WBJ Observer #2 March 2014 by Valkea Media Pro

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AMAZON HEATING UP POLAND Wrocław and Poznań are becoming near -shoring locations for Western Europe > 65

Poland’s innovation complex why business and science don’t mix > 18 Polish Vodka trouble ahead > 35

REAL ES TA NEWS TE

Observer report

MIPIM 2014

THE OFFICE REVOLUTION WARSAW

With an increasingly tenant-driven market, where do opportunities lie? > 53

ean-13_9772353371403_02.pdf

2/27/14

2:06 PM

• Top 5 office developers • Successful Polish entrepreneurs • Land of opportunity • Business lunch in Warsaw

CMY

march 2014

IN THIS ISSUE 35-38

Polish innovation faces numerous obstacles. From unfavorable tax laws to lack of funding, both from the government and private companies. What can be done to stop Poland from slumping in innovation rankings?

Bottoms up?

Polish vodka producers are facing tough times

18-27 Try these:

39-42 Shale Gas

How extensive are Polish deposits and are they sufficient for Poland to become an energy exporter?

News Review��6-12 Time Machine�� 13

Poland’s innovation gap Minister Kolarska-Bobińska on innovation

Commentary Politics: How to tell a lie�� 14 Law: Rules for managers�� 15 Economy: How much does Poland really owe?�� 16 Media: Fashion in turbulent times�� 17 Entrepreneurs Medicalgorithmics��29-32 Metka by Traczka��33-34 Real Estate Lokale Immobilia��45-73

84 Dining in style

Our top picks for business lunch in Warsaw

march 2014 • WBJ OBSERVER

Top 5: Office developers��74-75 Cityscape: Lublin��76-77 New Beginnings Conference��78-81 Lifestyle and culture Culture news��82-83 Hotel Spotlight: Andel’s Hotel Łódź�� 86 Final Note�� 88

43-44 “Science is global, and more and more, the brain drain is being replaced by brain circulation.”

Market intelligence from WBJ Group Morten Lindholm Publisher mlindholm@valkea.com Jacek Ciesnowski Managing Editor, WBJ Observer jciesnowski@wbj.pl Beata Socha Managing Editor, Lokale Immobilia bsocha@wbj.pl Remi Adekoya Politics Editor radekoya@wbj.pl Kamila Wajszczuk Editor, Made in Poland, Poland A.M. kwajszczuk@wbj.pl

made in poland

investing in poland

Profile: A guide to Polish exporters and Poland’s fastest growing export industries with macroeconomic and legal analysis. Multi-lingual. Targeted at: Foreign firms seeking Polish goods

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NEWS

I NTER NATIONA L

Inreview News highlights of the past month

Wanted: Viktor Yanukovych F

‘You’ll all be dead’ The negotiations for the agreement were attended by the Polish and German foreign ministers, Radosław Sikorski and Frank-Walter Steinmeier. At one point tempers visibly flared with Sikorski, after a marathon negotiating session, caught on camera telling Maidan leaders “you’ll all be dead” if they didn’t sign the deal. Minister Sikorski may have been right, as in the aftermath of the overthrow of the president documents found in one of his residences showed that he had signed off on a full-scale military attack against the protestors with the help of 2,500 soldiers. Yanukovych has since gone into hiding, fleeing first to Kharkiv in eastern Ukraine. In a televised interview he called his dismissal a coup d’état and said that he will not stand down, and that the parliament's

march 2014 • WBJ OBSERVER

Image: Shutterstock

ebruary saw the culmination of the three-month-long protests in Kiev’s Independence Square, the Maidan, which saw rivers of blood flowing in the streets as protestors battled with security forces in what seemed, at one point, to be the prelude to all-out war. With a new interim president – Speaker Oleksandr Turchynov – and interim government in place, a warrant for the arrest of Viktor Yanukovych, the president who was ousted from office towards the end of February, was issued. The move came a day after the opposition and President Viktor Yanukovych signed a treaty which put a stop to the violence.

decision to recall him was “illegal.” He has since gone to ground once again, and is thought to be in hiding in the Crimea. Tymoshenko freed Meanwhile, parliament also voted to release from jail former PM Yulia Tymoshenko. Her release was one of the conditions of the EU-Ukraine trade pact that Mr Yanukovych rejected last year. She made a staged entry onto the Maidan, saying that “We have eliminated this cancer, this tumor.” Not all protestors were happy to see her return, however, although she has said that she will not be seeking the presidency and has since gone to Germany to receive longawaited treatment for her back problems. Snap presidential elections have been called for on May 25 and parliament will now try to form a new government. “In

these days the most important thing is to form a functioning government,” said Vitaly Klitschko, a former world boxing champion and one of the opposition leaders. The European Commission has also said that it is ready to conclude a trade deal with Ukraine and offer aid once a new government was formed. Meanwhile, Russia blocked the remainder of the $15 billion loan it granted to Kiev recently. “We are ready to support Ukraine and give a signal to other countries that your country is not only solving the problems of the past but also looking ahead,” said EU foreign affairs chief Catherine Ashton. The now-in-charge opposition claims that the country needs some $35 billion over the next two years to avoid bankruptcy. u

DOMESTIC

Poland adopts nuclear power program

The Polish government has adopted its new nuclear program. “The Program … sets forth, among other things, the schedule of building two nuclear power plants and preparing a regulatory and organization framework for those investments,” read a statement from the ministry of Economy. It stipulates that by the end of 2016, the location will be chosen, with the construction of the first unit starting in 2019 and completed by the end of 2024. The second of the planned power plants should be ready by 2035. However, the document is not a binding plan, and should be seen as a “road map,” the statement said. Poland plans to build two nuclear power plants with 3,000 MW capacity each, with state-owned utility PGE playing a leading role in the project. According to the International Atomic Energy Agency, building a nuclear power plant in Poland could cost up to PLN 50 billion.

march 2014 • WBJ OBSERVER

Polish MPs argue over Round Table commemoration Politicians from the right-wing Solidarna Polska blocked legislation which would commemorate 25th anniversary of the Round Table talks, which are considered by many as the beginning of the end of the communist regime in Poland. The Sejm lower parliamentary house was preparing a resolution that would celebrate the anniversary and praise the results of the 1989 Round Table talks between the government and Solidarity. However, Solidarna Polska MPs were not happy with the celebratory tone of the draft and voiced their concern. “We do not agree with the glorification of the Round Table Talks – we want to tell the truth about what happened 25 years ago,” said Patryk Jaki, a Solidarna Polska MP who claimed that the talks led to “social exclusion, unemployment, poverty, and the emigration of millions of Poles.” The Round Table Talks were held between 6 February, 1989 and 4 April, 1989, and led to Poland’s first democratic elections since the end of World War II.

Bieńkowska to replace Tusk after European elections? According to the weekly Wprost, current deputy Prime Minister Elżbieta Bieńkowska could replace Donald Tusk as the prime minister, while either Ewa Kopacz or Paweł Graś

would became Civic Platform leader in Tusk’s place. The speculation came after an interview with another prominent Civic Platform politician and the party’s leader in European Parliament Jacek Protasiewicz, who in Wprost said that in six months Tusk will receive an offer to take over an important role in the newly elected European Parliament. The position has not been specified yet, althogh some argue that Tusk could became the next European Commission President, although the European People’s Party (which Civic Platform is a part of) already has another candidate for this position, Luxembourg’s JeanClaude Juncker. Furthermore, Tusk recently said that he was “not going to leave for Brussels.” Sources within the party however explain that Tusk getting a high-ranking position at the EU might help his party in next year’s domestic parliamentary elections. u

“Sorry, that’s just the kind of climate we have.” Deputy Prime Minister

Elżbieta Bieńkowska

commenting on train delays caused by snow.

Images: Shutterstock, KPRM

NEWS

years

b u siness & econom y

GM to spend €250 mln on diesel engine plant in Poland

General Motors has decided to start production of its new generation 1.6-liter diesel engines at its factory in Tychy in southwestern Poland, the company announced. The value of the investment at the factory, which is located in the Katowice Special Economic Zone, will amount to €250 million. Around 200,000 units annually are expected to roll off the production line of the factory, which will be enlarged by 30 percent, when it opens. GM Manufacturing Poland in Gliwice and Tychy employs some 3,500 people. Currently, the Opel Astra, Opel Cascada convertible, as well as 1.7 liter diesel engines are produced in the two factories.

WSE profit grows The Warsaw Stock Exchange had a consolidated net profit of PLN 28.5 million in the fourth quarter of 2013 compared with PLN 21.1 million a year earlier, the company said in a financial report. The result was higher than the market consensus of PLN 24.1 million. The company’s operating profit came in at PLN 26.4 million compared to PLN 26.9 million in Q4 2012. It was also higher than analysts expectations of PLN 24.6 million. Revenue in the fourth quarter of last year stood at PLN 70.9 million compared to PLN 74.1 million and to a market consensus of PLN 69 million. In the full financial year 2013 the WSE had a net profit of PLN 113.5 million, with operating profit at PLN 118.6 million and revenue at PLN 283.8 million.

PGNiG wants to renegotiate its deal with Qatargas Polish natural gas giant PGNiG wants to renegotiate its deal with Qatargas

march 2014 • WBJ OBSERVER

for deliveries of the fuel. Speaking to a parliamentary committee, PGNiG CEO Mariusz Zawisza said “I think that within the next 2-3 months we will have negotiation scenarios ready.” PGNiG wants to reschedule the timetable of future deliveries, as well as the price of Qatari gas. The original deal is supposed to start this year, with the first delivery in July. The gas was supposed to be delivered to the LNG terminal in Świnoujście. However, the construction of the facility has been delayed and according to the current timetable, it will be ready in December. The prices in

“In 2020 our ambitions will be much bigger than just our region.” Adam Maciejewski, CEO of the Warsaw Stock Exchange the initial agreement, while competitive then, are now too high as global gas prices have fallen in the recent years. The deal between PGNiG and Qatargas was signed in 2009. It stipulates that starting from 2014, for the next 20 years, Qatar will deliver 1 million cubic tons of gas annually.

Poczta Polska IPO possible in two years Poland’s stateowned postal operator Poczta Polska will be capable of debuting on the Warsaw Stock Exchange in two years’ time thanks to a restructuring process, the company’s CEO Jerzy Jóźkowiak told Rzeczpospolita in an interview. In 2013 the company most likely generated a net profit, the CEO said. “Poczta Polska’s revenue is not falling, even though the volume

of dispatches sent has declined by 4 percent,” he explained. The postal firm is prepared to start the process of going public, Jóźkowiak said. However, the decision regarding the bourse debut will be made by the company’s owner, the State Treasury.

Integer to enter Italian and Colombian postal markets Grupa Integer, a Polish postal company, is to install 400 InPost parcel lockers in Italy by the end of June 2014, the company announced in a statement mid-February. The investment is worth over €30 million, and will encompass northern cities in Italy, such as Milan and Turin, as well as the capital, Rome. Earlier in January Integer said that it won a tender announced by Colombia’s national postal operator 4-72. As part of that contract, Integer will install 100 parcel lockers in Colombia by the end of 2014.

LOT expects PLN 170 mln profit in 2015 The CEO of the state-owned Polish airline, Sebastian Mikosz, said in an interview with Dziennik Gazeta Prawna in early February that he expects the company’s next year’s profit to reach PLN 170 million, compared to the PLN 71 million forecast for this year. “Our plan is to make a profit large enough that we won’t have to ask for additional state aid, but I can’t say that our current forecasts allow us to say that we’ll get by without any help from the Treasury,” Mikosz said, adding that LOT won’t ask for the second tranche of state funds at least until June. The company’s rescue plan is currently being reviewed by the European Commission. LOT received the first tranche of state aid amounting to PLN 400 million in December 2012, and initially expected to receive the second tranche, worth PLN 381 million, in August 2013. Mikosz has said numerous times that because the company’s financial situation is improving, the second tranche won’t need to be so large. u

Images: General Motors, WSE, WIkimedia

NEWS

GDP growth drops in 2013, but accelerates in Q4

the fourth quarter of 2013 compared to 1.9 percent in Q3. Finance Minister Mateusz Szczurek believes that GDP growth may amount to 2.9 percent in 2014, in line with estimates from the National Bank of Poland. Meanwhile, the budget accounts for GDP growth at 2.5 percent this year.

Poland’s GDP growth in 2013 amounted to 1.6 percent, according to a flash estimate released by the Central Statistical Office (GUS) in late January. The figure is a drop of 0.3 percentage points on 2012, when GDP came in at 1.9 percent. In another flash estimate released in mid-February, GUS said that Poland’s gross domestic product grew by 2.7 percent year-on-year in

Inflation stable and low Poland’s CPI inflation stood at 0.7 percent year-on-year in January, the same level as in December, according to data published by statistics office GUS. Month-on-month inflation stood at 0.1 percent. Economists surveyed by the Polish Press Agency had expected CPI to come in at 0.9 percent y/y and 0.3 percent m/m in January. When compared to December, prices rose mainly in case of food (1.4 percent), as well as alcohol and tobacco (0.8

Back on track

Poland’s quarterly GDP growth (%, y/y, non-seasonally adjusted)

4 3 2 1

13 20 Q4

20 Q1

12 20

20 Q1

11 20

20 Q1

Source: Central Statistical Office

percent). Costs related to housing also grew (0.2 percent) due to factors such as higher prices of sewerage services, water, gas and heating, while prices of waste management and electricity declined, BZ WBK economists wrote in an e-mailed comment.

Unemployment rises to 14% The registered unemployment rate stood at 14 percent at the end of January, according to data published by GUS. The figure is in line with an estimate published by the Labor Ministry earlier in February. In year-onyear terms, the unemployment rate declined from 14.2 percent recorded in January 2013. The number of unemployed registered in labor offices amounted to 2.26 million at the end of last month. It was 102,800 higher than at the end of December. u

Back on track Poland’s quarterly GDP (y/y, non-seasonally adjusted) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013*

4.5 4.3 4.4 4.9 3.5 2.3 1.3 0.7 0.5 0.8 1.9 2.7

5 4 3 2 1

* Flash estimate Source: Central Statistical Office (GUS)

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013*

•

WBJ OBSERVER • march 2014

news

Powermeter

Who’s hot, who’s not, according to the Polish media

Włodek Pawlik: The Polish jazz musician won this year’s Grammy in the Best Large Jazz Ensemble Album category for his “Night in Calisia” album. He recorded it with US trumpeter Randy Brecker and the Kalisz Philharmonic Orchestra. Pawlik is not the first Pole to scoop a “golden gramophone.” Just last year, Krzysztof Penderecki’s album “Penderecki: Fonogrammi; Horn Concerto; Partita; The Awakening Of Jacob; Anaklasis,” won the award in the Best Classical Compendium category. A statuette also went to Paweł Sęk, who co-produced the track “We Are Young” by the band Fun., which won the Song of the Year Grammy that year. Pesa: Polish rolling stock manufacturer Pesa is the first company from Central and Eastern Europe to have been nominated for the Financial Times Boldness in Business award, and will go up against global enterprises such as Twitter and Continental Resources. Pesa has been touted as a great example of how transition can lead to success. Built on the rubble of a ruined enterprise, the company now competes with some of the biggest market players. Its products have been selling like hot cakes recently, with their machines being sold to Russia, Belarus and Germany in recent months. Łukasz Wejchert: The former president of one of the leading Polish web portals, Onet.pl, will become a member of the supervisory board of another popular website – Wirtualna Polska, which has just been acquired by the o2 Group. Wejchert, who was also responsible for launching the Virgin Mobile GSM network in Poland, will be responsible for developing new projects.

