Warimpex: No spec projects in Russia, but purchases elsewhere

Warimpex’s performance in Russia has negatively affected its financial results, so the company’s strategy is to continue starting projects there in order to generate some cash flow from the Russian market.

As Franz Jurkowitsch, the president of the Warimpex’ board, explains, lease contracts in Russia tend to be signed in rubles – and this generates additional exchange rate risks for the developer. “What we have to admit is that even in this tough environment the rents were paid on time without delays,” said Franz Jurkowitsch. Warimpex still plans to build commercial space in Russia on the plots it possesses, but in non-speculative projects. The company will decide to build only after a 7–10 year lease contract and the right financial terms have been agreed. “Without these we won’t build in Russia. Speculative projects are not on the table ,” the company’s president has told ‘Eurobuild CEE’. Warimpex still has a total of 6 ha located in Russia. “Selling the plots is not being considered either. We will wait if we do not receive adequate offers. But for sure we are not buying new plots in Russia,” Franz Jurkowitsch told us.

Warimpex, though, is planning intensive development in Poland and the Czech Republic. At the moment new markets are not being considered by the developer. “Prague is recovering. We are looking at new projects to buy there. We are also looking at Poland and the whole of the Czech Republic,” Franz Jurkowitsch told us. Warimpex plans to develop not only hotel projects but also offices. “If it is a large scale project, we will consider a combination of at least two functions. If the project has the scale needed, such a combinations sell very well,” the president explained.

Warimpex has reserved plots for projects in Białystok, Budapest and St Petersburg. One project that will soon be launched is the Chopin Office building located at ul. Przy Rondzie 2 in Kraków, next to an existing hotel owned by the developer – Chopin Hotel Kraków. In Łódź, Warimpex has won the tender to buy a plot in the neigbourhood of the Andel's hotel, which also belongs to Warimpex. The deal is scheduled to be finalised in the next two weeks, according to Christoph Salzer, Warimpex’s regional director.

When it comes to the financial situation of the company, in H1 2015 revenues from Warimpex’s Russian hotels fell by almost 36 pct y-o-y. A similar situation can be seen in Karlove Vary in the Czech Republic, where the Dvořak Hotel has been significantly impacted by the lack of visitors from Russia. Dvořak Hotel’s revenues are down by nearly 40 pct. Therefore, the total revenue generated by Warimpex in the hotel segment decreased by 17 pct y-o-y to EUR 25.8 mln in H1. Total revenue slumped by 24 pct, falling to EUR 27.9 mln from EUR 36.7 mln a year earlier. EBIT fell from EUR -1.4 mln to -19.2 mln, a result of a write-down in the valuation of office and hotel assets in Russia. As a result, the net profit generated by the company in H1 2015 was negative, amounting to EUR -24.9 mln, compared with EUR -10.8 mln a year earlier.