich on Aleje Ujazdowskie in Warsaw.
Wejchert Investment plans to use the 1,000 square-meter villa for meetings of the Polska Rada Biznesu business club in which Jan Wejchert is a member. The company also built the adjacent new 1,100 square meter office building.
Wejchert, who owns stakes in private television station TVN and well as media company ITI, said that renovating the palace was the first time his company dabbled in real estate, and that it wasn't necessarily a money-making venture. "This is a bit like a hobby," he said.
Wejchert Investment bought the Palac Sobanskich from the heirs of the Sobanski family, which received the palace back from the city in the mid-1990s as part of a restitution claim. Wejchert Investment refused to say how much it paid for the pre-war building.
The investment company last year began refurbishing the palace, which previously served a variety of functions, from a secret police office, to the ROP party headquarters, to the site of one of Solidarity leader Lech Walesa's institutes.
An additional underground section expanded the renovated building, which originally had 1,000 square meters of space plus two smaller buildings of 400 square meters, by 350 square meters. The palace will serve as the headquarters of Polska Rada Biznesu, a business club that has 100 members including well-known consultant Henryka Bochniarz, entrepreneur Zbigniew Niemczycki and investor Jan Kulczyk. Until now, the club's headquarters had been on ulica Klonowa.
While Wejchert Investment originally bought Palac Sobanski only with an eye to reconstruct the business club's offices, the firm later figured that it might as well build a new, small office building next to it, Wejchert said.
The 1,100 square meter office building has raised floors, full air-conditioning and pricey finishings, he said. Those features plus the good location makes the building "class A-plus," he said. "The address is prestigious."
And with that prestigious address comes a top-notch price. "We don't want to rent below DM 80 ($42) per square meter," Wejchert said. In addition to that, a tenant will need to pay $4-$5 per square meter in service fees.
Wejchert Investment would like to lease the entire building to one tenant, preferably an investment bank or a law firm, he said.
Potential tenants agreed that the building's location is attractive, but said the whopping $42 a square meter asking price is arduous in a market where average rents for class A space now are around $30 per square meter.
"This is a good location," said Stanislas Dwernicki, managing partner of law firm Gide Loyrette Nouel, which plans to leave its offices on ulica Kopernika and rent about 1,000 square meters of new office space later this year.
But Dwernicki, who said he wasn't contacted by Wejchert Investment but was aware of the new building, said that rent of $42 per square meter is "very expensive."
Dwernicki added that while other modern office buildings can lease 1,000 square meters on one floor while Wejchert Investment's building has a similar amount of space spread out through four floors, which makes it less efficient.
Whether Wejchert Investments gets its asking price or not, the company will donate any profit from renting the space to charity, Wejchert said. "If it was purely commercial, I don't think I would have done it," he said.
The money may not be important to Wejchert, but it may be to BRE Bank, which financed the refurbishment. Wejchert refused to disclose the conditions of BRE's financing, but he did say that his personal guarantee led to more flexible conditions for the loan.
Big loan for GTC
Warsaw-based developer Globe Trade Centre has taken on the largest financing in recent history for a real estate project in Central Europe a $165 million syndicated loan arranged by Germany's DePfa Bank.
The loan, co-arranged by other banks from Austria, Germany and Poland, will be spent on new, as yet unrevealed investments in the residential and office sector, said Zygmunt Chyla, Globe Trade Centre's marketing director.
Globe Trade Centre, owned by various shareholders including Citibank and Deutsche Bank, has so far developed projects worth $300 million in Poland, Chyla said. The developments include the Mokotow Business Park, which once completed will comprise 10 buildings totaling 150,000 square meters in office space; and the Przy Krolikarni, a high-end residential project that will have 300 apartments in the Mokotow district. Globe Trade Centre is also building Galeria Mokotow, a 70,000 square-meter shopping mall and in addition has dug into a massive 500-building residential development in Konstancja, an upscale neighborhood in Konstancin south of Warsaw.
But none of the mentioned projects will receive funds from the new facility, Chyla said. He said that the projects underway already closed their financing and that the loan will be used to fund completely new projects.
The existing projects were key however to obtaining the new loan, he said. Globe Trade Centre used its seven completed buildings in the Mokotow Business Park projects as collateral, Chyla said. That collateral gave the bank more security for its loan and brought down the overall cost of financing, Chyla said.
The Globe Trade Centre loan is the first movement on this market for DePfa Bank, which has assets of DM 252 billion and operates in 13 countries.
