The golden boys

The script could have been from a box-office action film, calm early on with the excitement and the action steadily inte nsifying, then a breath-taking twist in the plot before the usual happy ending

ING Real Estate Development and the citizens of Warsaw had been waiting for the afternoon of 7th February 2007 for 12 long years – the moment when the doors swung open of Złote Tarasy’s 63,500 sqm shopping and entertainment section, complete with a unique glass roof dome

 Scene one

 This Dutch company and the city authorities signed a letter of intent in 1995 to set up a joint venture to develop a multifunctional complex in the heart of the city on the site of a car park between Warsaw’s central railway station and ul. Złota. The Centrum Złota joint venture company was established three years later, afterwards changing its name to Złote Tarasy. Skanska, the Swedish general contractor, started the work in 2002 and today the final finishing touches are being given to the office section of the complex.

Action-packed

 The investment generated controversy from the outset. Former owners submitted claims to the hugely attractive 3.2-ha plot, which the law courts are still scrutinizing to this day. Pseudo-ecologists of the ‘Przyjazne Miasto’ pressure group proved another stumbling block, hindering the implementation of the project at various junctures. But in 2005 it seemed that nothing could hold back the Dutch investors and that Złote Tarasy would be welcoming its first customers in March of the following year. However, the opening date had to be postponed to early October 2006. But more tribulations were to follow. October 13th proved to be another ill-fated date, when it was announced that the opening had been put off yet again, this time to Q1 of 2007. Marcel A. Kooij, the managing director of the Złote Tarasy company was tight-lipped over the reasons for this postponement (generally known to have been caused by the general contractor) remarking curtly: “The building was not finished in time.”

The plot thickens

 The final opening date turned out to be 7th February 2007, but just before it arrived the blood pressure shot up yet again. ‘Przyjazne Miasto’ had locked horns with the developer once more over the shopping centre’s car park, which it claimed was harmful to both the natural environment and the residents of the city. At the end of the day, the attempts to block the car park were unsuccessful, with the whole hullabaloo disintegrating into media taunts. And the much feared transport paralysis that city centre residents and workers in the surrounding office buildings had so greatly feared simply did not materialize. Now the centre could take its first breath and start to live its own life.

Reaching an (anti) climax

 The developer’s executives seemed a little unhappy during the opening gala – perhaps tired of the whole business. However, Łukasz Stanicki, the manager of Poland’s first Hard Rock Café, a chain with a world-wide reputation, seemed the most enthusiastic of those attending. The main magnet attracting Varsovians to the centre has to be its tenants. The largest have already started trading: Marks & Spencer, Van Graaf, Zara, H&M, Empik, Hugo Boss, Mexx, New Yorker, Royal Collection, Intersport and Saturn. Lance Stanbury, the temporary director of the shopping centre on behalf of Cushman and Wakefield, which was responsible for organizing the management process prior to the opening as well as the opening itself, remains bullish: “We still have more than ten brands which cannot be found in other shopping centres – including Hard Rock Café, the Akwarium jazz club, Body Shop, Naf Naf and Next. That apart, our location in the heart of the city, next to the Warsaw central station, the underground railway and public transport is truly spectacular. Added to that is the atmosphere created by the extraordinary roof, and the various entertainment events inside will also be great draws.” In April his job will pass into the hands of Krzysztof Poznański – also from C&W. Time will tell whether the new manager can persuade Warsaw shoppers to part with their earnings here. But what do the experts think about the centre?

Renata Kusznierska, head of the retail section of the DTZ agency, remarks that: “The longer the market had to wait for Złote Tarasy, the greater were the expectations. Such is the inevitable challenge facing all projects whose opening has been postponed. Złote Tarasy’s strong point is the new brands. The customer, indeed, has a choice of an interesting and diverse range of boutiques, such as Body Shop, Next, Naf Naf and Petit Patapon. And in addition, these are the first flagship outlets of these brands in Poland, which also means they have to be the most impressive. But there seems to be, despite all the splendour and charm of Złote Tarasy, an absence of a clear leasing strategy and a concept for the ‘tenant mix’, which should surely be rectified over the passage of time. This is a large centre, which means it is more demanding as regards the distribution of all its various functions in a way that makes the available space more customer-friendly. The glass roof, which both illuminates the interior and provides a view of the city, makes a big impression.”

Renata Kusznierska also adds that the potential of Złote Tarasy is down to its location, since the centre was developed in the very heart of the city centre and its principal business district. This central location has also made it necessary to demand parking payments (PLN 5 per hour) as well as limiting the size of the car park – an underwhelming 1,600 spaces. By comparison, there are 4,000 parking lots in Arkadia, Warsaw’s largest shopping centre (110,000 sqm).

According to Lance Stanbury: “The introduction of small parking fees was necessary. But we have left a way out for tenants to offer their customers parking discounts. And we are also counting on customers coming by public transport, which is easily accessible to and from the complex.”

Final scene, act one

 In their summaries of the first day of trading in the centre, Złote Tarasy’s officials highlight the absence of traffic jams, (perhaps helped somewhat by the winter holiday season depopulating Warsaw), as well as the crowds that had flocked to the opening.

According to the centre’s temporary director: “64,000 people visited Złote Tarasy on 7th February 2007, which is an excellent result. You have to remember that it was open between 2.00pm and 10.00pm and not for the whole day.” Arkadia can claim an even better first-day result in October 2004 when 150,000 people strolled in between 10.00am and 10.00pm (the Carrefour hypermarket was open longer). When reminded of this, Złote Tarasy’s representatives retorted that more important than the number of customers is the amount of money they left in the tills.

