Good men in a crisis

"The credit crunch has not yet finished. Currently most banks are mainly trying to reduce the amount of leveraging, which is why there are few possibilities of obtaining financing on the market unless a project is located in one of the biggest cities in Poland," says David Sharkey, founder of Irish developer Caelum Development. Together with its Hungarian partner Futureal, it opened the Nova Park shopping centre in Gorzów Wielkopolski (with a leasable area of 32,400 sqm) on April 18th. "We are not planning any projects in the biggest cities in Poland. It seems to me that they are oversaturated with malls," explains David Sharkey. The company's strategy is to construct shopping centres in good locations in smaller towns with the intention of securing the position of being the dominant centre in a given area. Caelum Development built its portfolio of projects between 2004 and 2009 and is not planning to start any new ones. The company had also been an active developer in Germany and Hungary, but these properties have now been sold. "It seems to me that the Hungarian market is currently under some pressure, which is why we do not have a lot of plans connected with this country. We are now focusing our operations on Poland and Romania," reveals the founder of Caelum.
Hungarians cross their fingers for Poland
Hungarian developer Futureal has also been active during the crisis, and in April 2011 decided to join forces with Caelum Development to finish the Nova Park development in Gorzów. "The property market was only one part of the larger crisis. But it is a very vulnerable sector and has suffered a lot," explains Gábor Futó, president of the management board and founder of Futureal. "Poland coped admirably during the years of economic slowdown, and projects such as Nova Park are evidence of this. The centre includes not only international brands such as New Yorker, H&M and C&A, but also a lot of outlets with Polish roots - for example, the LPP group with its Reserved brand, which is also currently preparing for the opening of a flagship boutique on Váci utca, the main shopping street in Budapest. We admire Polish companies and are keeping our fingers crossed for them," says Gábor Futó. This is why the company is planning to develop in Poland. Futureal is currently carrying out due diligence on a number of projects, including in the retail and office sectors, as well as a residential development. All these schemes have building permits or are at an advanced stage in the application procedures. Most of these projects were put on hold due to the crisis. Together with developers, local partners or local government, Futureal is planning to invest EUR 100 mln in forming joint ventures. It could also arrange mezzanine financing. "We are the sort of company that is always looking for an investment partner. During the credit crunch we have cooperated with Immofinanz, Caelum, Akron, Klépierre-Ségécé and others," claims Gábor Futó. He now reveals that Futureal has invested EUR 10 mln in the Hines Russian & Poland Fund (HRPF), which is to invest EUR 900 mln in Russian retail, warehouse and residential projects (80 pct of the funds) and Polish office, retail and mixed-use projects.
To sell or not to sell?
Meanwhile, its Irish partner is concentrating on two projects that are already underway - the ParkLake Plaza shopping centre in Romania and a smaller one in Jastrzębie-Zdrój in Silesia. "ParkLake Plaza is one of these projects that would have been opened a long time ago, had it not been for the credit crunch. Now we are focusing all our effort and attention on opening the Bucharest centre before the end of 2014," explains the founder of Caelum. The company received a building permit for the Romanian project in February 2011. "There are parties interested in leasing over 70 pct of the area of the centre, so commercialisation is not going to be a problem," he assures. The developer is currently in negotiations with three banks to finance the project. "We are also negotiating with a potential partner to work with us on the project and hope that we will soon be able to announce a partnership agreement," adds David Sharkey. The construction will start in July and is to take 22 months. "We have already invested over EUR 100 mln in this project and despite the fact that Bucharest was badly affected by the credit crunch, we do believe that it will be a success as this is a fantastic location," he insists. The second scheme in the pipeline, the 16,000 sqm mall in Jastrzębie-Zdrój, was 60 pct pre-leased before the crisis, but these contracts have since expired. If everything goes according to the developer's plans, construction work will start in Q1 2013. Such caution probably results from the lessons learnt in the development of Nova Park in Gorzów. In the wake of the credit crunch, construction work had to be stopped, so the company had to find a partner and change the general contractor (the construction work was finally carried out by Warbud). What are the partners' plans now for the centre? "Nova Park could already be an attractive asset for sale. However, we would like to finish the commercialisation first and then decide whether to consider selling Nova Park or leave it in our portfolio for the next few years," concludes Gábor Futó.