Elżbieta Bieńkowska: Recently promoted to deputy prime minister, and regarded as a possible successor to Donald Tusk as the country’s prime minister, she made a political gaffe on the subject of trains and weather. “Sorry, that’s just the kind of climate we have,” said the minister, as a way of explaning why winter weather played havoc with the country’s rail network making trains run late or stop all together as they battle snow and ice. The minister’s words were cold comfort for the thousands of passengers who had to wait for hours in the middle of nowhere for their trains to resume their journeys. Wojciech Jaruzelski: It turns out you can be 90 years old and at the center of a highly publicized love affair. The former president, who introduced martial law in 1981, was apparently caught in flagranti with his housekeeper by his wife, who, apparently, now wants a divorce. This love triangle provided much needed fodder for the tabloids and a whole lot of embarrassment for others, especially their daughter Monika who appeared on the cover of a magazine screaming “There will be no divorce!” Lech Witecki and Małgorzata Krasnodębska-Tomkiel (pictured): The heads of the General Directorate for National Roads and Motorways and the Office of Competition and Consumer Protection respectively, have been dismissed by PM Tusk who, after reshuffling his cabinet in the fall, has started to clean up government controlled agencies. According to Tusk, many high-ranking agency bosses have become stagnant and stuck in a rut, and so fresh blood is much needed. Has Tusk forgotten that he has been in office since 2007? Bogdan Zdrojewski: The culture minister has just granted PLN 6 million to help build a museum inside the Temple of Divine Providence, which has been under construction for many years. The museum will exhibit various items related to the lives of Pope John Paul II and Primate Stefan Wyszyński. Many argue that while the money is earmarked for the museum it may be actually spent on building the temple, which is still far from being finished, and critics have also questioned the cultural aspect of the museum. The PLN 6 million grant accounted for nearly one third of the PLN 20 million spent on various cultural institutions and events this year.

march 2014 • WBJ OBSERVER

Images: Shutterstock, WIkimedia, KPRM, PESA, Flickr/collasito77, UOKiK, Dirlango, Ministry of of Regional Development

Poland’s Olympic Athletes: During this year’s Winter Olympic Games in Sochi, Polish athletes won six medals, four of which were gold. This was Poland’s best performance in the history of the Winter Olympics. Up until Sochi the Polish team had never won more than two gold medals at any games. The biggest hero of all was Kamil Stoch, who won both individual ski-jumping events, and in doing so became only the second Polish winter Olympian to become a double champion. The first one was Justyna Kowalczyk, who also got a gold in Sochi. In one of the biggest upsets during the games, speed-skier Zbigniew Bródka won the 1,500 meters race by a razor-thin margin of just 0.003 seconds and a bronze medal in the team pursuit event.

Images: Shutterstock, PKO BP

TIMEMACHINE From our pages . . . 15 years ago

10 years ago

5 years ago

March 1999 – PKO BP is delving into two new areas of business, real estate development and leasing. By the end of June the bank will establish a new, wholly owned real estate arm, PKO Nieruchomości as well as PKO Leasing. The bank hopes to become one of the 10 largest leasing companies in Poland.

March 2004 – Talk of the imminent arrival of yahoo.pl, a Polish-language version of the global internet portal, gains momentum as the troubled local player, Wirtualna Polska, filed for bankruptcy. “There is a niche on the market for a mixed language portal in both Polish and English,” said Evelina Dworak, from media house OMD.

March 2009 – PZL Mielec, which was acquired by the Sikorsky Aircraft Corporation (US) has started producing Black Hawk helicopters. A special Polish-US task force was created to assure that production remains on schedule for both the helicopters and cabins. Following tests, mass production is expected to be launched in 2011.

March 1999 – The government completed a national action plan to ensure that the Y2K problem, which could cripple computer systems around the world, is dealt with by Dec. 31, 1999. According to the government’s plan, the Y2K problem will cost Poland $1.8-1.9 billion to fix. u

March 2004 – American whitegoods producer Whirlpool announced its decision to invest €100 million in a cooker plant in Wrocław, thus confirming earlier rumors that the company had chosen Poland over rival offers from both Slovakia and the Czech Republic. u

March 2009 – after meeting US Secretary of State Hillary Clinton in Washington DC, Polish Foreign Minister Radosław Sikorski announced that the US would stick with plans to station 20 long-range Patriot missiles on Polish soil, first as a temporary measure and later on a permanent basis. u

Jury selected three finalists in the Zacznij.biz competition! Jury of Zacznij.biz competition chose 20 projects to take part in the semi-final phase of the competition. Prior to the semifinal presentations, these projects were invited to participate in Innovatorium II. The purpose of this workshop was to prepare the participants for the pitch, i.e. presentation of their ideas to the potential investors – business angels. All the participants then prepared for their project presentations in front of the jury – which took place on February 11, 2014. Each of the contestants had 15 minutes to make their pitch, and a further 15 minutes for a question-and answer session, just as in the case of real pitching to investors. Jury members admitted that selecting the finalists was a very difficult task mainly because each project was in a different industry. The jury's assessment was done according to how appealing the projects would be to investors. After the project presentations, the semifinal stage of the Zacznij.biz competition revealed three finalists: Agrobazalt, LabToolBox and Ubliko. Apart from the finalists, the jury also decided to reward five semifinalists. The finalists as well as the chosen semifinalists had the opportunity to showcase their ideas at a stand at the Gala on March, 4th, 2014. Zacznij.biz – idea – business – success, is a business plan competition organized by Polish Confederation Lewiatan and Lewiatan Business Angels. On September 16, 2013, the fourth edition of the Zacznij.biz competition was launched. The purpose of the contests is to promote entrepreneurship, as well as to assist entrepreneurs in preparing plans for their business and to help them attract investors – business angels. Honorary patronage of the Zacznij.biz competition: Ministry of Economy, Polish Agency for Enterprise Development, National Centre for Research and Development and Patent Office. More info: www.zacznij.biz.pl

Material co-funded by the European Union under the European Regional Development Fund

WBJ OBSERVER • march 2014

co m m e n ta ry

remi adekoya on politics

People want politicians to bull**** them

eputy Prime Minister Elżbieta Bieńkowska, who is in charge of Poland’s Infrastructure and Development Ministry, got herself into hot water recently. In response to reporters’ questions over several trains being delayed due to freezing weather conditions, she replied: “Sorry, that’s just the kind of climate we have.” The media outrage machine kicked into high-gear and within minutes political analysts, journalists and online commentators were roasting Bieńkowska, lambasting her arrogance and lack of sensitivity to the plight of those who had to wait in the cold for the delayed trains. Bieńkowska, who was appointed deputy PM last November, seemed genuinely surprised at all the fuss, revealing scant political instincts. The first rule of politics is: Always suck up to voters. Keep repeating how smart they are – “Poles are talented hard-working people, I am sure they will make the right choice on election day” – and how they are entitled to loads more than they are currently getting – “Poles deserve a better government, higher living standards,” etc. Psychologists call this the “ingratiation technique.” Tell people how great they are and their defenses are likely to be down by the time you attempt to manipulate them. Second rule of politics: Act like you care even if you don’t. People like to say they expect politicians to be honest with them. Nothing could be further from the truth. Except in extreme situations like war, a “Blood,

Sweat and Tears” speech is guaranteed to lose you an election. Voters want politicians to tell them things that will make them feel better about their lives. Some prefer the happy warrior who waxes optimistic, emanates positive emotions and promises a brighter future, Obama-style. Others prefer the thundering populist who appeals to the lowest common denominator, telling people they would have a better life if only such-and-such didn’t exist or so-and-so didn’t have so much of an influence on reality, Kaczyński-style. People like listening to the lies they want to hear. What they can’t live with is a politician telling them a bitter truth: “Hey, life is tough, deal with it” or “sorry, that’s just the kind of climate we have.” They say people won’t remember what a politician said, they won’t even remember what he did, but they will always remember how he made them feel. When Bieńkowska tells people they should learn to live with the cold weather and stop complaining about delayed trains, even though on an intellectual level they may know know she is right, they will still resent her for it. There is a Nigerian proverb that states “all truth is good but not all truth is good to say.” This is particularly true in politics. So either Ms Bieńkowska learns to bull**** a little better or she is not going to last very long in politics. u

The first rule of politics is: Always suck up to voters.

march 2014 • WBJ OBSERVER

Remi Adekoya is the politics editor of WBJ Observer. He also writes for The Guardian

commentar y

judith gliniecki it’s the law

Director, be prudent

ver the years, I’ve advised a lot of companies that were looking to make an investment in Poland. During this process, the investor team and I tend to discuss several recurring themes about doing business here. One of these “talks” is inevitably about a director’s duties and liabilities. Unfortunately, it often results from a call from a fretting board candidate who heard something about jail time and personal liability in Poland. I’m not going to regale you with tales of how bad it can get for a director in Poland when it goes wrong. Search the internet if you want sensationalism. Keep reading if you want a practical take. Before we talk about the risks, let’s be clear on the roles of the two types of boards in Poland: management and supervisory. The supervisory board is the classic board. Not all companies need a supervisory board, and its role focuses on oversight. The management board manages the company and represents it. To use English legal nomenclature, these are the “officers” of a company. It is to this latter group— the persons really running a company—that vast majority of the potential director’s liabilities apply.

might be inclined to reconsider. Although the list is long, the liabilities can generally be grouped into three categories, and only one of them is a real concern if you are trying to be diligent about compliance. The first group relates to corporate and accounting compliance. A management board member may be fined or worse for not keeping up-to-date corporate records and making proper and timely corporate and tax filings. Frankly speaking, I’ve seen a lot of companies get behind on their filings or keep sloppy corporate records. As long as they make an effort to put things right, a fine is rarely imposed. The second group relates to insolvency. In other words, this is when a company’s liabilities exceed its assets. If you take nothing else from this article, be careful that your company does not become insolvent. In addition to various civil and criminal penalties, you, as a management board member, put your personal assets at risk if you fail to file for bankruptcy timely.

If you take nothing else from this article, be careful that your company does not become insolvent.

The bare facts I have a three page memorandum listing the claims, fines and prison terms that may be brought against a management board member of a limited liability company (Sp. z o.o.). If you read it without knowing anything else about doing business in Poland, you

Staying safe The third group relates to situations in which a director causes damage to a company through improper actions or failure to take action. It probably comes as no surprise that you should perform your duties diligently. If you do that, and make sure that your company stays solvent, Poland is not a scary place for directors. u Judith Gliniecki is a partner in Wierzbowski Eversheds Poland

WBJ OBSERVER • march 2014

co m m e n ta ry

remi adekoya on debt

Poland’s hidden debt How much does Poland owe and does it really matter?

he Polish government says the country’s public debt stands at roughly 53 percent of GDP, considerably less than all the European economies larger than Poland. Also, Poland has managed to keep its debt ratio below the EU-mandated 60 percent of GDP threshold, something even the stereotypically frugal Germans have not managed to do. However, Leszek Balcerowicz, the former head of Poland’s central bank and who was also finance minister from 1989 to 1991, engineering Poland’s transformation from communism to a market economy, has questioned the official figures. Balcerowicz and his thinktank, the Civic Development Forum (FOR), have conducted their own analysis, revealing that if Poland’s hidden debt was taken into account, the actual debt-to-GDP ratio would be more like 250 percent, high by any standards. “According to our estimates, the hidden debt, and so the state’s obligations on further expenses, has reached PLN 3.1 trillion, which comes out to PLN 83,000 per citizen,” said Balcerowicz at a press conference late last year. The greatest part of the hidden debt are obligations of the Social Insurance Institution towards pensioners.”

deputy finance minister and adviser to Balcerowicz who often appears with the former NBP head during debt discussions, what he thinks about the issue and its potential consequences for the Polish economy. Gomułka explained that there is a “big difference” between official and unofficial debt. “Official debt is traded and enters financial markets, unofficial debt is not traded on financial markets. Unofficial debt is the obligation a state makes to repay its citizens, whom it borrows from, at some later stage,” Gomułka said. This debt is not owed to foreign investors and banks, but to Polish households and so financial markets and ratings agencies are “not concerned by this debt”. If at some point in the future, the government has difficulty meeting its obligations, there will be no crisis involving investors but rather an internal crisis, Gomułka said. “Households will simply be told that past governments were foolish, the current government cannot meet the obligations they were dumped with, and thus they have to reduce them by passing the necessary laws,” Gomułka added. That being said, it is difficult to imagine that Poland’s hidden debt would have no impact on the markets were Poland to experience an economic or financial crisis. And having a huge amount of hidden debt could prove costlier to the perceptions of Poland among foreign investors than that of, say, Germany or the United States, which have been considered (for better or worse) safe havens for decades. It is good Poland is trying to emulate western economies. But it certainly doesn’t need to repeat all their mistakes. u

The greatest part of the hidden debt are obligations of the Social Insurance Institution towards pensioners.

Poland like Greece? “Hidden debts are legal obligations not covered by treasury papers. Just like the revealed debt, at one point in time, hidden debt will start to pose a threat to development,” Balcerowicz said. “There will come a time when the hidden debt will no longer be hidden, just like in Greece.” So does Poland’s hidden debt problem pose a fundamental threat to the stability of the country’s economy? WBJ Observer asked Stanisław Gomułka, a former

march 2014 • WBJ OBSERVER

Remi Adekoya is the politics editor of WBJ Observer. He also writes for The Guardian

commentar y

john beauchamp ON the media

Dressing down the revolution Or, the dangers of writing about current events in a monthly publication …

hen printing a monthly magazine, there’s always the risk that what you print immediately becomes defunct from a news point of view. After all, having had to shift from printing a weekly newspaper to publishing a monthly magazine is something that all of us at the WBJ Observer have had to take in our stride. One of the greatest shifts has been with our sense of time, and I’m not talking about coming into work late or anything like that; it’s actually realizing that what may go to print may already be past its sell by date when it reaches the light of day. These are hurdles which have to be crossed, and so far we have done pretty well. But enough backslapping. Bad timing However, it is not possible to get it right all the time. The Polish edition of Glamour – a fashion monthly – recently ran an article about fashion on the Maidan, the central square in Kiev where Ukrainians battled to oust President Yanukovych from power. The magazine proudly exclaimed on its Facebook page: “How does the life of a fashion girl change when there’s a bloody revolution?” All well and good, you may think, at least the girls at Glamour are following current events. The magazine ended up running a spread, complete with well-dressed revolucionista, written by a Ukrainian

fashion journalist, about looking glam in essentially what became a warzone. However, little did the editorial team know that within hours of coming off the press, the Maidan revolution had turned bloody, going on to claim the lives of over 80 protestors. Very bad timing, admittedly. The magazine went on to apologize profusely, although it did say that “the majority of us didn’t expect such a turn of events.” Even the Ukrainian author of the text came out to explain what she had in mind when writing the article. So be it. But why? After the media storm calmed down, I found myself beginning to wonder why on earth such a magazine would even decide to run a feature on revolutionary fashion. That is, fashion during a revolution, not big changes to the things we wear. Whereas I understand that the events on the Maidan have gripped Poland – after all, Ukraine’s capital is less than 800 km away from Warsaw – did the editorial team of this esteemed fashion monthly really know what they were getting themselves into, whether or not there were rivers of blood flowing on the streets? It gives food for thought about jumping on the news bandwagon at any cost, and while the intentions I’m sure were noble, I’m not impressed. u John Beauchamp is managing editor of wbj.pl and formerly head of Polish Radio’s English Section

WBJ OBSERVER • march 2014

cover story

innovation

Poland’s innovation complex STORY BY beata Socha

march 2014 • WBJ OBSERVER

emember the scene from Back to the Future III, when Clara Clayton, Doc Brown’s lady-friend, beautifully portrayed by Mary

Steenburgen, is trying to hitch a ride on the 88-mph train heading straight for 1985? The train keeps moving in leaps, leaving the poor Clara flabbergasted and gasping for air while trying to climb over a heap of wood and protagonists to her presence. Every time she seems to be a step closer, the train suddenly accelerates knocking her off her feet, again

Image: Shutterstock

sneak into the locomotive to alert the two

and again. Well, it’s a little like that when you think about innovation in Poland

WBJ OBSERVER • march 2014

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innovation

P oland ’ s innovation hi g hli g hts

“Miniature” 3D printers

A small, Olsztyn-based company – Zortrax – has made its mark on the world of 3D printing. It has successfully designed, tested and commercialized its compact, ultra-light M200 3D printer. It has already sold 5,000 units to IT giant Dell. Zortrax products are 43x36x34.5 centimeters in size and weigh 16 kilograms. The compact printers are more efficient in designing larger products. “Sometimes it’s better to have 10 smaller printers working at the same time printing smaller components of a bigger machine, than one huge printer working on the entire thing,” said Rafał Tomasiak, the firm’s CEO. Interestingly, the company raised its funds with the help of the crowd-funding service, Kickstarter. The production and logistics will be moved to Hong Kong as a costcutting measure. Dell will use the printers in its Asian offices. The printers, along with necessary software, cost €1,595.

march 2014 • WBJ OBSERVER

ll-equipped and underfunded, the Polish innovation sector keeps racing against the clock in a desperate attempt not to get caught up in the “middle-income trap,” a real buzzword at present. It is hopelessly trying to catch up with the international giants which have unlimited resources and far less red tape than Polish firms have to cut through. Yes, high-tech stands for only 5 percent of Poland’s exports, which is very low. Yes, there were no Polish companies in Boston Consulting Group’s most innovative firms ranking in 2013. But does it follow that Polish companies don’t innovate? They do, only on foreign licenses. Poland has been one of the top outsourcing destinations over the past decade or so, including for the IT and R&D industries. Take Samsung’s R&D centers, already present in four Polish cities, which have been churning out new specs for devices and apps since 2000. Polish: good or bad? Can we then call these apps and appliances Polish? Not really, even though it was the sweat and tears of Polish engineers that made Samsung tablets and their Android operational system competitive against Apple’s iPads. And now Poles buy them in bulk.

