Recycled pearls

Developers are saving the symbols of  the communist era, converting them into modern office buildings and making a fortune at the same time
Mladen Petrov

The most outstanding architect of his generation. A representative of the resistance movement in architecture. These are just a couple of the plaudits thrown his way. He designed the first glass curtain wall constituting the elevation of a high-rise building at the Rondo Waszyngtona roundabout (later renovated). He co-designed the Stadion Dziesięciolecia stadium and gave Poznań its famous Okrąglak tower. Added to this was that he also had a keen sense of humour. It is the hundredth anniversary of Marek Leykam’s birth this year. The Polish architect also designed the office of the Presidium of the Council of Ministers on ul. Wspólna in the capital city. He modelled what was to be the most important building in the country, the seat of the communist government, on Palazzo Strozzi in Florence, which is regarded as a symbol of business entrepreneurship. So Bierut’s communist government was to be housed in premises inspired by a palace owned by the bankers who devised the basis of capitalism in the 14th century. The building, which was very impressive inside, retained ‘forms close to and understandable for the masses’, in accordance with a resolution by the National Party Council of Architects of 1949. One feature was a courtyard enclosed by rows of colonnades with interiors alluding to the Wawel castle in Kraków. However, the government never actually moved into ul. Wspólna 62. The building then had a rather unfortunate history and in  2005 was handed over in a very bad condition by a trustee in the bankruptcy of Daewoo to Euro-Invest, which belongs to Kulczyk Holding. Extensive refurbishment work started this summer.
The renovation of the above-mentioned Okrąglak is also to start by the end of the year. The owner of the building, Centrum Development and Investments, is to invest app. PLN 60 mln in the project. The general contractor for the project is to be chosen this month and the project is due to be finished at the end of next year. The first contracts for retail space have already been signed. Negotiations are also being finalised with a tenant from the financial sector that is to occupy a large portion of the available office space (5,100 sqm). Cities such as Prague and Sofia are also the scenes of similar renovation work. Developers are now taking on run-down buildings where socialist realism has left its mark in other cities. In Łódź, for example, more and more tenants are moving into the newly renovated Cross Point building (12,500 sqm).  In 2007, Mermaid Properties bought the building of the former Próchnik factory in an auction. This was built in the mid-70s, but no longer resembles the original building as only the structure is still intact. A few years ago the building that is now the Prosta 69 Business Centre also underwent modernisation work. The property, which was completed in 1968 for the J. Griman lighting material factory, has been transformed into an office building with a total leasable area of 11,300 sqm.
Expensive past
In 2006, Yareal Polska became the owner of the building at ul. Mokotowska 49 in Warsaw city centre. Built in the period 1952-1954, this was once the office of Metalexport, but it is now known as Mokotowska Square and is located on a street that is starting to attract top brands and boutiques. “We had a dilemma when buying this building. We had to make a choice – either convert it into an apartment building or retain its office function,” recalls Eric Dapoigny, president of the management board of Yareal Polska. We decided to go for the office option. “We already knew at that time that we would have to spend more on the renovation than if we built it from scratch. Our earlier revitalisation projects showed, however, that tenants and investors – and that’s who we are building for after all – appreciate such schemes and know that sometimes it is worth paying more for a building with a history,” adds the president, without revealing the costs of the project, however.
The construction work on ul. Mokotowska is to be completed in H1 next year. It will offer 8,500 sqm of offices as well as 1,100 sqm of retail space. Before this happens, the company has to surmount a number of technical difficulties. “We could have carried out a merely cosmetic renovation, but we have decided to go the whole way,” explains Eric Dapoigny. This is why only the skeleton of the former building was left intact on ul. Mokotowska and a new stone elevation has been erected in an accurate reconstruction of the former façade. “The earlier layout was not practical, so we had to completely redesign it in order to provide the interiors with access to natural light. We had to maintain maximum flexibility in the design,” explains the president of Yareal Polska. The company is not revealing any details concerning future office tenants, but all the retail premises on the ground floor of the building have reportedly been leased already. Exclusive boutiques are to open in the building as well, but the investor has yet to disclose who these might be.
An important choice
Vasil Vassilev, the president of Bratia Vassilevi, one of the oldest Bulgarian retail companies whose roots go back as far as to 1894, was faced with a similar choice. Fourteen years ago the company bought a ‘Mraz’ refrigerator factory, but did not want to continue producing the old-fashioned, environmentally hazardous appliances. However, because the plant was located only one and a half kilometres away from Narodno Sabranie square, which is in the very centre of the capital city, Vasil Vassilev had tw alternatives: a shopping centre or an office park. He decided to go for the second option. “We took over the storage facilities of twelve office buildings. The factory that used to stand here must have had an extremely strong structure. If we wanted we could have built on top of them without any extra reinforcement. This was another advantage, after the location, of this purchase,” claims Vasil Vassilev. Initially, the company was considering the construction of office buildings from scratch, but quickly abandoned this plan. “It turned out that the demolition of such solid buildings would considerably increase the capital expenditure. That was why we have decided to carry out a complete refurbishment, which cost us half as much as demolishing and building from scratch,” adds Vasil Vassilev. And this was how Vassilev Business City was born. Eventually it will contain 75,000 sqm of office space for lease. As the situation on the office market in Sofia improves, other renovation projects are to be launched. Four buildings have been put into service so far (a total of 12,000 sqm, 80 pct leased) and 20,000 sqm of warehouse space, which is 85 pct leased.
