Remodelled type of business

Tenement city

The company is the leader in its niche on the Łódź market. It has renovated and handed over to buyers over 30 projects and four more are just starting. The idea is simple: to buy old, neglected buildings and give them another lease of life. “We buy historic residential facilities – tenements with their glory days behind them – and we reintroduce them to the market,” explains Marek Kralka, the owner of Kralka Investment Group. He emphasises that the properties chosen by the company must fulfil a number of conditions. First of all they need to be at least half-empty to guarantee a return on the investment from the start. “We negotiate with the remaining tenants and offer legal solutions. We have a special department established to do that and a separate budget for removals and searching for new apartments for the residents of the purchased building,” Marek Kralka explains. Such business is apparently highly profitable in Łódź, even though the demographic and apartment market indexes are poor. “All the buildings that we revitalised last year were sold before the project was finished. Łódź is a city that provides people like me with opportunities. I can adjust the prices to the market’s requirements. Moreover, I try to make it possible to buy an extra room than in typical development projects for the same amount of money. This has proven to be most effective – particularly when it comes to young couples who are planning to have children. Instead of buying a one-room apartment, they can instead become the owners of a two-room flat with an area of app. 45 sqm where there is some space for a new member of the family. The average price per sqm of an apartment in our buildings amounts to PLN 2,500,” stresses Marek Kralka. However, the new tenant must cover any costs incurred by the renovation of their apartment. The company mainly concerns itself with the revitalisation of communal areas, roofs, façades, backyards and pavements – but any expenditure related to the actual apartment has to be paid by the resident. However, these apartment renovation services are only offered to each buyer – they are not obligatory. Łódź is famous for its tenement buildings. The city has even launched the ‘Mia100 Tenements’ programme using European Union funds to simplify and subsidise the renovation of old buildings. However, so far Kralka Investment Group has not had to turn to the city for such support. “The pace at which we complete our projects – 70 pct are finished within a year – is usually shorter than the period needed for securing subsidies. The procedures and formalities take such a long time that we can finish the project before the administrative issues are resolved, therefore we do not even bother to apply for the subsidies offered by the city. However, we cooperate very closely with the buildings conservation department,” adds the head of the company.

Entering new markets

The speed of the company’s expansion has made it possible for the owner of Kralka Investment Group to not only think about new projects in Łódź but also about expanding beyond its home city market. “We want to grow and continue to look for new business opportunities,” declares Marek Kralka. The first (or even the second) step has already been made – the company has started buying up tenement buildings in Warsaw (on ul. Techników) and in Kraków (on ul. Ignacego Krasickiego). The Warsaw project offers a potential useable and residential area of 700 sqm, while the Kraków one has a possible useable and residential area of 550 sqm. Six such modernisation projects are currently under preparation with a combined residential and useable area of 5,000 sqm: one in Warsaw, one in Kraków and another four in Łódź. Three of them have been bought out of funds raised from a corporate bonds issue, which were floated with the support of Gerda Broker and the Secus Asset Management brokerage house. The securities, worth PLN 7 mln, were addressed to individual investors. “The project in Kraków will also be financed in this way. Besides, Kralka Investment Group is considering the revitalisation of a building where the residential function would be replaced by an office one. “This is the former factory of the Food Research Institute [Instytut Badania Żywności] in Łódź. So far we are only talking about the project. We are only considering it because the Łódź market is rather unique in terms of office space. It has a substantial supply of offices with a relatively high vacancy rate,” remarks Marek Kralka. The company also wants to carry out (the first such project in its history) the modernisation of a Łódź tenement building that would become a fully ecological residential building after the refurbishment. “The villa in Widzew district will be converted into an eco-tenement, which will be supplied with energy by a heat pump installed by us,” reveals the head of Kralka Investment Group.