Poland is the sixth hardest working country in the world, after Mexico, Chile, South Korea, Estonia and Russia, according to CNN Money. That's all well and good but the image accompanying the ranking hardly paints Poland as an innovative and techsavvy economy.

“Poles import from other countries products that other Poles have invented,” said Alicja Adamczak, president of Poland’s patent office. The problem might be that Poles are not huge fans of the “Made in Poland” label. “A businessman looking to buy technology assumes that ‘Polish’ means ‘bad’ and starts looking abroad,” said Professor Janusz Czapiński, a social psychologist. Unsupportive? No wonder, then, that the innovation business is so underfunded. According to GE’s Innovation Barometer survey carried out in 2012, out of the 25 countries examined, Poland is at the very bottom in terms of the accessibility of private financing for innovators. Only 23 percent of respondents said that “private investors are supportive of companies that need funds to innovate,” meanwhile the average was 59 percent. The respondents painted a similarly gloomy picture when asked about government support (again, the lowest spot in the ranking, with only 23 percent of those polled saying they are happy with the government’s involvement, against the 47 percent average) as well as the educational model in Poland. Only Japan came in lower when asked if universities help shape tomorrow’s innovators.

Image: Shutterstock, PAN, Zortrax, CNN Money

This would indicate that Polish R&D gets little support either from the tightfisted government, or from the greedy, short-sighted capitalists. Neither can Poles expect future generations to be more innovative, because apparently their teachers just don’t get it. Any Polishmade advancements must therefore be attributed to either individual genius or a remarkable stroke of luck. Of course, it could also mean that complaining is Poles’ second nature. Silicon Valley needed Truth be told, the Polish government spends less on science than most other European countries, at least in absolute terms. Still, as much as two-thirds of all R&D funding comes from the state and only a third is privately financed. Furthermore, the portion of GDP devoted to fostering innovation keeps getting bigger each year. In 2013, 0.9 percent of Poland’s GDP was earmarked for innovation. By 2020, the government wants to increase that slice to 2 percent of GDP, roughly the EU average. The government has said that it will spend PLN 6.5 billion on Polish science in 2014, with PLN 5 billion coming from state coffers and PLN 1.5 billion from EU funds. The EU has indeed been more than generous to Polish companies and science institutes. Over the next seven years, they can count on nearly €10 billion from EU money. “The spending on R&D in the ICT sector has increased threefold over the past three years. ... The biotechnology industry received 20 percent more R&D outlays,” said Dominik Rozkrut, vice president of Central Statistical Office (GUS) in Szczecin. With all this funding flowing in, why can’t Poles cultivate their own Silicon Valley? It’s not OK to fail One reason is the very nature of these funds. As shown above, Polish R&D is fed mostly with tax money. And tax payers aren’t really into risky ventures. “In Silicon Valley they have this saying: ‘it’s OK to fail.’ In Poland, however, how do

P oland ’ s innovation hi g hli g hts

Graphene – razor-thin carbon

Laser matrix manufactured at the Institute of High Pressure Physics of the Polish Academy of Sciences

you tell the tax payers that an endeavor financed with their money failed?” said Jacek Tomkiewicz, professor of economics at Kozminski University. But working on cutting-edge stuff needs money being spent quickly and flexibly, and tax money allows neither. “The state’s role is to fund base research, invest in human capital, organize mentoring programs and create a friendly business environment,” Tomkiewicz said. No accountability There is, however, a lot of skepticism going round as to whether pumping all this money into science makes Poles more innovative. What does come out of the R&D pipeline? Most of the funds for science are distributed mainly by two institutions: the National Research and Development Centre (NCBiR) based in Warsaw, and the National Science Centre (NCN) in Kraków. While the NCBiR focuses more on turning scientific discoveries into business value, NCN finances predominantly base research. Luckily, the effects of base research are not easy to measure, or we’d be in trouble. There is little accountability in base research: a researcher procures a grant, works on his dissertation or papers for 3-5 years and then... poof. The money is gone but no one expects any real results in return. “As long as you keep your books

Graphene is a substance made up of carbon atoms arranged in a hexagonal pattern in a single or double layer. The term was first coined in 1947 but until the 1960s physicists were skeptical such a substance could even exist. In 2010, work on graphene earned two physicists – Andre Geim and Konstantin Novoselov – a Nobel Prize. In the same year, the EuroGraphene project was launched, with the Institute of Electronic Materials Technology in Warsaw acting as the Polish partner of the program. In December 2013, Nano Carbon, a Polish company launched the first commercial graphene project. The firm has been selling the material at $300 for 1 square centimeter. The firm says the first entirely Polish product made out of graphene will be available in early 2015. Combined with polymers, graphene could be used in a number of industries, including electronics and automotive production. Depending on the compound used, the substance could increase electric conduction or insulation. It could also be used to create very light materials for industrial manufacturing. The range of potential uses for the cuttingedge (pun intended) material is still largely uncharted territory. Scientists from the Warsaw University of Life Sciences (SGGW) have found that the material could also be applied in the treatment of cancer. Graphene wraps around cancer cells in a thin layer, cutting off its nutrition and thus eventually causing cell death.

WBJ OBSERVER • march 2014

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innovation

P oland ’ s innovation hi g hli g hts

Science-to-business

march 2014 • WBJ OBSERVER

A consortium of eight Warsaw science facilities and industries received E76 million from European Regional Development Fund to build a 22,000-sqm cutting-edge lab complex

in check, spend the right amount on manpower, equipment etc., you are covered,” said one researcher who chose to remain anonymous. And so the bulk of these resources simply goes to advancing scientific careers – producing papers and dissertations. Academic consortium The money can, however, be used for the production of more tangible investments. Eight Warsaw science faculties and institutes, led by the Warsaw University of Technology, have banded together to open a joint laboratory, called the Center for Advanced Materials and Technologies (CEZAMAT). The center’s purpose is to facilitate high-tech research and development in the field of nanotechnology, semiconductor microsystems, photonics and biotechnology. “We want to focus predominantly on research that can produce useful results, which means they will have commercial applications. Secondly, we focus on cooperation between researchers representing various scientific fields. This is where we see CEZAMAT’s strength as well as

opportunity for creating innovation,” Romuald Beck, science vice president of CEZAMAT, said. The consortium will use EU funds as well as their own to build a nearly 22,000sqm complex in Warsaw with state-ofthe-art labs. The project received over €76 million from European Regional Development Fund in addition to the €13.5 million of local funds. Construction has just been launched and the building is expected to be delivered by the end of 2015. More carrot Creating a nurturing environment for scientists is all well and good, but business doesn’t always want to wait for scientists to come up with an invention. They want their innovation now, before competitors get their hands on them. And if you can’t finance these risky endeavors with public money, what then? How can you get more private venture capitalists and business angels involved in developing new tech? It’s not easy, especially if your tax system supports importing innovation rather than unearth-

Images: Shutterstock, CEZAMAT, Wikimedia

Polish high-tech exports may be small in volume, but Polish universities are actively pursuing the commercial applications of the science they develop. The University of Warsaw has managed to export several of them. Methods of producing modified mRNA, developed by the Faculty of Physics in collaboration with the Louisiana State University, have been licensed by a German company. They increase mRNA stability and enhance its efficiency in producing therapeutic proteins that may be used in cancer treatment. Polish scientists have also successfully commercialized original methods of producing new complexes of ruthenium, used in organic synthesis, including pharmaceutical and fine chemicals production. The invention was acquired by a large international company based in Belgium. Another, invention, the Optical Time Projection Chamber (OTPC) makes it possible to record the radioactive decay of exotic nuclei with a digital camera. It was developed by the Institute of Experimental Physics and purchased by a Russian institute. The University also developed a magnetic field stabilizer, which allows Nuclear Magnetic Resonance spectrometers to operate without interruptions caused by DC power supply lines (used by most city transport systems). The technology was purchased by a US-based company.

ing it at home. For example, Polish businesses get over 50 percent write-offs for purchasing and implementing technology no older than five years old. Purchasing, not developing, mind you. The only companies that enjoy tax breaks for R&D spending are major research centers, with revenues of €1.2 million, at least 20 percent of which comes from selling R&D services or intellectual property rights. “An increasing number of countries see that designing and implementing a system of mixed incentives is crucial to creating for businesspeople the conditions to plan their R&D long-term. EU subsidies, awarded through competitions and limited in their scope by subsequent budget perspectives, don’t allow them to do that,” said Magdalena Burnat-Mikosz, a partner at Deloitte. “Meanwhile, an effective tax relief for R&D is still at early planning stages, and Poland keeps trailing innovative economies,” she added. Hub and room Although Poland’s tax system does little to encourage private institutions to spend money on R&D, some venture capitalists are beginning to pop up here and there, looking for innovative ideas and energy to make them happen. Deutsche Telekom (DT) has recently opened an entirely commercial enterprise, an innovation center (including a start-up incubator and accelerator and venture fund) called Hub:Raum. Unlike regular, publicly-funded tech parks, its scope of activity goes beyond offering office space to start-ups at preferential rates. The center also invests capital (up to €30,000 of pre-seed capital plus up to €50,000 of seed capital over the first six months of partnership). In exchange DT gets up to 20 percent of the seed enterprise, just as any venture capitalist would. If the project proves successful, more financing is available from VC fund T-Venture. Kraków is the second location for DT’s Hub:Raum, the first one being Berlin. The Kraków hub aims at attracting businesses from the entire CEE region.

“We realize that it is hard for fledgling firms to find a place to work. We cater to their needs by offering over 1,000 sqm of space, virtually unlimited access to Deutsche Telecom experts and mentors, marketing campaigns as well as good coffee. We welcome all those interested in innovation,” said Jakub Probola, head of Hub:Raum for CEE. What is also noteworthy in this initiative is the emphasis it puts on disseminating knowledge: if you take an active part in the community by organizing workshops or by mentoring other startups, you pay only PLN 150 per desk per month, as opposed to PLN 600 if you don’t. Trust issues You might wonder, why would anyone go to such trouble to make people exchange ideas and knowledge? Don’t people do that on their own? Look at social websites and memes – after all, an insightful comment can make it around the world in a matter of hours. Isn’t cooperation a part of our nature? Unfortunately, not for Poles. They are considered (by other Poles nonetheless) as highly uncooperative. They are ambitious and entrepreneurial (there are some 1.7 million SMEs active in Poland) but extremely distrustful. This is partly the fault of the communist system, which relied on a network of “snitches” keeping tabs on their neighbors and coworkers. But it is also propagated by the current education system, which promotes individualism and not collaboration. “Poland scores really high in terms of literacy and numeracy, as evidenced by Poland’s 13th position in the global PISA ranking of 15-year-olds, higher than Germany or the US. But what happens after that?” said Michał Boni, former minister of digitization. Not much. Children grow up, go to universities and continue to excel, alone. “We often encourage students to write their MA theses in pairs or groups. But it happens very rarely. They just don’t trust one another,” Tomkiewicz said.

P oland ’ s innovation hi g hli g hts

Trains – patenting safety

Train manufacturer PESA has received several distinctions and awards for its innovative designs and collision safety technologies. Its Elf trains, for example, have been equipped with a patented energy absorption technology as well as a safety cage consisting of an aluminum “honeycomb” block for the train driver compartment. The train is one of only two in the world that has successfully completed four rigorous “impact scenarios:” collision with another 185-ton vehicle at 36 kph, collision with an 80-ton cargo rail car at 36 kph, collision with a 15ton tank truck at 110 kph and with a small vehicle or animal. The company has been successfully selling its trains in European countries, including Germany, the Czech Republic, Bulgaria, Hungary and Romania. In November last year, Deutsche Bahn purchased €120 million worth of PESA’s Link trains.

Business-to-Science

WBJ OBSERVER • march 2014

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innovation Mazowieckie – Poland’s innovation muscle Poland in Regional Innovation Scoreboard 2012

Beholder’s eye

in the world Gross Domestic Expenditures on Research and Development (GERD) calculated as the number of patent applications and patents granted per $1 million of R&D spending (after South Korea and Singapore, 2012 ranking) Source: OECD

in the world number of patent applications

Source: World Intellectual Property Organization

out of EU-27

Source: Innovation Union Scoreboard 2013

in the world The Global Innovation Index 2013 Source: Cornell University, INSEAD, World Intellectual Property Organization

in the world Global Innovation Index 2009 Source: Boston Consulting Group

march 2014 • WBJ OBSERVER

Source: European Commission

Is Poland innovative or not? Opinions vary, as do statistics.

Moderate – high Modest – high Modest – medium Modest – low

That is also probably why universities have such a hard time finding business partners, something the government has been trying to remedy for years by introducing a number of programs aimed at binding business with science. “Scientists do come up with new technologies, but these rarely see the light of day. Companies need to get involved in such projects at an early stage, before an invention is commercialized,” said Dominik Jankowski, Enterprise Europe Network coordinator at the University of Warsaw’s Technology Transfer Centre (UOTT). “The University of Warsaw sold five technologies over the past five years,” Jankowski added. So the universities are active, but business needs to cooperate. How do you make business cooperate? “In the Intelligent Development program [part of the EU’s 2014-2020 financial perspective] companies will get the money to order research from companies. It is no longer Science-to-Business, but Businessto-Science,” Boni said. Hooked-up Creating clusters is by far the best way to foster innovation. The Polish government has been hard at work to make that happen, building tech parks anywhere it can. There are one or two new tech parks being built in Poland each year. But what good will they do if the only reason Poles have for banding together is to access EU money? “Clusters are hooked up with an IV drip to EU funds,” said Bohdan

Wyżnikiewicz, vice-president of the Polish Economists Society (TEP). But as soon as the money dries up, 80 percent of all clusters fall apart. Again, mainly because of Poles’ distrust of one another. Trust issues aside, does it really make sense to build all this space in the most remote and small backwaters in the hope that they will spark some tech genius with their fiber optic internet and preferential rents? Wouldn’t it make more sense to foster innovation where it already exists? Pulling the weight Mazowieckie voivodship is by far the most innovative part of Poland. It pulls the weight of the entire country, attracting 50 percent of Poland’s FDI. It is in fact the only Polish region that made it to the next-to-last “moderate innovator” category, with all the other regions still classified in the bottom cluster, euphemistically called “modest innovators” in the latest Innovation Union Scoreboard. But the new 2014-2020 Intelligent Development program will see nearly 90 percent of all resources allocated to Poland’s underdeveloped regions. The question is: What is Poland’s priority when it comes to innovation? Fighting inequality on a national level or helping those few brighter areas on the country’s map to catch up with the EU, not to mention the rest of the world? The 88-mph train is almost at the Ravine, so if Poland wants to hitch that ride, it’ll have to do better. u

innovation

Science funding:

in need of a strategy Interview by kamila wajszczuk

Professor Wojciech Bal is research group leader of the Institute of Biochemistry and Biophysics in the Polish Academy of Sciences, and is a member of Obywatele Nauki (Citizens of Academia), a civic movement that promotes change in the scientific and academic environment.

f eb r u a r y 2 0 1 4 â€˘ W B J O B S E R V E R

What do you think of the present situation regarding state financing of scientific research? Over the past few years a lot of money has been pumped into scientific research, the highest amount in history, but in a rather chaotic way. First of all there is no well thought out strategy. And there is still insufficient financing. The money is spent in an ad hoc manner, without a strategic plan, without a systematic approach to financing. There are good elements, but they do not add up. What are the main problems? It is likely that some of the funds are simply wasted. This is not confirmed officially, of course, but word has it that in some cases grant money was spent on modern equipment, which is now lying unused in storage rooms. The problem is that there is a lack of financing for equipment maintenance after the warranty period and for other current expenses. Regulations directly forbid spending money from grants for such purposes. And research institutions simply do not have big enough budgets to finance them. This is not only a question of equipment, as even the best apparatus alone is not enough to do research. You need a well-educated individual to operate it. And there are very scarce funds to employ such people. Why is grant financing so problematic? The problem with grant financing is that it is short-term, and when the financing period ends you need to apply again and justify your cause essentially from scratch. This often means that you cannot continue even the best research. For example, from my field of research, the time between the discovery of a specific chemical reaction and its practical implementation in cooperation with a business entity was 16 years. During this time, numerous phases of research were carried out, adding up to the full cycle that ends in an innovative product. Meanwhile, grants are usually given

Image: Wojciech Bal

cover story

Who cuts the pie?

