Unsportsmanly conduct

Two sports stadiums, two potential retail developments and two disappointed UK developers. A look at the kind of pitfalls facing investors interested in

re-developing municipal properties

Recently each successive year in Poland has seen a record amount of foreign investment in the country’s real estate. This has come to our shores despite the often labyrinthine legal problems over the rights of land ownership and negotiations with public authorities, as well as tender and planning permission procedures. With such a stampede of companies fighting over the best plots to develop their projects, there are bound to be winners and losers. To illustrate the problems typically faced by such potential investors, we shall look at two cases in different Polish cities, both involving difficulties and disappointments for UK companies, and both redevelopments of sports stadiums.

 The first of these is located in the city of Toruń, and concerns the fate of the motocross stadium on ul. Broniewskiego. The city council came to the conclusion that the stadium should be relocated, and in order to finance this, the old premises would be sold to an investor for a residential or retail project. Last May, the council announced that the stadium and its 6.3-ha grounds would be put up for sale. This initially attracted the interest of Helical Poland – a subsidiary of British firm Helical Bar – who hoped to build a shopping centre on the site, as well as Polish firm Nesta Bis, who had a similar proposal, except in this case for a mixed retail and residential development. Just how attractive this plot was became evident when several other firms later got involved, namely, Polish developers Przedsiębiorstwo Budowlane Konstanty Strus, Wrocław Plaza, Echo Investment and the Israeli company Plaza Centers Poland.

Record-breaker

 After lengthy negotiations with the council, Helical were under the impression that they had secured a deal to buy the old stadium and develop a new one. According to Jonathan Tinker, the director of Helical Poland: “Our original proposal was that we would develop the new stadium in a PPP for around PLN 35 mln, in exchange for which we would receive the old stadium and the zoning plans.”

However, the election of a new administration led to the property being sold at a public auction in January this year, the result of which was that it was sold to Plaza Centers for a sum unprecedented in Toruń of PLN 60.27 mln – nearly twice the reserve price of PLN 31 mln. Helical narrowly missed out with a bid of just under PLN 60 mln. The city recently announced that a tender for the new stadium project would be held in July.

Plaza Centers, which currently has 4 shopping centres in Poland (in Warsaw, Kraków, Poznań and Ruda Śląska) and 3 others under development, plans to develop a 30-35,000 sqm shopping and entertainment complex (with possibly a cinema) for app. EUR 50 mln on the Toruń site. But there is still a long way to go before the city’s shoppers are able to make their first purchases in the new mall. The first stage is a 60 day period after the auction for the approval of the concept for the centre. Once both sides have agreed to this, then the site development conditions can be drawn up and then Plaza Centers can apply for the building permit. This whole process is likely to take until the end of 2008. If  all goes to plan then  work can finally begin in mid-2009, with the centre ready in 2010.

Unsurprisingly slow

 According to Eli Mazor, the general manager of Plaza Centers Poland, the length of time that this project will take to get off the ground is normal and accepted by developers in Poland. “Sometimes you can buy a plot with a master plan and so you can build on it immediately,” says Mr Mazor. He goes on to add that “procedures are procedures – and even if the city pushed things, we would still have to follow them (...) but this is the present condition of the market.”

The Toruń investment is, however, a relatively simple case when compared to the next one we shall examine – the battle over ul. Jurowiecka in Białystok. This location is on a major junction close to the city centre and is coveted by two companies: British company Parkridge CE Retail, who have plans for a EUR 27 mln, 33,000 sqm Focus Park Białystok shopping complex on one side of the road; and SSA Jagiellonia owned by the Jagiellonia Białystok football club, who with ECE Projektmanagement  intend to develop the 50,000 sqm Galeria Jagiellonia mall for app. EUR 60 mln on the other side. This is the current site of the Jagiellonia Bialystok football stadium, which would be demolished to make way for the project, with a new stadium to be built in another location. According to Wojciech Strzałkowski, one of the owners of SSA Jagiellonia, the profits generated from the shopping centre would be re-invested in the football club.

Białystok, however, is not Warsaw, being both smaller and less affluent, and thus it is difficult see how it would be able to support two large malls facing each other across the same road. The race was on to see who could get their project up and running first, forcing the other to pull out.

Planning and appealing

 Parkridge suffered a major hitch early on when in December Nathan North