The refurbishment work on Wspólna 62 will  cost PLN 60 mln in total. In autumn 2011, the former governmental offices will re-open as Ufficio Primo, a class ‘A+’ office building. “We have managed to buy a real pearl among the buildings from the People’s Republic of Poland period. Marek Leykam, who was undoubtedly an outstanding architect of the time, broke with the socialist realism that predominated and – even though it was the early 50s – designed a building that in outlook and shape resembled the renaissance bankers’ palaces of Florence,” says Jan Lubomirski-Lanckoroński, president of the management board of Euro Investment, about the project. “The building was designed in a way that would not reveal the splendour of its interiors outside. The architect did not want to show the opulence of the building to everyone who was looking at it. Inside its beauty and uniqueness are amazing,” hymns the president of the development company.
Costs under control
Restoring the former glory of a building is a time-consuming and costly task. Jan Lubomirski-Lanckoroński admits that the renovation of a building is nearly twice as expensive as building it from scratch; however, the prospect of owning one of Warsaw’s architectural pearls is worth the outlay. “We are currently trying to restore the building to its former glory, thanks to which we will see exclusive class ‘A+’ offices and classical renaissance interiors,” claims the president of the management board of the company. The financing – EUR 16 mln from Berlin Hyp bank – reinforces the confidence in the project, not only among admirers of underestimated architecture, but also among people in the financial world.
Britta Slater, the portfolio manager of Pramerica Real Estate Investors, has taken on a similar project. The company is the owner of the Cube office building in Prague, which is currently undergoing extensive refurbishment. The former office of Koospol was built at the end of the 70s, and for 20 years the Czech office of Citybank was located in the building, which was designed by the famous Czech architects Stanisław Franc, Jan Nováček and Vladimír Fencl. “Our Central European Participation Fund bought the office building in 2005. We were won over by its location and architecture. Its space has been designed in a way that is most convenient for tenants. Besides, the building never had a shortage of them, which is what ultimately persuaded us to buy it. By comparison, a modern building that neighbours our facility was empty for a year after it was finished. Its impersonal, modernist character did not appeal to tenants,” claims Britta Slater. “Indeed, the age of a building matters, but its quality and standard are even more important. Renovations were carried out in 2000, so we were satisfied with its condition when we bought it. Now asset management and cost control are very important. A good facility manager can administer a slightly older building without any problems,” believes Britta Slater. The renovation work on the building, which has an area of 20,000 sqm, is to finish next year.
Walls have ears
There is still much more still to do on ul. Wspólna in Warsaw. Before the first tenants can move into Ufficio Primo, all the installations have to be replaced, “including the former regime’s bugging devices,” adds Jan Lubomirski-Lanckoroński. The renovation work, which is being carried out in cooperation with an art restorer, is aimed at retaining as many of the original elements as possible. Next year it will offer 6,000 sqm of office space for lease, a congress centre, conference rooms, a VIP salon and a café. There are additional plans to convert the patio into an area for exhibitions and concerts. “The project enjoys substantial interest from potential tenants, and we are now holding negotiations with banks and law firms,” explains Jan Lubomirski-Lanckoroński, who goes on to add that he is closely following developments on the real estate market and is not ruling out involvement in similar projects in the future. The company has not finalised any leasing contracts yet, but the rents for the building are among the highest in the capital city.
Not all the owners of buildings with a longer past find it profitable to invest in them.  Warsaw-based company Dipservice, the owner  of a ten-storey residential and office building  on the ONZ roundabout, has other ideas. It had been planning the revitalisation of the building as far back as ten years ago. In this period the state-owned company has had eight different presidents, which has not created conditions conducive for making such an important decision. Finally the plans were abandoned. The company now wants to demolish the building and erect a modern office building in its place, and is now waiting for the site development conditions to be issued. The planned building is to be of a similar height as the neighbouring Rondo 1 tower and its entrance is to face one of the stations of the second underground line, which is now under construction. At this point the company is looking for a co-investor for the project and another for a scheme which is to be developed on the site of an old facility on ul. Domaniewska in Mokotów district. Eventually the building, where the offices of Bank Ochrony Środowiska are located (among others), is to be demolished and an office building and a hotel are to be built in its place. Both projects are to be carried out in the next five years. Before this and as soon as next year, Dipservice, which will first be merged with Towarzystwo Obrotu Nieruchomościami Agro Holdingu, is to make its debut on the  Warsaw Stock Exchange.
Our heritage
Why is it worth embarking on the revitalisation of old buildings and what justifies the much higher costs of such projects? “Architecture has always been my passion and I have never had any doubts that it was worth taking on this project,” insists Jan Lubomirski-Lanckoroński. “Buildings like this constitute part of our heritage, particularly in a city like Warsaw, which was completely destroyed during the war. It is our responsibility to look after them. It is worth saving these buildings because they are examples of world class architectural projects, as well as embodying our cultural values and rich history,” he concludes.