In the previous EU innovation program, Innovative Economy, it was the Ministry of Economy that played the lead. Through the Polish Agency for Enterprise Development (PARP), its implementing body, the ministry disposed of nearly half of the €8.255 billion of EU funds for innovation. Now the government is changing its tactics. Maybe the Ministry of Science and Higher Education will have more luck propelling Polish companies to innovation? The National Centre for Research and Development (NCBiR), responsible for distributing the funds on behalf of the ministry, will be dividing nearly 70 percent of the €7.625 billion pie available in the “Intelligent Development” program.

Innovative Economy – 2007-2013

Intelligent Development – 2014-2020

€8.255

€7.625

billion from the European Regional Development Fund

Administration cost

billion from the European Regional Development Fund

Ministry of Interior – Priority 7-8

out for three- to four-year periods and when you apply for a new one, you have to prove that your research will bring something new. The system wants you to make scientific discoveries in three to four years. What about cooperation with business entities? Do they contribute much? There is still little involvement of business partners, but there has been some improvement over the past year or so. This was partly supported by official programs, such as those managed by the National Center for Research and Development. However there is still a huge gap in financing – there are no funds for proof-of-concept research, which is

PARP (Economy Ministry)

NCBiR (Ministry of Sc PARP (Ministry of Eco Administration cost

NCBiR (Ministry of Science and Higher Education)

used to verify whether an idea a scientist came up with is at all applicable. No funding is earmarked for all those stages of study that come between the initial work of scientists and its commercial implementation. Medical sciences are a good example. In Poland there are no funds for Phase I clinical research. So even if scientists discover a molecule that could be used for medical treatment, there are no means to do research necessary to push it towards commercialization. Is there a chance for more involvement from business partners? There will be incentives for academiabusiness cooperation in the new EU

budget perspective, this should improve the situation. They will include educational programs, which will help academic and business groups to get to know each other. Such initiatives have already surfaced, but more are necessary. Work should also be done to intensify cooperation with the international business environment. In Poland, foreign capital is involved in creating research and development units only to a small extent, though it must be said that this is slowly changing for the better. I hope that there will be changes for the better in this field. The majority of inventions appear in academic institutions, but their practical implementation is up to the business sphere. u

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years

ENTREPRENEURS

The brains that work for the heart While still at university, Marek Dziubiński developed a passion for algorithms. His “journey of a lifetime” has taken him to the position of president of an innovative medical equipment company that exports to the US. And this is just the beginning

by KAMILA WAJSZCZUK

Image: Medicalgorithmics

Pocket ECG is a heart activity monitoring device, backed by innovative software and remote data storage

he device produced by Medicalgorithmics is no bigger than a smartphone. While patients go about their daily routine, the Pocket ECG measures the heart’s activity and sends the data to a remote server. From there it is visible to a physician who can analyze

the data on his computer and diagnose the patient. Smart and convenient, both for the patient and for the doctor. The man behind this invention is 37-year-old Marek Dziubiński, president and CTO of Medicalgorithmics, holder of a PhD in information technology. Having

done his master’s degree at the University of Warsaw, he went to the Gdańsk University of Technology to undertake research on digital signal processing. At the same time he was employed at an engineering firm in Germany, where he worked on algorithms used in sound recording.

WBJ OBSERVER • march 2014

ENTREPRENEURS

98%

was the proportion of sales revenue generated by Medicalgorithmics on the US market in 2012.

From sound to heartbeat “That company went bankrupt about 2002 or 2003 and I decided that this was a good moment to do something on my own,” Dziubiński said. Even when still employed there, he came up with ideas that had market potential, so the bankruptcy only prompted his decision. But he realized that sound engineering was not going to be his direction. “After the failure of the company I worked in, I came to the conclusion that the audio market is not very prospective, so I looked for another field of knowledge that I could work on. I decided to go into medicine, or more precisely biomedical signals processing, or ECG,” Dziubiński said. At first, his medical knowledge was not large, but he worked with doctors and analyzed medical services markets to be able to design what is now the Pocket ECG. It took over ten years before the initial invention was first sold. Over that time Dziubiński worked with a partner firm, Emtel, which produces cardiology equipment. They told him about the need to use an algorithm in cardiac monitors used in hospitals, but Dziubiński, who was ready to create that algorithm, wanted to find a broader use.

“

Into the business sphere Medicalgorithmics was established as a company in 2005. It received financing from a business angel fund from the US, New Europe Ventures, and then from a Polish fund, BIB Seed Capital. “The concept of innovation financing was still at a very early stage at that time,” Dziubiński said. Before getting the first financial injection he talked to a number of compa-

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People who come up with innovations tend to believe that these ideas will be instantly adopted by the world. But this is not how things work.

”

Marek J. Dziubiński, PhD President & CTO of Medicalgorithmics

Going global With sales across the US and in some Asian countries, Medicalgorithmics seems to have successfully connected the business and science spheres. “Our company is at its global expansion stage,” Dziubiński said. Starting last year, the firm has taken steps to enter such countries as the United Kingdom and Spain, where contracts have already been signed, as well as Australia and Brazil, where talks are in progress. Not all markets are in the company’s target, at least for now. The key is the structure of medical services financing. But in the future, the structure should be favorable globally, Dziubiński believes. Trends that will support sales include medical services outsourcing and reducing the risk of hospitalization. What is rather unusual for the sales structure of a Polish company, Medicalgorithmics generates only a small percentage of its revenue domestically. The Polish system of health care financing does not favor the sales of Pocket ECG, at least for the time being, Dziubiński explained. There is no will to reimburse

Image: Łukasz Mazurek

nies about his idea, but he wasn’t getting his point across. Dziubiński sees difficulties as a challenge. “Commercializing my innovation was a gigantic mental journey for me,” he said. He had to change his perspective from that of a scientist who would like to stay away from the outside world and work on perfecting his idea, to that of a businessman. Commercial entities in turn are usually not interested in innovation as such and one of the main challenges is battling the misunderstanding between these two spheres, he explained. “People who come up with innovations tend to believe that these ideas will be instantly adopted by the world. But this is not how things work – people concentrate on whatever brings benefits in a secure manner, and they do not necessarily want to take a risk and find out whether an innovation can be implemented,” Dziubiński said. “It’s a complicated world that must be understood in order to give your product attractive packaging.”

ENTREPRENEURS

Images: Medicalgorithmics

4.5%

is the estimated market share of Medicalgorithmics on the US cardiac telemetry market.

the services from the National Health Fund and patients are not eager to pay themselves. Apart from entering new markets, Medicalgorithmics also has acquisition plans and has the means to finance them. “We have quite a lot of cash and have finalized a share issue,” Dziubiński said. To add to all that, Medicalgorithmics is working on expanding its product offer. New products will also be for cardiology use and fit into the same business model as the Pocket ECG, with support services offered. This way they can easily be sold through the company’s existing distribution network. “I think the market can expect new products from us within the next two to three years,” Dziubiński said. In 2011 Medicalgorithmics entered the NewConnect market of the Warsaw Stock Exchange and recently, on February 3 this year, its listing was transferred to the Warsaw bourse’s main market. Dziubiński believes that going public made the company more transparent and trustworthy. “When we inform partners about the company’s potential, available funds, etc., they can easily verify the

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information on the internet.” Of course it also makes it easier to raise capital. Keeping it Polish There are no plans for a foreign listing though, or any calls for a foreign presence other than sales. Medicalgorithmics is, and will remain, a Polish company, with its headquarters and an R&D unit in the country, Dziubiński stressed. It’s a competitive advantage, both in terms of cost and quality, he said. “Poland is a superpower when it comes to IT,” Dziubiński said, with many skilled people who are willing to stay and work here. The Gdańsk R&D center of Medicalgorithmics is constantly employing new engineers. No figures may be revealed at the moment, although the firm declares that the number of employees may grow by several dozen over the next few months. This is a must as the company has to cover orders that have already been placed. New paths “We have started a globalization

process and we have several goals,” Dziubiński said. One of them is to make the servicing model, when the equipment producer offers related services available to physicians, more common in the medical technology sector. The Medicalgorithmics team also has a large number of ideas for new algorithmic solutions. Another prospective segment is big data. The company has a large data base – tens of thousands of ECG transcripts. The goal is to make use of this resource. Finally, the third long-term goal is to build a global enterprise that is flexible enough to adapt to various markets. Dziubiński believes that the key factor is getting to know local business conditions and working with local partners to find optimal, locally-tailored solutions. Personally, Dziubiński plans to continue what he calls his journey into the unknown, started years ago when he was still a PhD student. “For me this is the journey of a lifetime, I try to analyze it as it goes and continue to learn.” Every time he encounters a barrier or difficulty, he treats it as an opportunity to learn something new. u

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Images: Karolina fender Noińska / JAJKOFILM, Press Materials / Metka by Traczka

A label to reckon with

We all travel. But not all of us travel in style. WBJ Observer investigates Metka by Traczka, a lingerie baggie business and the brainchild of Anna Traczewska, a marketing professional turned style guru

by JOHN BEAUCHAMP

get the call. “Just coming now,” and five minutes later we head down ul. Grottgera, a quiet street known for its boutique start-ups in a green part of Warsaw’s Mokotów district. I’m out to meet Anna Traczewska, the brains behind her own boutique lingerie baggie business, Metka by Traczka. We open the door to the studio and let in Lusia, a lively Sheltie who rushes in and starts barking at us to hurry up and get inside; there’s a frost out. The studio is divided into two parts: the “front-end,” where the business is done, and the “back-end,” where a wall of multi-colored fabrics wraps itself around you, and the side workbench, with the Łucznik-brand sewing machine which makes it all happen. “I’ve been doing this for going on

eight years,” Traczewska told me while I swipe a glance at some baggies in progress. When it all began Warsaw’s gearing up for Christmas in 2006. “I was strapped for cash and I didn’t have any money to get presents for my friends, and I fell on the idea that I’ll buy a piece of fabric and make them travel bags for their lingerie, embroidered with the words ‘wash me’ ‘wear me,’ or ‘clean,’ ‘not so clean.’ … The girls were absolutely delighted,” Traczewska said with a smile. But it didn’t end there. “Soon afterwards, I was getting calls asking me to sew some more.” This time, she started earning some money from her newfound baggie fame, marking the beginning of

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Metka by Traczka, purveyors of boutique lingerie baggies. “At the very beginning I wasn’t certain that this would grow into something bigger, so my investments were minimal, mostly in fabrics, but the biggest investment I made was my time and finding out where I would get my threads, string, fabrics and other supplies,” Traczewska said. The set-up As a newly-crowned entrepreneur, Traczewska turned to the internet to reach out to clients, going first to pakamera.pl and decobazaar.com, both Polish online boutique stores, although she has expanded her list to sell her wares on other such sites internationally, including etsy.com. “I sell 80 percent of my products online,” she said, adding that when starting out, a full-on internet presence was a must. “Just setting up a Facebook page isn’t enough … It’s all about creating the brand.” Luckily for Traczewska, she already had a background in marketing. “I had the opportunity to work with some amazing brands in my life,” she said, adding that once the brand is there, it needs to be nurtured. “A brand is an emotional relationship with a product, so the fact that this idea came from the heart … and the fact my products are hand-made has meant that they are appreciated.” Without going as far as creating a stand-alone website, Traczewska set up a blog which acted as an archive of all the products that she made with Metka by Traczka, as well as a way to communicate with her growing number of followers. “I often find myself going back to the blog to remind myself of the names which I used for the items I produced a few years ago,” Traczewska said. Now she has a running series on the Metka by Traczka blog called “Around the World,” where people send in their pictures of Traczewska’s baggies in exotic locations. What started as a one-off thing – a client got the ball rolling by sending pictures from Halong Bay in Vietnam –

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has now on taken a life of its own. “Now I get so many pictures from across the world that I have to check on Google Maps to see where these places are!” Traczewska said. Back to business What started out as a small-scale enterprise turned into something bigger for Anna Traczewska. “At the beginning I was happy I sold anything at all,” she said, saying that the moment she managed to pay for a holiday to Egypt was when she realized she was onto something big. “It took me about three years to really get the business going, but you have to remember that I’m running a small-scale business; it will never grow into massproduction and I don’t want to go down that path,” she added. “I wouldn’t have dreamed then that I would be able to make a living doing this.” A few years down the line and Metka by Traczka has branched out from baggies to laptop sleeves and yoga-mat carriers for trendy urbanite 30-somethings. But the baggies remain at the top of the sales list. And they’re not just being sold to individual clients, either. Despite keeping it small-scale, Metka by Traczka now gets offers from corporate clients. “Five years ago I wouldn’t have dreamed that my baggies, which, after all, form an intimate part of someone’s travel baggage, could be manufactured as corporate gifts, but it turns out that a lot of

companies – including a number of large cosmetic brands on the Polish market – now buy my baggies for their clients, contractors and journalists,” Traczewska said, adding that travel agencies are also getting in on the baggie craze. In order to manage with all her corporate and individual orders, Traczewska decided to delve into the world of corporate social responsibility, taking on four part-time helpers whom she found on niepelnosprawni.pl, an internet site for the disabled. “These are people with major disabilities, but they are great at what they do and their willpower is amazing,” Traczewska said. Branching out While Traczewska still aims to hold on to her baggie empire, she does dream about the future. “I am convinced that in five years’ time Metka by Traczka will be alive and kicking, and that I might have my own internet shop or even my own boutique on ul. Mokotowska: or maybe not,” she explained. However, “the aim isn’t to make huge sums of money, the point is to have a cool brand, although I do dream about interiors and home accessories,” Traczewska added. Having created such a niche label and nurturing the brand, it seems that Metka by Traczka may do just that. Lusia the Sheltie yaps in agreement.

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Spirited Away

In the mid 1990s, Poland was flowing with vodka. There were then some 1,000 distilleries in the country, but that number has now dropped to a mere 100 as producers struggle to make ends meet

by Jacek Ciesnowski

“T

he three most astonishing things in the past halfcentury were Blues, Cubism and … Polish Vodka” is a famous quote attributed to Pablo Picasso. Whether he actually said it is disputed and even if he did, Polish vodka was invented centuries ago not in the 20th; but the truth is that for generations, Poland was synonymous with the clear, grain-based alcohol. It was consumed by royals and simple folk, and inspired numerous literary works. Local brands very often transcended borders. Years before the fall of communism, there were two Polish things that you could buy in every airport in the world, canned Krakus ham and a bottle of Wyborowa. No wonder that with such a reputation, international companies snapped up the most famous

Polish brands and distilleries. France’s Pernod Ricard owns the Wyborowa and Luksusowa brands among many others, while Russia’s CEDC has Żubrówka and Palace Vodka. France’s Louis Vuitton Moët Hennessy (LVMH) owns one of the world’s most famous super-premium vodka brands – Belvedere. Unlike with many other items, international companies love to emphasize that their products are actually made in Poland. When a white-goods producer manufactures its fridges or cookers in Poland it usually puts a “Made in EU” sticker on it, as if they’re ashamed of their origins. In the instance of vodka, however, the Polish flags are proudly displayed on the label. This is why Canadian-born and Michigan-based entrepreneur Terry

Olson decided to sell Polish vodka in the States. His Zim’s Vodka, which boasts the white eagle and the Polish flag on the front of the bottle, is made in Wrocław and is exported to the US. “I considered producing it in the US originally, but after research, I concluded that Poland is the motherland of vodka and authenticity is critical to marketing and brand strategy,” said Olson. “If you want the best wines you think of France and Italy. For beer it’s Germany, Belgium, and I have to say Canada because that’s where I’m from. … When you get to vodka there’s no question it’s Russia or Poland,” he added. Excise excess Still, it’s a sad irony that in a country which prides itself on being an originator

WBJ OBSERVER • march 2014

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Polish-Russian Vodka Wars

For decades, both countries have been waging a war over who is the originator of the term “vodka.” Historic documents show that old papers from the 15th century, in Russian as well as in Polish, such a term was used. The first instance of the word “wódka” can be found in a Polish document from 1405, while in Russia the earliest mention is in 1440. Even though Poles won that round there’s no doubt that the spirit was produced before both Poland and Russia came into existence as states. The strong alcohol was first distilled in the Middle East around the 5th century. The war is far from being settled. Back in January, Russian Foreign Minister Sergey Lavrov started a brief diplomatic scuffle when he said that only Poles still make vodka from potatoes, claiming that it’s an inferior product. “We used to do this in the Soviet Union,” Lavrov said. “Now we try to do it from wheat,” he added. Polish producers and diplomats were outraged and explained that firstly, vodka in Poland is also made from wheat and other grains, and secondly potato-made spirits are actually much more difficult to distill and are considered by many to be a superior product. Poland also gained an unlikely ally in this battle when Hugh Laurie, a British actor known for portraying House M.D., unanimously endorsed Polish vodka over the Russian counterparts.

