Taking the wrong path

When the class B Blue Point, in the Praga district of Warsaw, emerged three years ago, it was expected to fill up with tenants without any great fuss, because as well as being close to the city centre, it also offered tenants 16,500 sqm of office space. The drawback was that its developer, Pezetel Development, had had no previous experience in commercialising such units and although the rents weren't the highest (USD 18-19 sqm), the owner had a tough time trying to find anchor tenants.

Never too big

Presumably, it was that lack of experience which led to Pezetel losing a number of valuable clients. Puls Biznesu, for example, entered negotiations with Pezetel in a bid to lease 2,000 sqm, but the latter "were very inflexible", according to Katarzyna Cieplak of Knight Frank Nieruchomosci. Other companies, which had been potential Blue Point tenants, leased space in competing office buildings, such as Centrum Milenium, also located in Praga. Negotiations with Carrefour, who were planning to lease 5,300 sqm, met an equally unhappy end. Following several months of talks and a letter of intent, according to which Carrefour pledged to lease space for seven years from Pezetel, negotiations broke down and the dispute was settled in court.

Bankruptcy

Today, 60 per cent of the space at Blue Point has been leased, by tenants such as the Bauer publishing house, the bank Pekao SA, Provident Polska, Prumerica Financial and Agros-Fortuna. Pezetel Development has, however, been bankrupt since November 19th. The court made the decision following a petition for bankruptcy filed by Millennium Bank, the company's creditor. Bogdan Dobkowski, the general receiver is to arrange the sale of Pezetel's assets and repayment of debts, which in practice means the sale of Blue Point. "The building is being valued right now and will then be put up for sale. I hope it will be sold in the first half of 2004," says Dobkowski. Since Millennium Bank has a secured claim on the property's mortgage and their claims need to be satisfied first, Andrzej Jesionek, Pezetel Development's President, is reluctant to talk about it. He claims that the petition for bankruptcy is just pressure that the bank is trying to put on his company. "In my opinion, no file should have been made for Pezetel's liquidation but a settlement reached instead. Millennium Bank petitioned for our bankruptcy because expectations of a 70 per cent leasing rate allowed them to do so, but we did manage to lease 63 per cent of the building. I've appealed against all the decisions taken by the court so far and I think that the bank petitioned for our bankruptcy because of the advantageous clauses in the new bankruptcy law."

Don't hold on

The Platan Group have found themselves in an altogether different predicament. Although the company have considerably more experience than Pezetel, their financial standing has been rumoured about too. "They've over-invested," is the most frequent comment. The Dom Dochodowy o Trzech Frontach office building, which took four years to renovate and cost the company USD 18 mln, is seen as the most unfortunate of their investments. Apparently, the investment's break-even point is USD 30 sqm but Platan Park have in the meantime, set their rents at USD 28 sqm and only 30 per cent of its space has been leased so far. "We are up to date with all our payments to the banks. Our problems stem from payment hold-ups from our tenants," says the Group's Mateusz Polkowski. Platan's portfolio looks good: Centrum Milenium is 82 per cent leased, Nautilius 88 per cent, Plaza 2000 is fully leased, Platan Park I has 79 per cent occupancy and Platan Park II 50 per cent. Dom Dochodowy is the only building which is almost empty. "Developers should sell their buildings and use the assets to finance further activity. I don't understand why Platan Group have held on to their property for so long," says a consultant, who has cooperated with the company for a number of years. He points to overstaffing as another possible reason for their troubles: "Every matter seems to require more people to deal with it, than with any other company."

Symptoms

Although the company denies that it is experiencing financial difficulties, there are a number of facts which seem to confirm that this is indeed the case. Several lower management members of staff have left the company recently (out of loyalty to their former employer they refused to comment on this, though they admit that the unstable situation at the firm played a part in their departure). Moreover, Wojciech Kopij, Project Management Director and member of the board, has been replaced by Grzegorz Dąbrowski, Operations and Property Management Director. This change might confirm the view that the company has failed to keep strict control over its expenses. Nowadays, Platan adopts a stricter approach with their agents and more often than not, demands financial reporting for its marketing activities.