The first day might have disillusioned cinema buffs, since the Multikino is still preparing for its debut, with the first films to be shown this June. The owners of some 20 other outlets (mainly restaurants and bars) also did not manage to finish equipping their points. All are to be ready for the opening of the Multikino.

The Lumen and Tower office buildings (a total 45,000 sqm) are still waiting for tenants, although they will surely not have long to wait since only around 5 pct of the space is unoccupied in the centre, while a huge queue has formed of potential tenants interested in the larger immediately available spaces.

Special instalment

 The centre’s managers and owners have several issues which still have to be resolved, one of which is the damages which Skanska may have to pay for not delivering the centre in time.

According to Marcel A. Kooij: “The most important thing at this moment is to finish the building. We shall be talking in a constructive manner with the general contractor, but the subject matter of these negotiations is confidential.”

Another issue is that of damages for the tenants. Several retailers have told us they are still studying last year’s results and will take action in the light of these analyses. Some are already talking about compensation.

Artur Mikołajko, the board president of Intersport, which has opened an app. 1,100 sqm showroom in Złote Tarasy, reveals that: “We are presently negotiating compensation for the postponement of the centre’s opening date. I don’t yet know whether this will be a one-off sum or perhaps a rent reduction. I cannot disclose the amounts being discussed, but they are worth trying for.”

On this issue Marcel A. Kooij comments laconically: “Admittedly, we are talking with a certain number of tenants about the postponement of the opening, but I have still yet to meet an unhappy tenant.”

One unresolved issue is that of the shares in the venture which ING Real Estate has sold. ING Real Estate signed an agreement in 2000 with Rodamco to sell 50 pct of the shares at the end of the investment period. A few years ago the prediction was that Rodamco would spend EUR 150–175 mln on the shares (this was written about in ‘Eurobuild Poland’ in 2001), but since then the price of properties in Poland has increased substantially. Specialists have been reluctant to estimate the project’s present value, but it has been unofficially assessed at around EUR 650 mln.

Marcel A. Kooij claims that: “Consistent with the concluded agreement, 50 pct of Złote Tarasy’s shares will be sold to Rodamco when we become owners of all the shares. The contract defines the parameters which are to be used to calculate the price. Rodamco will pay the price defined in the contract. At the moment the date when the shares are to be purchased from city is still unknown.” The city still holds 23 pct of the shares. The authorities in December 2006 announced a tender would be held to prepare an estimate of the value of the property. The office of property ownership supervision at city hall told us that only one offer had been received and that the tender had still not been decided.

How much did Złote Tarasy cost? The estimates given by the developer have varied around EUR 400 mln, but during the opening ceremony the sum of EUR 500 mln was mentioned, while a few days later Marcel A. Kooij remarked: “Construction is still proceeding around the clock, which means expenses will rise until the work comes to a conclusion. Only when we sum up all the various elements will a concrete figure be given. The estimated cost of the investment is presently between EUR 450 and 500 mln.”

Tune in next time, folks!

 The most interesting issue seems to be how the competition for Warsaw’s shoppers will be resolved. Renata Kusznierska feels that neither Galeria Mokotów nor Arkadia have to worry about their tide of customers receding. These are centres already firmly embedded in the minds of the population of the city and region, with a large group of loyal and regular customers, facts which are attested to by the managers of those two shopping centres. Galeria Mokotów – half of which also belongs to Rodamco – was patiently and systematically prepared for its opening (62,000 sqm, 2,600 parking lots)

Janusz Stupkiewicz, Galeria Mokotów’s manager, feels that “there is still room for several shopping centres and every mall, even those which are in a less desirable situation will attract customers and be able to keep its head above water. We had not planned any special promotion campaign related to the opening of Złote Tarasy. For several years we have been investing in our growth. We enlarged the centre, started a Shape fitness club, have a new system of car park management, and we have renovated the staircases. Some of our efforts may not be very visible to customers, but they are surely making our centre more customer-friendly.”

A similar opinion is expressed by Roman Skowroński, Arkadia’s acting manager and director of the Cefic portfolio, who fears no competition from the new giant: “There will always be room for modern shopping developments on the Warsaw market. Arkadia has proved in more than 2 years that it is the market leader, with more than 20 mln customers a year. Virtually all the space has been commercialized, while tenant rotation is at a minimum level – a fact seen as unique on the Polish market.”

Roman Skowroński adds that Cefic is this year placing special stress on devising a system which is to attach customers more strongly to the centre. To achieve this, a loyalty programme is to be introduced, but he quickly makes it clear that this has nothing to do with Złote Tarasy. He stresses that work on the programme has been proceeding for some time and is rooted in a stage of the centre’s growth and not directly from the opening of Złote Tarasy.

A third shopping giant – Wola Park (72,000 sqm GLA) is also untroubled by the new competition. Jacek Jańczak, centre manager of Wola Park, asserts with evident pride: “Our centre boasts the highest customer loyalty index – 81 pct – according to a TNS OBOP poll, and that figure did not fall even when Arkadia opened three years ago. Admittedly, we do expect Złote Tarasy to arouse interest at the beginning even among our customers, but our strong point is the family character of Wola Park. As far as our centre’s turnover figures are concerned, we saw them rise last year compared with the preceding year. We do expect the rate to fall in the next month or so, but this will surely not be a permanent trend.”

And now for the sequel

 A huge challenge now faces Złote Tarasy – to win the hearts and pockets of the citizens of Warsaw and its surrounding districts. The competition should not be taken lightly, although on the other hand, the city’s growth prospects are definitely good. According to official estimates, the population will increase from today’s 2 million approximately, to 4 million. Competition, too, is not expected to grow rapidly, with the dvevelopment of only one large shopping centre planned for Warsaw, a joint Prokom Investment and an Immochan project in Wilanów.