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of the term “vodka,” making it is becoming a money-losing operation. “We thought that after a disastrous 2011, when producers lost PLN 326 million combined, there was a hope that everything would go back to normal, as in the following year they posted some PLN 199 million in profits. But it looks like the situation will repeat itself,” said Leszek Wiwała, president of the board, Polish Spirits Industry, an organization encompassing the majority of vodka producers in the country. Wiwała was referring to a recent government decision to raise the excise on spirits by 15 percent. The last excise hike was back in 2009 (by 9 percent), but producers took that rise on themselves and instead of increasing the price, they lowered their profit margins. This time around, they can’t afford to do so again. The economy ministry estimates that thanks to the excise hike, the budget will get an additional PLN 780 million. But according to a report by the Sobieski Institute, a think-tank, the budget will actually receive PLN 150 million less from alcohol sales, as most consumers, instead of paying PLN 2 more for a bottle of vodka in a store, are more likely to buy it from illegal sources. “Such booze is made by organized criminal groups, it’s very often made from industrial-grade alcohol used in products such as wiper fluid. It’s not only cheap, but also dangerous to your health,” said Wiwała. The organization estimates that the so-called “gray area” is responsible for 15 percent of vodka sales in the country. Wiwała’s concerns are echoed by Andrzej Szumowski, deputy CEO of Pernod Ricard Polska, the producer of the worldfamous Wyborowa Vodka, and president of the Polish Vodka Association. “We feel cheated. We pay taxes, excise and nobody even asked for our opinion. What’s even worse, only excise for vodka was raised, other alcohols like beer and wine were left alone.” Szumowski is not excited about the future of vodka producers. “Only a fortune-teller can predict how 2014 will look for us. But I’m sure we will be hit by the decision to raise the excise duty.”

Roller coaster ride The excise increase has had a shortterm positive effect on the industry, however. Shops and wholesalers were buying as many cases as they could before the end of the year so they could still sell it with the lower price tag. Because of that, in December alone the production grew by 47 percent year-on-year, which will definitely improve financial results for 2013. On the flipside, after a period of increased production, manufacturing in the first months of 2014 has come to a screeching halt. As an example, January sales of Belvedere, which produces popular brands like Sobieski and Krupnik, dropped by 50 percent y/y. Short-term gains The PLN 2 per bottle increase might not look significant, but in reality it is. Many vodka enthusiasts in Poland are not drinking the products for their taste: they’re counting every penny, and every price increase forces them to turn to cheaper booze, even if it means risking their health. Other sources of cheap alcohol for Poles are discount stores. “They’re buying high volumes of our products but they offer a very low mark-up,” said Wiwała, explaining that producers are between a rock and a hard place, as they have to sell their products under discount stores’ conditions or risk losing a significant piece of their market share. Obey the law Lower profits coincide with lower consumption. According to the International Wine & Spirit Research (IWSR) report, between 2008-2012, consumption dropped by 2.6 percent and by 2016 it will contract by another 1.6 percent. This stems from the fact that Poles’ taste in alcohol is changing and they can afford to buy more expensive, imported spirits. Just between 2008-2012, whiskey sales increased by 22 percent. “The main whiskey consumers are 25- to 30-year-old educated men. Consumers are keen to experiment with this alcohols which has become more available and affordable than ever,” said Piotr Poznański from IWSR.

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How much does vodka cost and why An average price of a 0.5 liter bottle of vodka

PLN 23 PLN 2

Production costs

PLN 5.32

Producer and distributors proﬁt margins

PLN 4.30 VAT

PLN 11.38 Excise

Source: Polish Spirits Industry

So maybe a good idea for producers would be to concentrate on premium and super-premium brands, which they sell less of, but enjoy much bigger profit margins from. Opinions are divided on the subject, however. “I don’t think Poles are ready for such a change. We simply are not affluent enough to afford superpremium products,” said Wiwała. Others think that this might be something that can save the industry from going into oblivion. The Polish Vodka Association, which encompasses several Polish (or Polish-based) producers, heavily lobbied the Polish parliament to pass a bill that clearly stipulates what can be called “Polish Vodka.” According to the recently passed bill, the label can be applied only to products manufactured exclusively in this country, as well as made from potatoes or traditional cereals (rye, wheat, barley, oats and triticale). Some producers were against the legislation. As much as 30 percent of vodka in Poland is made from corn, which is much cheaper than other cereals, but can hardly be called “traditional,” and these products under the new legisla-

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tion won’t be able to call themselves “Polish Vodka.” “We should differentiate vodka made in Poland from Polish vodka,” explains Szumowski, who lobbied hard for the bill to be passed and calls it “a milestone that will greatly help promote Polish vodka abroad and in Poland,” adding that currently only 10 percent of vodka produced locally meets all the criteria to be called Polish vodka. He does hope, however, that such numbers will soon increase. The bill is the first step to transform Polish vodka from a cheap but potent spirit to a super-premium brand drunk by the élite. It’s an ambitious plan, but it has been done before. American Revolution The super-premium sector of vodka in the US was created in the second half of the 1990s by Polish brands such as Chopin and Belvedere. They were promoted through references to the Polish traditions of distilling vodka and quickly gained popularity, especially among musicians. Many rappers replaced their bottles of Courvoisier cognacs with their

newly-found favorite Polish drinks. “Only 15 years ago, drinking pure vodka in the US was unimaginable. It was used only as an ingredient in cocktails,” said Wiwała. Americans preferred unadulterated whiskey and brandy. Nowadays, most colored drinks end up in cocktails. This all resulted in creating a new superpremium sector, a shelf higher than the one occupied by Finlandia and Absolut. Even Bruce Willis jumped on the bandwagon, becoming a spokesman, and eventually an investor, in the Sobieski vodka brand. Super-premium But what worked in the US might not be that easy to repeat in Poland. The local sector is dominated by cheap products. The value sector is responsible for some 90 percent of the market, while standard sectors have the remaining 10 percent. The premium and super-premium spirits are sold in miniscule numbers domestically, and these sectors are expected to increase by 8 and 39 percent respectively by 2018, but it will only be a drop in the sea of 80 proofs. u

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Image: Shutterstock

The shale gas bubble

Three years ago, Poland seemed on the verge of an energy boom powered by the vast shale gas reserves it was reported to hold. Did that prove to be wishful thinking?

by REMI ADEKOYA

hen the US Department of Energy announced in 2011 that Poland may hold as much as 5.3 trillion cubic meters of shale gas – enough for 300 years consumption for Poland – the local political class swooned. Politicians rushed out to announce that the country would soon be an energy giant. Foreign Minister Radosław Sikorski declared that Poland was on its way to becoming a “second Norway.” The excitement was understandable. The vision of Poland not only shaking off its dependence on Russian gas supplies, but also becoming a (rich) energy exporter within a decade was intoxicating. Energy remains a significant link between Poland and its former communistera Russian masters, a tie Warsaw would happily sever. Moscow currently supplies two-thirds of Poland’s gas, about 11 billion cubic meters per year. “After years of dependence on our large neighbor, today we can say that my generation will see the day when we will be independent in the area of natural gas, and we will be setting [the] terms,” Prime Minister Donald Tusk announced triumphantly at the time. Even when a few months later, a report from the Polish Geological Institute estimated the country’s shale gas reserves at between 0.35 and 0.77 trillion cubic meters (tcm), about 10 times less than the original American estimate, the mood remained very gung-ho. Fast-forward three years and the reality on the ground is that ExxonMobil, ConocoPhillips, Marathon Oil and Talisman Energy have all withdrawn from shale exploration in Poland, leaving only a handful of smaller companies and one major player, Chevron, in the search for the unconventional resource. So how did we go from those early heady days to where we are now? Bureaucracy, again? “The main problem is that our government has been unable to implement regulations governing the energy industry and especially the hydrocarbon sector for the past three years, instead there has been continuous inter-ministerial conflict on

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Going deep P

oland’s Pomerania region in the north is considered to be the most promising place for shale gas exploitation. But experts say getting to the shale beds where the gas may be found will prove more challenging than in other parts of the globe – mainly because the beds are believed to be deeper. That means added cost, with estimates putting drilling costs at as much as $15 million per well instead of the average cost of $4 million in the USA, for example. Here’s how fracking works.

1 2

In most places where shale beds are believed to be present, deposits are between 1 and 2.5 kilometers below the earth’s surface. In Poland, experts say the deposits are even deeper. Reaching them could take as long as two months.

Water tables, usually about 100 meters underground, are protected from pollution in the drilling process by multiple layered steel casings surrounding the drilling bore.

3 4

Once at the depth of the shale bed, the bore is turned horizontally.

A “perforation gun,” loaded with explosives, is fed through the bore. Once on the shale bed, charges from the “gun” are set off, punching holes in the surrounding rock. Debris from the explosions is then cleared.

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A mixture of sand, water and chemicals is pumped down under high pressure, forcing the rock apart and releasing gas.

The water is pumped out of the well, leaving the sand behind to keep the fractures open. Gas seeps out of the broken shale layer to be pumped to the surface.

THE DEFINITIVE GUIDE TO POLISH EXPORTS Our annual “Made in Poland” export guide surveys the industries, firms and organizations fueling Polish exports: Boosts Polish firms and products Profiles fastest-growing Polish export industries Expert macroeconomic and legal analysis Targeted at foreign firms seeking Polish goods Published in multiple languages Distributed to subscribers of other WBJ.pl, WBJ Observer magazine, Foreign chamber members, Polish embassies/consulates abroad, Regional development agencies, Key Polish and foreign conferences and trade fairs.

To advertise: Agnieszka Brejwo, abrejwo@wbj.pl, ph. 504 201 007

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the issue,” said Wojciech Jakóbik, a sector analyst at the Jagiellonian Institute. Jakóbik said that since there is no one particular ministry responsible for energy affairs, several ministries, such as the environment ministry, the treasury ministry and the economy ministry were all “fighting to promote their own agenda.” “Too many ministries have a say in energy affairs in Poland, while none of them have full responsibility for the issue. All these ministries have lobbyists around them and thus are de facto fighting a proxy war among various interest groups,” said Jakóbik. An example in case was the years-long battle between the environment and treasury ministries over the creation of a national hydrocarbon operator, which would be entitled to proceeds from shale gas royalties. The environment ministry strongly supported the idea, while the treasury was dead set against it. In the end, Environment Minister Marcin Korolec, and his deputy Piotr Woźniak, who was Poland’s chief geologist, were dismissed late last year, obviously losing that battle. Maciej Grabowski, an economist by profession and instinctively more probusiness, took over as environment minister. He said speeding up shale exploration in Poland would be his “priority.” It’s the geology, stupid Surely, Poland’s bureaucracy has not done a satisfactory job on shale gas. In a scathing report released by the Supreme Audit Office (NIK) in January this year, it stated that “despite declarations, the Environment Ministry did not treat the issue of shale gas exploration as a priority. For instance, in 2007-2012 there were only three people responsible for the issuing of licenses for shale gas search.” As a result, the ministry issued administrative decisions related to the licenses for shale gas exploration with “significant delays (132 days on average where the law required 30 days).” NIK also said that “no credible estimation of the size of shale gas deposits in Poland have been made so far.” In order to do so, about 200 exploratory wells would have to be dug. At the current boring speed, that would take about 12 years, NIK estimated.

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However, Andrzej Szczęśniak, an independent industry analyst, does not believe delays on the hydrocarbon bill and bureaucracy are the reasons so many firms have given up on shale gas exploration in Poland. He says the conditions for foreign companies in Poland are “excellent.” “Taxes and royalties are currently set at a very low level, the government has postponed the introduction of a new hydrocarbon tax for seven years [until 2020]. I know of no other country where shale gas explorers have such favorable financial conditions,” Szczęśniak said. He also stated that Polish expectations regarding shale gas had been “very unrealistic” and “the result of a media hoopla.” “Now the reality is setting in. The main problem for shale gas explorers here is geology,” Szczęśniak said. “The geological conditions are simply too chal-

“

I know of no other country where shale gas explorers have such favorable financial conditions.

”

lenging, much more challenging than, for example, in the United States, which is leading the shale gas boom,” he added. Szczęśniak’s view was echoed in a December 2013 paper written for the Pulitzer Center by a journalist Dimiter Kenarov, who visited Poland in 2012 and interviewed dozens of people involved in the shale gas industry. Kenarov said that on the one hand the shale gas explorers who left Poland had faced purely technical problems: “not enough modern rigs for horizontal drilling, not enough equipment, no competitive services for hydraulic fracturing, no gas infrastructure and poor roads.” On the other hand, Poland’s “shale rock layers were very deep underground, which increased the price-tag of drilling and

fracking,” he added. Overall, digging one exploratory well in Poland costs roughly $15 million, compared to about $4 million in the Barnett Shale basin in Texas. “The price of natural gas in Europe was significantly higher than in the US, but even that could hardly make up for the expensive production costs,” Kenarov wrote. Investments needed Due to the lack of necessary infrastructure and equipment as well as the cost of drilling in Poland, huge investments will be needed to make the industry viable. But the big players will not make those investments unless they see some impressive-looking exploration results. Yet the results will likely remain unimpressive as long as the huge investments necessary are not made. And so the circle closes. So far, companies in Poland have drilled roughly 50 exploratory wells while, according to Environment Minister Maciej Grabowski, it would take between 200 and 250 to assess whether Poland’s deposits are commercially viable. All hope is not lost, though. Szczęśniak said that there is still a chance that Poland’s much longed-for shale gas revolution will take off. He said the geological conditions in the Pomeranian region seem the most promising and could well prove profitable for shale gas explorers. In January this year, San Leon Energy, a gas explorer backed by George Soros and investment management firm BlackRock, said one of its Polish wells had “moved a long way” towards producing Poland’s, and Europe’s first commercial shale gas. “This is the most encouraging vertical shale well test in Poland to date. We have moved a long way towards cracking the code towards commercial production from our unconventional plays,” the firm’s CEO said in a statement. Optimism ungrounded in reality is a silly man’s game. But it is still decidedly too early to write off Poland’s shale gas revolution for good. While the country is not going to become a “second Norway,” it could still find enough commercial quantity shale gas reserves to make itself energy self-sufficient. That in itself would be worth no small celebration. u

o b ser v er inter v iew

SET TO INNOVATE Image: Ministry of Science and Higher Education

Interview by ewa boniecka Lena Kolarska-Bobinska, Poland’s science and higher education minister, talks with WBJ Observer about promoting innovation in the economy and increasing cooperation between universities, the academic community and business Building effective cooperation between universities and business is vital for making Poland innovative. Linking science with economic revival is the main goal of the EU’s new program, “Horizon 2020.” How are you going to deal with this challenge when business is not eager to develop effective cooperation with universities, and invest money in innovative projects? In today’s world, where knowledge is power, innovation is a fundamental driver of the global economy. Innovation helps create new jobs, markets, industries and opportunities that we never even dreamed of. Horizon 2020 is a step forward – it’s a stepping stone towards an innovation-driven economy. One of the main goals of Horizon 2020 is to build bridges between research and the market in order to promote smart, sustainable and inclusive growth. Poland can use the opportunity to speed up the pace towards a knowledgebased economy. Over the last several years, our innovation-oriented policies have led to a steady increase in business sector involvement in financing R&D activities in Poland. According to the latest available data, in 2012 the value of BERD indicator amounted to PLN 5.3 billion. The number of entities that

carried out research and development activities in 2012 exceeded 2,700, which is 23.1-percent higher than in the previous year. Returning to Horizon 2020, we are taking the necessary steps to create efficient measures and instruments, supporting the synergy between Horizon 2020 and structural funds. We want Polish scientists to be more actively present in global science, which is why, based on the idea of tailor-made services, we are building a support system for Polish scientists in order to increase their chances in this challenging competition.

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Poland is one of the 30 most innovative countries in the world.

