beyondbrics

Impression of Zlota 44. Photo: Orco

Warsaw’s skyline seemed destined to be permanently blighted with the concrete hulk of a half-finished residential tower in the centre of the city – but Orco, the Luxembourg-registered developer, said on Thursday that it had capped out the 54th storey of the 190m tower and will reopen the effort to sell the building’s luxury flats. 

“This building is a symbol of Orco’s resilience,” says Jean François Ott, the company’s founder who first started building in the Czech Republic in 1991 but who led the overextended company to the brink of collapse in the first wave of the economic crisis.

The company had to seek refuge from creditors in French courts, faced down a minority shareholder revolt, and ended up with a court-negotiated plan to reschedule debts.

“We went through hell and came back,” says Ott.

As part of the company’s restructuring, Ott decided to pull out of most secondary markets, sell off the company’s Russian assets, and focus on four cities: Prague, Budapest, Warsaw and Berlin.

The company reported revenues of €117m for this first nine months of 2011 compared to revenues of €213 for the same period a year earlier, and a net loss of €35m.

A key part in that plan was the future of the Warsaw tower, called Zlota 44 for its address. Designed by celebrity architect Daniel Libeskind, who has Polish roots, the completion of the tower could prove to be a big boost for Orco’s bottom line, a significant help when it is frozen out of bond markets and faces banks which are increasingly unwilling to finance new projects.

The building had run into trouble in 2009, first from Orco, which halted construction for financial reasons, and then from Poland’s fearsome bureaucracy which saw neighbours challenge the building permit, delaying a resumption of work for many years.

The luxury tower will have 251 flats, of which about 80 have been sold. The average price is €8,000 per square metre, far above the average Warsaw price of just over 7,000 zlotys (€1,666) per square metre. However, Orco is aiming at the top end of the market, and has been helped by the crisis which knocked out many competing projects aimed at luxury buyers.

“I am one million per cent confident that there are 200 people in Poland who want to buy themselves this kind of apartment,” says Ott.

Orco has also been boosted by a recent deal that will see €129m in bonds that fall due this year converted into Orco shares, after bondholders of the company’s German unit approved a debt restructuring programme.

As a result, Orco’s shares (listed in Warsaw, Prague and Paris) have had a good run. Shares in Prague rose 2.7 per cent to Kc104.7 ($5.50) on Thursday, and rose to Kc106.7 in trading on Friday, continuing their longest rise since September.

Related reading:
Poland property: still sagging, beyondbrics
Poland: Special Report, FT