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However, there is a growing understanding in Poland that without innovation we will not be able catch up with the West in development and compete in the global marketplace. Despite all the efforts of your predecessor, Barbara Kudrycka, to develop better cooperation between science and business, we are still not able to exploit our intellectual and scientific potential to achieve a break through in innovative activity: what can you do to change this? The two major reforms introduced by my predecessor have built the proper framework for innovation policy that stimulates research and development.

WBJ OBSERVER • march 2014

What is Horizon 2020?

orizon 2020 is the biggest EU Research and Innovation program ever with nearly €80 billion of funding available over 7 years (20142020) – in addition to the private investment that this money will attract. It promises more breakthroughs, discoveries and worldfirsts by taking great ideas from the lab to the market. By coupling research and innovation, Horizon 2020 is helping to achieve this with its emphasis on excellent science, industrial leadership and tackling societal challenges. The goal is to ensure Europe produces world-class science, removes barriers to innovation and makes it easier for the public and private sectors to work together in delivering innovation. Horizon 2020 is open to everyone, with a simple structure that reduces red tape and time so participants can focus on what is really important. This approach makes sure new projects get off the ground quickly – and achieve results faster. Source: European Union

march 2014 • WBJ OBSERVER

The newly built system opened a window of opportunity for students and researchers. What I consider as one of the most important outcomes of these reforms is the gradual change in the mentality of scientists. They have become more open-minded and more confident in cooperating with business. Commercialization of research is no longer an unnecessary threat but an opportunity to succeed. Market-driven innovation is also high on our agenda. The new Operational Program – Smart Growth – will focus on delivering better solutions for building stronger links with business and boosting entrepreneurial culture. To make a return on investments in innovation, there is a need to turn projects into production. The problem in Poland is that the results of university research do not have commercial applications, so projects often go to waste. How can the “Horizon 2020” money improve the situation? As shown in Bloomberg’s recent Global Innovation Index, Poland is one of the 30 most innovative countries in the world. It ranked 24th out of 215 countries that were examined, overtaking countries such as Ireland, Portugal, Hungary, China and Israel. Poland has paid special attention to overcoming national and regional disparities in terms of research and innovation performance. The introduction of “Twinning” and “Teaming” instruments to the program will help to build a more coherent European science strategy. The main idea is to team up and bring closer together regions and scientists with a leading counterpart institution elsewhere in Europe. Science is global, and more and more, the brain drain is being replaced by brain circulation. As I mentioned before, we focus on bringing together funding from Horizon 2020 and from the EU structural funds so we can fully benefit from this unique opportunity for Polish science.

Our higher education system is still seen as outdated, our leading universities are high in world rankings, and many graduates are still inadequately prepared for the job market: what should be done to improve the quality of education, and to give graduates the skills needed to promote innovation in both economic and social fields? World rankings are usually based on a university’s performance in science. The most famous ranking, the so called “Shanghai Ranking,” relies solely on research indicators e.g. the number of Noble Prize winners among alumni and academics. Therefore the teaching performance of our universities should not be assessed only with regard to their position in international rankings. Nevertheless, we are conscious that a mismatch between the expectations of employers and the competencies of graduates remains an issue. Therefore, since 2011, the Ministry of Science and Higher Education has been taking steps to improve the quality of teaching. The Higher Education reform of 2011 introduced the National Qualifications Framework for Higher Education. The curricula are now defined by learning outcomes, encompassing knowledge, skills and social competences, such as team work, creativity and entrepreneurship. Another important element of the recent reform is a strong distinction between different profiles of curricula: an academic one, linked with highquality research, and a bigger emphasis on theoretical modules, and a practiceoriented one, with a stronger emphasis on practical modules. The above changes will be strengthened by new provisions included in the draft law of 2013 that focus in particular on the needs of the modern economy. We believe that the steps already taken, and our new proposals, which will come into force in 2014, will help Polish graduates to successfully enter the labor market and play a significant role in transforming Poland into one of Europe’s innovation leaders. u

Image: European Union

o b ser v er inter v iew

March 2014

SPECIAL EDITION

WITH

REAL ESTATE NEWS

With an increasingly tenant-driven market, where do opportunities lie?

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Warsaw office rent crunch

30 PAGES OF REAL ESTATE NEWS

High Streets: Pl. Trzech Krzyży The place to be and be seen

53-55

72-73

Amazon fever Out of the 700,000 sqm of logistics space under construction, half belongs to the US online retailer 65-67

Interview Exclusive interview with the CEO of Polski Holding Nieruchomości 68-69

Hotel rush After a good year, hotel developers expect an even better 2014 63-64

PLUS: Poland’s investment appeal�� 57 New tech in real estate�� 61 Retail expansion� �� 70 Segro’s €100 million acquisitions�� 52 Griffin buys three office schemes�� 48

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news

OFFICE

BBI Development preparing for Plac Unii sale

Echo sells phase two of Aquarius complex for €27.7 million

The management board of BBI Development has decided to launch the sale process of the Nowy Plac Unii project. “The buyer, financial and economic conditions of the transaction as well as the schedule for the sale process will be established in market negotiations, carried out together with an outside adviser,” the company wrote. The company already has a potential buyer interested in the project and the sale should go through by the end of the year, Michał Skotnicki, BBI’s CEO, said earlier this month. The scheme, delivered in Q4 2013, offers 56,200 sqm of GLA, including 15,200 sqm of retail space and 41,000 sqm of office space. BBI developed the project in consortium with Liebrecht & Wood and holds a 40-percent stake in it. The seller has chosen CBRE as the adviser for the transaction.

CMY

Images: CBRE, Echo Investment

Tawstock Estates sells Euromarket

Investor Tawstock Estates has sold the Euromarket business center in Kraków for an undisclosed sum to a company managed by Bluehouse Capital. CBRE and Savills advised on the transaction. Euromarket, delivered in 2001, is a fivestorey building with a total office space of 10,600 sqm and over 1,600 sqm of retail space. Its main tenants are BP Europe and CanPack. Bluehouse Capital is a private equity real estate firm focused on emerging European markets, including Bulgaria, Croatia, the Czech Republic, Greece, Hungary, Romania and Serbia.u

march 2014 • WBJ OBSERVER

Aquarius Business House, located in Wrocław’s downtown, features 25,000 sqm of GLA

eveloper Echo Investment has sold phase two of the Aquarius Business House office complex for €22.7 million. The buyer of the scheme is a company called Skua. Phase two of the Aquarius Business House was delivered in November 2013. According to the sale agreement, the property will be managed by a subsidiary of Echo Investment, Echo Investment Property Management, until 2017. The complex is made up of two seven-storey buildings, altogether offer-

ing 25,000 sqm of leasable area and 410 parking spaces. It is located in the city center of Wrocław, on the corner of ul. Borowska and ul. Swobodna. Its book value recorded in Q3 2013 was PLN 79.8 million. “As of the date of this report the group has no credit encumbering the asset sold, therefore the entire transaction value will generate cash flow in the same amount,” the company wrote in a statement. Back in April 2013 the company sold phase one of the development for €41.9 million to a company named Horta. u

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MIXED-USE

PHN subsidiary signs deal for Gdynia harbor project

Office

Griffin Group buys three office schemes in Warsaw

Images: CBRE, PHN

Dalmor, a subsidiary of state-controlled real estate group Polski Holding Nieruchomości (PHN), has signed a letter of intent with a “renowned developer” for an investment in the Port Rybacki harbor area in Gdynia, PHN said in a statement. The area for development comprises 10 hectares of land located on an artificial pier, close to the Sea Towers residential project. The zoning plan allows for the construction of 70,000 sqm of GLA of commercial space and 120,000 sqm of residential area. The partners intend to cooperate in planning the investment, developing it and then commercializing the project, PHN said. The scheme will be located next to Gdynia’s port. Under the terms of the letter of intent, the partners will evaluate their potential cooperation and prepare the documentation necessary for the investment. RESIDENTIAL

NBP expects moderate apartment price growth

Trends observed on the residential real estate market in 2013 are likely to continue this year and result in moderate price growth, the National Bank of Poland wrote in a report on Thursday. The number of new apartments delivered in 2013 was lower by 6,800 than in 2012, but the number of newly launched investments in the second half of last year was higher than in H2 2012. Over the next two years, the number of apartments available will grow and prices will rise moderately, the NBP said. In Q4 2013 apartment prices were stable on the primary markets of all Polish cities, the report also found. This was true both for newly launched sales and for apartments put on sale earlier. u

march 2014 • WBJ OBSERVER

Bliski Centrum offers nearly 5,000 sqm of GLA in Warsaw’s city center

roperty investor Griffin Group has acquired the Company House II office building in Warsaw from AXA Real Estate. The deal value was not disclosed. Company House II, completed in 2013 and featuring 9,379 sqm of GLA, is located on the western end of Aleje Jerozolimskie, in Warsaw’s Włochy district. Its acquisition by Griffin follows the purchase of the neighboring property, Company House I, in February 2013. Company House II is Griffin’s third purchase in recent months. In December 2013 and January 2014 it acquired two

office buildings in Warsaw’s center, Bliski Centrum and Nordic Park, for a total of €130 million. The Bliski Centrum scheme, located on ul. Żurawia 8, offers 4,704 sqm of office space and 177 sqm of retail area. CBRE advised the seller, Castle Carbery Properties, on the transaction. The A-class Nordic Park project, located on ul. Kruczkowskiego 8, features 8,259 sqm of GLA, including 8,104 sqm of office space. The company’s Warsaw portfolio also includes the Hala Koszyki retail/office complex, currently undergoing refurbishment. u

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who ’ s n ew s Wojciech Smyk has been appointed vice president responsible for the Polish assets of BlackRock’s real estate business, following BlackRock’s acquisition of MGPA last October. In his new role Smyk will focus on local asset management and local partnership opportunities. Prior to joining BlackRock he worked for Ernst & Young Real Estate in Warsaw. He holds a Certified Commercial Investment Member (CCIM) designation and has seven years’ experience in the commercial and investment real estate industry. He graduated with a dual Masters degree from the Warsaw School of Economics. Katarzyna Zawodna has been promoted to be the president of Skanska Property Poland. She succeeded Waldemar Olbryk in that position, who took the position as senior vice president at Skanska Infrastructure Development. Zawodna will lead Skanska’s commercial property development business in Poland and will be in charge of project development, leasing, asset management and divestment. Previously, she held the position of regional director for the northern region at Skanska Poland. Zawodna graduated from the Warsaw School of Economics. She also holds an international title of LEED Accredited Professional. “I am confident that Katarzyna will continue to make our organization successful and drive toward a leading position on the market. With her extensive business knowledge, leadership skills and commitment she is bound to succeed,” said Nicolas Lindberg, president of Skanska Commercial Development Europe. u

march 2014 • WBJ OBSERVER

MIXED-USE

PKP to investment in Wrocław and Kraków

Poznań City Center opened in November 2013

tate-controlled railway group PKP is working on major joint-venture investments in two major regional cities in southern Poland, Wrocław and Kraków. The company has already started looking for a property development partner for the Wrocław Świebodzki railway station in the city’s center. The project’s estimated value is PLN 2 billion. The property in question will be developed on 28 hectares of land, including a nineteenth-century railway station, which will be refurbished. The station is not being used currently, but there are plans to re-launch it as a transport hub. “The land designated for the project is highly attractive due to its location. It is less than a kilometer from Wrocław’s market square,” the company said in a statement. The Kraków project involves the city’s central station, on ul. Bosacka. PKP is looking for a partner in the investment, which is expected to cost some PLN 200 million. “The process of looking for an inves-

tor was launched in December 2013. The 1.4-ha plot is located in Kraków’s downtown area, close to the Kraków Nowy Główny railway station,” the firm said in a statement. The investment will involve revitalizing historic buildings as well as building new schemes, either office, hotel or retail. Over the past few years, PKP has carried out two large property development projects involving the main stations in Poznań and Katowice. Poznań City Center, developed in a JV with real estate fund Europa Capital and developer TriGranit Development, offers 61,000 sqm of retail space, along with railway and bus stations. Galeria Katowicka, built in partnership with Neinver and Meyer Bergman, features 53,000 sqm of retail area and a transportation hub. PKP is also working on two similar projects in Warsaw, involving the Warszawa Zachodnia and Warszawa Gdańska stations. Ghelamco has recently been selected as the partner for the Warszawa Gdańska redevelopment. u

Images: Plus Communication, Trojmiasto.pl, Capital Park, Skanska, BlackRock

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Galeria Rumia will offer 16,000 sqm of GLA Upside Property has purchased a portfolio of three shopping centers from Polimeni International. The sum of the transaction, closed in December 2013 but announced in February, was not disclosed. The portfolio comprises 38,000 sqm of retail space, housing 170 tenants. The 9,000-sqm Galeria Jastrzębie, in southern Poland, houses 40 stores. Galeria

Słupsk, featuring 60 stores on 13,000 sqm of GLA, and Galeria Rumia, housing 90 units on 16,000 sqm, are both located in northern Poland, along the Baltic coastline. The malls’ manager, Upside Property Management, has said it will now focus on optimizing the tenant mix of the schemes and on raising their value. u

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Upside Property buys three malls

Capital Park launches Vis à Vis street mall in Łódź S

RETAIL

Capital Park has launched its second street mall under the Vis à Vis brand in Łódź. The project will offer 5,646 sqm of retail space and will be located on ul. Zgierska. It’s scheduled for completion in Q4 2014. Budimex has been chosen as the general contractor for the scheme, which has been designed by Diehl Architekci. The Blue Ocean Investment Group is responsible for commercializing the mall. It will be anchored by the grocery supermarket Intermarché, with the remaining area set to house 20 stores, including a Rossman drugstore, clothing brand Pepco and pharmacy Euro Apteka. The developer delivered the first Vis à Vis city mall in Radom in November 2011. u

WBJ OBSERVER • march 2014

news

who ’ s n ew s Karel Zeman has been promoted to head of asset management in Poland at CBRE Global Investors. Previously he held the position of head of research and strategy for the CEE region. Before joining CBRE, Zeman worked for Cushman & Wakefield as head of research in the Czech Republic. He graduated from the Charles University in Prague in geography and regional development. Zeman is a member of the RICS and is active in the ICSC. He is a Czech national and speaks fluent Polish. “Karel has extensive knowledge of the Polish real estate market, having worked in the business since 2006. His experience and thorough understanding of the market will greatly compliment our Warsaw asset management team,” said Martin Sabelko, managing director CEE at CBRE Global Investors.

LOGISTICS

Segro buys three Polish logistics parks for €100 million

Images: Segro, CBRE, Cushman & Wakefield

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Marek Noetzel has been promoted to head of retail department at Cushman & Wakefield. Noetzel joined Cushman & Wakefield’s Polish office

in 2002. He is a graduate of the economics department of the University of Gdańsk. He also studied in Dublin Institute of Technology and in Sheffield Hallam University in Real Estate Investment and Management Department. He holds MRICS title. Marek has 12 years’ experience in the commercial real estate market. He has successfully cooperated with companies such as IKEA, Carrefour, Dixons, Braaten + Pedersen Plus Partners, Quinlan Private Golub, Neinver, Multi Development, Galeria Neptun and St Martins. u

march 2014 • WBJ OBSERVER

Segro Logistics Park Stryków, part of SELP portfolio, located in central Poland

egro European Logistics Partnership (SELP) has acquired three Polish warehouse assets, located on the outskirts of Warsaw, Łódź and Poznań, for some €100 million. The transaction is a part of a portfolio deal involving 14 prime logistics assets in Poland, Germany and France, which Segro purchased for a total sum of €472 million from two funds, one managed by Tristan Capital Partners (CCPIII) and the other co-managed by Tristan Capital Partners and AEW Europe. The transaction is set to be completed in Q2 2014, subject to closing conditions. The properties cover approximately

679,000 sqm of leasable space, including one building currently under construction and 51 hectares of land for development in Germany. The portfolio generates €31.6 million in annual rental income, which translates to a net initial yield of 7.1 percent. “The transaction is in line with our strategic objective to grow the SELP portfolio and marks a further step in our drive to create a leading Continental European logistics platform,” said David Sleath, Segro’s Chief Executive Officer. Segro’s Polish assets are located in Gdańsk, Gliwice and Tychy (Silesia), Łódź, Poznań, Stryków, Warsaw and Wrocław. u

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REAL ESTATE NEWS

Warsaw rent crunch

Elżbieta Czerpak, director of market research at Knight Frank

“Warsaw is currently a tenant’s market, which is reflected by an increasing flexibility of office space owners in negotiations and lower effective rent rates. Consequently, they are now some 25-30 percent below headline rates.”

Poland’s office market overview Total office stock (sqm)

New supply in 2013 (sqm)

Stock under construction (sqm)

Vacancy rate

Warsaw

4,120,000

294,000

721,000

12.7%

Kraków

602,800

30,100

99,000

5.1%

Wrocław

512,100

71,800

83,100

12.6%

Tri-City

436,400

72,000

48,800

13.9%

Łódź

302,900

20,700

2,600

16.6%

Poznań

288,000

22,300

62,800

15.0%

281,000

13,800

74,500

9.4%

Katowice

Prime office yields 7.5%-8% (regional cities); 6-6.25% (Warsaw)

Source: Knight Frank

Images: HB Reavis, Knight Frank

With 300,000 sqm of office space set to come online in 2014, experts see office vacancy rates increasing to 15 percent towards the end of the year arsaw continues to be the number 1 office market in Poland. With 4.12 million sqm of existing office space, it accounts for over 60 percent Poland’s entire office stock. The city is also Poland’s undisputed leader in terms of rent rates, which stand at some €16-€26/sqm/month in the Central Business District, while offices in non-central locations currently fetch €11-€18/sqm/month, according to data by Knight Frank. However, the strong position of tenants pushes effective rents some 25-30 percent below the asking price. Experts expect rents to drop both in the city center and in more remote locations. “Mokotów [Warsaw’s southern office hub] is likely to compete for tenants with Wola and Włochy, [both districts located west of the CBD] and developers will continue to offer pre-leases with very competitive terms,” said Soren Rodian Olsen, head of office and industrial investments, capital markets at Cushman & Wakefield. “Rents are under pressure, they have been for the past 12-18 months. And the pressure will continue considering the

WBJ OBSERVER • march 2014

additional supply to be delivered during 2014,” Olsen added. Rising stock The rate of current development is indeed impressive. Another 700,000 sqm is currently in the pipeline, with some 44 percent of that volume, 316,000 sqm, scheduled to roll off in 2014, according to data by Knight Frank. One of this year’s biggest completions will be Gdański Business Center by HB Reavis, set to delivered 46,000 sqm of GLA. A similar amount of office stock (294,000 sqm) was delivered in 2013, 13 percent more than the 2012 figure. Some of the largest projects completed last year include Konstruktorska Business Center (48,000 sqm), Miasteczko Orange (43,700 sqm) and T-Mobile Office Park (40,000 sqm). Empty space Experts say demand will continue to grow, which will, at least partially, offset the supply increase. “Lease agreements signed in 2013 correspond to 633,600 sqm of office space, which was a very good result compared with 2012, as it stands for a 4 percent increase,” said Elżbieta Czerpak, director of market research at Knight Frank. Last year saw the highest net absorption in five years, which stood at 191,000 sqm. However, assuming similar leasing activity this year, the amount of empty office stock will still likely increase by some 100,000 sqm.

march 2014 • WBJ OBSERVER

350,000 300,000 250,000

2015r

2016r

Half a million With the 438,000 sqm of office space that stood empty as of December 2013, Warsaw will likely see vacant office space exceed 500,000 sqm this year. “Given the low pre-lease level in buildings that are currently under construction, we can expect higher vacancy rates in 2014 … that should exceed 15 percent at the end of the year,” Czerpak explained. “We’ve been observing increasing vacancy rates for two years now. In Q4 2013, vacancy stood at 12.77 percent and was 2 pp. higher than 12 months earlier,” Czerpak added. Royal Trakt

Total 2014r 2015r 2016r

200,000 150,000

50,000

2014r

The pipeline Space under construc

Total 721,000 sqm

100,000

50000 0

Space under construction in Warsaw

sqm

2014

2015

Source: Knight Frank

100000

The pipeline

194,000 sqm

“In Warsaw, the demand for office space is high.350000 However, company preferences are changing. They are usually 300000 looking250000 for high-quality schemes in the best locations. The volume of lease 200000 transactions in 2014 should be at least 150000 the same as in previous years.”

210,000 sqm

Joanna Mroczek, director, head of consultancy & research, CBRE

o f f ice

317,000 sqm

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2016

Vacancy continues to be slightly lower in the city center than in peripheral districts. It stood at 12.5 percent in Warsaw’s Central Business District, while outside the central area it amounted to 12.8 percent. “In Warsaw, the demand for office space is high. However, company preferences are changing. They are usually looking for high-quality schemes in the best locations,” said Joanna Mroczek, director at CBRE. “The volume of lease transactions in 2014 should be at least the same as in previous years,” she added.

721,0 317,0 210,0 194,0

Source: Knight Frank

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REAL ESTATE NEWS

“The currently ambiguous legal state of many historic properties and re-privatization claims being raised make these projects risky for foreign investors.”

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Images: IVG, CBRE, Liebrecht & Wood, Cushman & Wakefield

Small projects The one segment which seems resistant to current pressure is boutique offices, located in the very heart of the city, usually in historic buildings refurbished into A-class office space. “Prices in small, prestigious office projects are higher than the Warsaw market average and range from €23 to €26/sqm/ month,” Czerpak said. Warsaw has a number of these small boutique office schemes, particularly around Pl. Trzech Krzyży, Pl. Grzybowski as well as along ul. Jasna and ul. Świętokrzyska. “Their central location, access to public transport and easy accessibility for cars make them a very attractive option for certain groups of occupiers,” Olsen said. Boutique office buildings cater to a specific type of tenant – usually smaller firms, which are ready to pay a premium for the location. “These are usually law firms, consulting firms, brokerage houses, private banking companies, as well as well-known Polish and international corporations,” Czerpak explained. Historic refurbishing Given their strong rent levels, no wonder boutique offices are receiving an increasing amount of investor attention. “There is a strong appetite for small and medium-sized office schemes, targeted by investors who are looking for 5,00010,000 sqm office buildings below the €70 million mark,” Olsen said. “What sells particularly well are historic tenement houses, with high quality furnishings and unique architec-

ITI

Maciej Zajdel, managing director, IVG Poland O

Koneser

tural solutions,” said Andrzej Brochocki, managing partner at advisory Kancelaria Brochocki. Small schemes are increasingly in, but contrary to the large-scale projects, the older they are, the better. This trend is nothing new in mature European markets, where boutique office buildings make up between 60 and 80 percent of all acquisitions, with prices below €50 million. “Three out of ten recent investments by IVG Poland involved purchases of historic buildings for a total of over €70 million: Le Palais, Royal Trakt Offices and Pałac Młodziejowskiego,” said Maciej Zajdel, Managing Director at IVG Poland. “They have been refurbished and transformed into A-class office schemes, comprising 15,000 sqm of space, which has been fully leased,”

“There is a strong appetite for small and medium-sized office schemes, targeted by investors who are looking for 5,000-10,000 sqm office buildings below the €70-million mark.” Soren Rodian Olsen, head of office & industrial investments, capital markets at Cushman & Wakefield

Zajdel added. Experts believe the demand for historic buildings will grow once the legal issues involving restitution claims for re-privatized buildings are resolved (see interview, p. 56). “The currently ambiguous legal state of many historic properties and re-privatization claims being raised make these projects risky for foreign investors,” Maciej Zajdel said. Old distillery Some developers are, however, bold enough to undertake major refurbishing projects. Liebrecht & Wood, in a joint venture with BBI Development, will develop the retail-office part of the Koneser complex, located within a 19th century distillery in Warsaw’s Praga district. The complex will house 22,000 sqm of office and 22,500 sqm of retail space. The investment is valued at PLN 450 million, and the completion of the project is planned for 2017. “We have been working on Koneser for the past few years and now it has all the prerequisites to become a unique landmark project of this part of Warsaw,” said Michał Skotnicki, President of BBI Development.

– Beata Socha

WBJ OBSERVER • march 2014

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in v estment

Interview: Magdalena Zienkiewicz is legal counsel and partner at Wierciński, Kwieciński, Baehr sp.k., a Warsaw-based law firm. She heads the firm’s real estate and investment team and her areas of expertise include real estate transactions, city zoning law and construction law Why do so few investors decide to invest in restoring old tenement houses? Extensions, redevelopments or restorations of old tenement buildings are all complex projects in legal, technical and organizational terms. The complexity and specific nature of such investments makes these processes time-consuming, and demands considerable effort and financial resources. At a later point in time, all of that can be reflected in high lease rates or selling prices for premises located in such buildings. Although there are few investors specializing in such investments, recently we have seen increasing interest in tenement building renewal from development companies, mostly due to the attractive locations and architectural value of such buildings. The process of purchasing old tenement buildings is also complex, isn’t it? That’s right. One of the main problems involved in the purchase of tenement buildings is the often unclear legal status of the property and the multitude of persons from whom the property rights must be acquired. A common issue in Warsaw is that some re-privatization proceedings pursuant to the Decree of 26 October 1945 on land ownership and use in the Capital City of Warsaw have not been completed yet. Sometimes investors would purchase claims for the recovery of tenement buildings under that Decree from the

march 2014 • WBJ OBSERVER

heirs of former owners, and they join the proceedings, taking over the risk of success or failure. In any case, it is extremely important to perform a careful and reliable legal due diligence of a property before purchase, in order to confirm the legal title of the property of the current holders, or the validity of re-privatization claims, and to determine the potential corrective measures that must be taken to allow for an effective purchase.

tor’s plans require the approval of those owners, who form a housing community. Those processes are also complex from the legal perspective, due to the need to address the common areas of the building and to secure the rights to purchase floor space which does not exist yet. In such situations, investors often agree to renovate the entire building (e.g. facade, staircases) in exchange for the housing community’s approval of their investment plans.

What if a tenement building has tenants? If a tenement building is purchased by an investor as a whole, then in principle it must be vacated before construction works begin. In practice, investors are not interested in maintaining the existing tenancies, usually due to the low rents paid by tenants. This is not a simple process, because the investor must comply with the provisions of the Act of 21 June 2001 on the protection of tenant rights and on municipal housing resources, which imposes a number of restrictions in this respect. First of all, the investor is not free to terminate tenancy agreements and evict the tenants. The process is time-consuming and challenging in many respects. In a situation where some premises within a building are already owned by individual persons, and the investor has only purchased a part of the building or plans to extend or convert the loft, then the inves-

What legal challenges are involved in the restoration process of old tenement buildings? In the case of listed historical monuments, or buildings located within a monument protection area, the investor’s freedom of design and development is considerably restricted. Construction works must be discussed with a curator for historic buildings, and his/her guidance must be followed. In some situations, the officer may ban certain solutions, if he believes they would compromise the historical value of the building or its structure. In particular this could be the installation of air conditioning systems or lifts, which are very important in the case of office buildings. The conditions in which such investments are carried out are usually tough, owing to little space between neighboring buildings, no room for site facilities and often the need to occupy the road. u

Image: Wierciński, Kwieciński, Baehr

Restoration issues

lo k ale immo b ilia

in v estment SPECIAL EDITION

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REAL ESTATE NEWS

Land of opportunity Investors are unanimous that Poland will see more investor interest than last year

Image: Shutterstock

Poland’s investment volume in 2003-2013 (€ million) 6,000 5,000 4,000

Source: Jones Lang LaSalle

3,000 2,000 1,000

erlands, Poland, Russia, Spain, Sweden, Switzerland, Turkey, the UK and Ukraine. Stable income The Polish market lures investors not only with its stability and low risk but also with strong yields. Prime office yields are estimated at 6.25 percent, while retail yields for the best-in-class

13 20

12 20

11 20

10 20

09 20

08 20

07 20

06 20

05 20

0 03

More deals As many as 67 percent of investors expect this year’s transaction volume to surpass last year’s figure of over €3 billion. The improving macroeconomic situation in Europe and increasingly positive investor sentiment will likely lead to more activity in the real estate market, the report said. Most respondents also expect property prices, including those of residential real estate, to remain stable over 2014. EY’s survey, carried out in the fall of 2013, involved 500 investors active in 15 countries: Austria, Belgium, France, Germany, Italy, Luxembourg, the Neth-

On the mend

oland will be a highly attractive market for real estate investors in 2014, according to a study by advisory firm EY. As many as 33 percent of the 500 investors polled by EY said Poland is a “very attractive” market, while 67 percent called it attractive. More importantly, Poland was the only European market that not a single investor surveyed considered unattractive.

products bring 5.75 percent, according to data by Jones Lang LaSalle. Meanwhile, warehouses bring even more money, with yields at 7.75 percent for the best logistics properties. “Prime retail yields should remain stable but prime office and warehouse yields might see some compression during 2014,” the report states. The yield

WBJ OBSERVER • march 2014

media patrona g e

Digital revolution in real estate at MIPIM Top experts will discuss the impact of e-commerce and digital technology advancements on the commercial real estate at MIPIM

march 2014 • WBJ OBSERVER

Image: CEEQA

op European and EMEA business leaders will meet at this year’s CEEQA@Mipim event, organized in partnership with MIPIM in Cannes, to discuss the impact of e-commerce and digital technology developments on the commercial real estate sector, and its implications for the CEE and SEE markets. The conference, called “The Digital Revolution in Real Estate – Impact on Office & BPO, Retail and Logistics Investment,” will take place on March 11, 2014. The event starts at 3 p.m. in Palais des Festivals’ Blue Room on Level 3. It will open with a keynote speech by Amazon property head Raimund Paetzmann, followed by two panels, discussing the digital revolution from a tenants’ perspective and its financial impact on the real estate market. The evening will end with an annual CEEQA@Mipim cocktail reception at which the short list for this year’s CEEQA awards and winners of this year’s RealGreen awards for green building will be announced. Live entertainment will be provided by Balearica Unplugged. Last year’s event was attended by 200 people.

Pop legend Kim Wilde to perform at this year’s CEEQA Gala.

Born to be Wilde The CEEQA@Mipim event is a prelude to the 11th annual CEEQA Gala ceremony, which will be held on April 8, 2014 at the stylish and spacious SOHO Factory in Warsaw. This edition of CEEQA will present a total of 26 awards. As many as 22 real estate projects, companies and industry professionals will be distinguished with statuettes, as well as the four RealGreen awards announced at MIPIM. The entertainment at this year’s CEEQA Gala will be spearheaded by legendary entertainer Kim Wilde with a special show direct from the Rock Meets Classics European tour, as well as an acoustic

set with her touring band. Kim Wilde stormed into the charts in the eighties with a string of global hits including Kids In America, You Came, Cambodia and You keep Me Hanging On and has continued to record and perform new material as well as her well-known classics. The live show promises to top all previous concerts at the CEEQA Gala including in recent years Bananarama, Edyta Górniak, Sister Sledge and Boney M. The gala dinner and awards ceremony is attended by 600 business leaders from more than 40 countries including the cream of the CEE and SEE sector. u

SPECIAL EDITION

REAL ESTATE NEWS

Images: EY

A sustainable bounce back

Easy money Real estate investors active in the Polish market have easier access to capital than a year ago, according to a recent report by Cushman & Wakefield. The maximum loan-to-value ratio for senior debt invested in real estate in Poland currently stands at some 65-70 percent, a marked increase from the 50-60 percent recorded in Q1 2013. Its current level puts Poland on a par with core Western European countries. “Appetite for the dominant CEE markets increased by 17 percent,” the report said. Poland, and the entire CEE region, are not only increasingly attractive to investors but also to lenders. Poland’s margins on prime loans have also decreased over the past 12 months, from 2.50-3.50 percent in Q1 2013 to 1.75-3.00 percent in Q1 2014, the survey showed. Meanwhile, the country’s rating remains at 3 (on a 1-5 scale), which is on a par with Switzerland and Norway, but below most other Western European markets. Polish real estate investors also have good access to mezzanine capital.

– Beata Socha

CEE appeal

2013 investment volumes in CEE (in € million) Poland Czech Republic

Total 6,034

Hungary Slovakia Romania Other CEE Source: Jones Lang LaSalle

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EXPERT VIEW

spread between prime and secondary product is currently at 100 to 250 base points, and is expected to widen.

In 2013 the total volume of investment transaction in Poland reached the highest volumes since the record-breaking year of 2006. As the economy starts to recover, the number of investments is looking to rise. Cross-border activity is expected to increase slightly over the coming years. Consequently, transaction volumes are expected to equal or even exceed 2013 levels. Poland remains an important transaction market among other European locations. Transaction volumes look set to rise but the general investment Anna Kicińska, confidence has been less overwhelmpartner at EY ing than in core Western European Poland Real markets. However, the early indications Estate Advisory suggest a sustainable bounce back. Group

Distressed assets and opportunistic acquisitions The largest transactions in 2013 were conducted by the leading European real estate investment players. The majority of capital invested in Poland came from Continental Europe with Germany playing a key role. The group of other top market buyers also included UK and American investors. We have not yet seen a significant influx of Middle and Far Eastern investors to Poland although this has already materialized in some core Western European markets, with Chinese sovereign wealth funds and pension funds leading the game. We expect that the office segment will Kamil Kowa, remain dominant, especially in light of senior manager a number of transactions which are still at EY Poland pending. However, as the number of Real Estate Advisory Group available quality assets in the office and retail sectors is shrinking, less prime assets are expected to become more popular, subject to appropriate pricing. There is continuous investor interest in distressed assets and opportunistic acquisitions (e.g. conversion of obsolete assets to alternative uses, leased residential assets). We expect the continuation of positive trends in the industrial sector, which reached peak figures in terms of investment volume in 2013, partially following the development of e-commerce and muted economic recovery.

WBJ OBSERVER • march 2014

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in v estment

Becoming core market Interview: James Chapman is partner and head of capital markets in Central Europe at Cushman & Wakefield

Is Poland becoming a core market in Europe then? There are several key considerations: for new pan-European funds the UK, France, Germany and Poland are the core elements in many funds’ target markets. Meanwhile, certain traditional markets such as Italy and Spain are of increasing interest but are classified as peripheral markets. Poland is up there in prime focus. We see Asian capital looking at Poland and actively bidding on assets, which is a very strong validation of the Polish market. What kind of assets are investors targeting? The Polish, as well as the Czech market, are becoming mature, with increasing diversity of capital and a wider range of investment deals. It is no longer just prime assets that are in demand. Equity sources are looking at regional cities for all major assets classes and with retail that extends to the top 20 cities. Until recently all the focus has been on the top-tier cities (Warsaw, Wrocław, and, to some extent, Kraków, and retail in

march 2014 • WBJ OBSERVER

What about other CEE countries? Interestingly, whilst the Polish investment volume continues to grow, its overall dominance in the Central European region (including the Czech Republic, Slovakia, Poland and Hungary) reduced from 80 percent in 2012 to some 55 percent in 2013. We see this as a positive trend showing the increasing liquidity of the whole region. Where is the money coming from? The bulk of the money is still European, that is German or UK-based money managers. But the latter bring money from all around the world, so it could be Asian and North American money as well. In 2014 we’ll see more direct investment of Asian capital and American/ Canadian. They are still likely to use a local partner such as a European money manager with experience in Poland. James Chapman, partner, head of capital markets in Central Europe at Cushman & Wakefield

Katowice). Properties previously ignored are now in focus: retail and logistics schemes in sub-markets and a wider range of cities. We can see domestic capital growing, with investors looking at value-add and opportunistic assets. All these aspects point to the fact that Poland is a healthy market and there is strong confidence among investors.

How do Asian investors see Poland? In 2013 the headline was Asian money going to the UK. This year it will move more into continental Europe. There is huge demand for key cities in Germany, there is interest in Paris but there is also strong interest in Poland. Poland came onto the radar of Asian investors some 6-12 months ago but now investors are beginning to understand that opportunities are even greater in Poland. We see more investors in terms of their number, but they also have more capital to spend. Importantly, their desire to spend is greater. Poland has very good opportunities and available stock. – Beata Socha

Image: Cushman & Wakefield

Real estate investors active in Poland have easier access to capital, with loanto-value-ratio on par with Western European countries. Does it mean it is no longer an emerging market? We’ve moved away from being an emerging market. Investors are getting increasingly confident. Last year was the fourth consecutive year of growth in transaction volumes and we fully expect that 2014 will be the fifth consecutive year of such growth.

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new tec h nolo g y SPECIAL EDITION

With the slew of real estate data available, property managers, real estate owners and agents are employing new technologies to stay on top of things

hat were the top 10 investment transactions in Poland last year? How much warehouse space is available in Poland’s logistics hub? How many retail schemes will be built this year? Which office project offers the largest floor plate? These days the first step for people looking to buy a home has long been an internet search. The same is becoming increasingly true for the commercial property market. Real estate information is out there but accessing it is becoming increasingly difficult, given the amount of data produced daily. A simple Google search just won’t do any more.

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Real estate going virtual

REAL ESTATE NEWS

“Technological development has flooded all of us with data. What was exciting at first has now become overwhelming,” said Monika RajskaWolińska, partner at Colliers International. Fighting fire with fire One way of taming the information beast is by using the very weapon that has created the chaos – technology. The area where technology seems to be the best fit is property management. The amount of data pouring in each month is enormous, and then there is reporting the data to property owners, fund managers, agents,

WBJ OBSERVER • march 2014

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new tec h nolo g y

“

All in the cloud The days of forwarding excel sheets and poring over endless rows of raw tenant data are hopefully coming to an end for property managers. No more documents lost in the chasm of company disk space, digging through mailboxes and scribbling on post-its. “Our experience with using new technologies in property management, which has always been one the most innovative departments, has helped us develop more efficient databases,” said Rajska-Wolińska. Across all industries, an increasing amount of business data are transferred

march 2014 • WBJ OBSERVER

outside the confines of company servers. According to forecasts by IT giant Cisco, 2014 will be the first year when the majority of workloads (51 percent) will shift to the cloud, versus 49 percent in the traditional IT space. By 2017, nearly two-thirds of workloads will be processed by cloud data centers. “Our data rooms have made not only the work of property managers easier, they are also used by our investment department, as well as the office and warehouse departments,” said RajskaWolińska. So even if real estate is not the most technologically advanced industry in the world, databases, virtual data rooms, online help desks – are taking the business by storm. “A key decision for us was to share our knowledge with our clients and that’s why we’ve created officemap.pl and warehouses.pl, also available for mobile devices, which allow them to select properties they find interesting,” RajskaWolińska added.

Sensitive data With all the data roaming around cyberspace, there is one issue that still needs to be resolved.

”

Monika Rajska-Wolińska, partner at Colliers International, managing director of Colliers in Poland

“Global advisory firms handle vast amounts of knowledge about tenants, property owners and properties. I believe ensuring data safety has become one of the most important issues,” said RajskaWolińska. Meanwhile, only 56 percent of Cisco’s survey respondents trust the ability of cloud providers to safeguard the sensitive and confidential data entrusted to them. “You can’t really function without proper security measures, limiting access to sensitive data and enforcing safety procedures (both internal and provided for in the law). It’s time the real estate market addressed the issues by careful analysis and proper data selection,” Rajska-Wolińska added. u

Image: Colliers International

as well as communicating with tenants and potential buyers. “Human nature is reluctant to change,” explained Rajska-Wolińska. “It became clear when we started implementing our online help desk system for our clients and property managers. The beginnings were tough for both sides but in the end the new technology made a lot of tenantproperty manager processes easier and more expedient.” she said. The real estate business may very well be about human interaction, but cloud computing is what makes this interaction more transparent and efficient.

Global advisory firms handle vast amounts of knowledge about tenants, property owners and properties. I believe ensuring data safety has become one of the most important issues. You can’t really function without proper security measures, limiting access to sensitive data and enforcing safety procedures.

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SPECIAL EDITION

Hotel rush Image: Wings Properties

2009

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After a good 2013, the hotel industry is poised for an even better year

The five-star OVO Hilton Wrocław will be opened under the DoubleTree by Hilton brand and house 200 rooms and suites

Willkommen

Who, where and why? Germans are still the largest group visiting Poland, followed by Czechs and Ukrainians. In terms of hotel stays, however, German tourists were followed by Russians and Britons, according to statistics office GUS, whose data also hotels saw 2010 showed 2011 that in 20122013, Polish 2013 5.24 million foreign guests staying for a total of 12.5 million nights. Interestingly, health tourism is gaining in importance, particularly for German tourists (12 percent of all Germans came to Poland for medical reasons in 2013). Poland is also becoming increasingly popular as a holiday destination, with Kraków the most popular of all Polish cities. An increasing number of Poland’s eastern neighbors are coming to the country on one-day trips, mainly to do

some shopping. As many as 40 percent of all Russians, Belarusians and Ukrainians who visited Poland last year stated shopping as their primary goal. The most frequently visited parts of Poland are the southern voivodships of Małopolskie (Kraków) and Dolnośląskie (Wrocław), followed by the northern Pomorskie (Tri-City) and Zachodniopomorskie (Szczecin), with Mazowieckie (Warsaw) in fifth place. No wonder, then, that these areas are where most of new hotel developments are located. Hotel base Developer Grupa Dobry Hotel recently launched construction on a four-star Best Western hotel in Kraków, called Best Western Plus Q Hotel. This will be the investor’s fifth hotel scheme under the Best Western brand. The sevenstorey, 154-room hotel is scheduled to be completed by the end of 2014. It will be located close to the ICE convention center, also due to be delivered in 2014. Wrocław is also expecting a new high-end hotel to be launched soon. The five-star OVO Hilton Wrocław, being developed by Wings Properties, will be opened under the DoubleTree by Hilton brand and will have 200 rooms and suites, conference rooms and a 6.5-meter-high ballroom. Construction is expected to start in Q1 2014 with completion due in 2016.

Number of hotel stays Number of foreign tourists staying in Polish hotels

Other nationalities France Belarus

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REAL ESTATE NEWS

ast year was a good one for the Polish hotel business. Some 72 million foreigners visited Poland in 2013, nearly Number 8 percent more than a oreign tourists staying in Polish hotels of hotel stays year earlier, according to estimates by the Ministry of Sport and Tourism. Nearly 16 million of them were tourists, which also represents a 7 percent increase compared to 2012 numbers. The length of visits has also increased significantly, which is particularly important for the hotel industry. In 2012, an average visit lasted 3.8 days, while in 2013 it was as much as 4.5 days.

008

h ospitalit y

Foreign tourists staying in Poland in 2013 by country of origin

Total 5,242,972

Germany

Ukraine

Belarus

Russia

Italy

France

Other nationalities

Source: Central Statistical Office (GUS)

As many as 800 new hotel rooms will open in Warsaw in 2014. Hilton is set to deliver two new facilities to Poland’s capital: a four-star Double Tree by Hilton and a three-star Hampton by Hilton, each with 300 rooms. Meanwhile, the four-star Warsaw Plaza Hotel will deliver another 150 rooms to the Warsaw market. New three- or four-star hotels will also

WBJ OBSERVER • march 2014

h ospitalit y

be built in Gdańsk and Poznań, as well as in the Silesia region. But apart from building new facilities, hotel chains are also refurbishing and modernizing their existing ones. Hospitality group Orbis, a unit of France’s Accor, plans to spend PLN 100 million in 2014 on the modernization of its key hotels. Orbis has stressed that 90 percent of that sum will be spent on the Warsaw market.

Health tourism is becoming increasingly popular, with Germans the largest group visiting Polish health centers and resorts

Prices back up? Experts seem confident the industry will see the results of economic recovery this year, with more guests and more conferences organized in hotels across Poland. Hotel owners will also likely raise room prices, particularly in the Tri-City and Kraków, due to increased tourist traffic. This comes as no surprise given that

Rate correction

Average hotel prices in major Polish cities (in €) City

June 2013

June 2012

Change y/y

82.03

155.16

-47.14

Gdańsk

78.08

106.56

-26.73

Wrocław

72.83

84.26

-13.57

Warsaw

Kraków

70.25

75.04

-6.39

Poznań

67.28

94.09

-28.50

Source: Calculations by WBJ based on data from hotel.info

hotel prices went down in 2013. In Warsaw, hotel room prices in June 2013 were 47 percent lower than in June 2012 (the month of the EURO 2012 championship). In Poznań they were nearly 29 percent lower, while in Gdańsk – 27 percent. – Beata Socha

Gala of the French Chamber of Commerce and Industry in Poland On February 7, during the Gala organized at the Sofitel Warsaw Victoria hotel, the French Chamber of Commerce and Industry in Poland started to celebrate its 20th anniversary. More than 450 guests participated to the Gala, including the current and former presidents of the CCIFP, politicians and the presidents of the largest French investors. During the Gala guests could see two fashion shows of French designers - Gerard Darel and Tara Jarmon and a fashion show of the Polish designer Ewa Ciepielewska. The partners of the Gala were: Leroy Merlin, Pierre Fabre Dermo Cosmétiques, EDF, Mazars, SPB, Galéries Lafayette, Pernod Ricard Polska, Servier, AP Uniapol, Société Générale and Sofitel Warsaw Victoria. The partners of the fashion shows were: Desir Paris, Tara Jarmon, Gerard Darel, Ciepielewska Design, Badura and Sisley, Warsaw Business Journal Observer was a media partner of the event.

march 2014 • WBJ OBSERVER

Image: Polish Tourist Organization

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lo g istics SPECIAL EDITION

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REAL ESTATE NEWS

Image: Panattoni Europe

Amazon heating up Poland

Amazon will open three logistics centers in Poland with a total area of 300,000 sqm

The US giant is building 300,000 sqm of logistics space in Poland, driving up the segment’s demand and development figures

n December 2013, 714,000 sqm of industrial space was under construction, the largest volume since 2008. Almost half of that amount is accounted for by Amazon’s new built-to-suit schemes near Wrocław and Poznań, according to a report by Jones Lang LaSalle. “We are expecting more developments to come as industrial is probably the hottest segment in Poland,” said Soren Rodian Olsen, head of office and industrial investments, capital markets at

Cushman and Wakefield. “We have seen substantial investment volume growth during 2011-2012 and again in 20122013.” Olsen explained and added that, “we expect continued strong investor appetite and more global capital to be deployed into Polish logistics during 2014.” Amazon fever Developers Goodman and Panattoni are on their way to constructing three builtto-suit logistics centers for Amazon, with a total of 300,000 sqm of space.

WBJ OBSERVER • march 2014

Soren Rodian Olsen, head of office & industrial investments, capital markets at Cushman & Wakefield

lo g istics

“We are expecting more developments to come as industrial is probably the hottest segment in Poland.”

The first one, constructed by Goodman and scheduled to open in 2014, will be located near Wrocław. Panattoni Europe will build the second center, near Poznań. It will feature 100,543 sqm, with 91,570 sqm designated for warehouse space. In 2015, the US online retailer’s third center will open near Wrocław, also delivered by Panattoni. “We are very excited to be investing here in Poland. … We are greatly appreciative of all the support we’ve received from the community to make this multi-hundred million euro investment become a reality,” said Timothy Collins, director of European operations for Amazon. Five hubs The southern city of Wrocław has long been one of Poland’s top five logistics hubs, which are located predominantly in western and southern parts of the country. “The hottest locations for warehouse space are Warsaw, central Poland, in particular Stryków, Poznań as well as Upper Silesia, namely Gliwice and Mysłowice,” said Olsen. At the end of 2013, the total warehouse stock totaled 7.45 million sqm, with 6.88 million sqm of space (92 percent of the total) located within the five largest markets:Warsaw, Upper Silesia, Poznań, central Poland and Wrocław, according to JLL data.

march 2014 • WBJ OBSERVER

Tomasz Olszewski, head of industrial agency in Central and Eastern Europe at Jones Lang LaSalle

Same but different Although almost equally attractive, these regions do have their own defining characteristics that are getting increasingly prominent. “Upper Silesia is attracting numerous automotive and production companies as well as logistics operators. Poznań and Wrocław are, to a larger degree, becoming near-shoring locations for Western European logistics, and export-bound production,” said Tomasz Olszewski, head of industrial agency in Central and Eastern Europe at JLL. “The Warsaw region is predominantly focused on catering to the logistics needs of the capital city and the premises of many retail chains. Finally, central Poland, which is increasingly integrating with the Warsaw region, is the main distribution center for companies operating across the country,” Olszewski added. Hot, getting hotter These locations are hot, both for developers and investors. Recently, Segro European Logistics Partnership (SELP) acquired three Polish warehouse assets, located on the outskirts of Warsaw, Łódź and Poznań, for some €100 million. “Investors are typically looking for large logistics centers, with good tenant covenant, for instance the recently traded H&M Distribution Center in

“Poznań and Wrocław are, to a larger degree, becoming near-shoring locations for Western European logistics, and export-bound production.”

Poznań,” said Olsen and added that, “Moreover, we see operators (i.e. logistics developers) with strong capital resources looking to further build up their respective logistics portfolios in Poland.” Panattoni has just launched stage four of its Panattoni Park Łódź East, in central Poland, that will add another 8,300 sqm of space to the complex. The new space has already been pre-leased to BPO company CERO International. Together with the 11,000 sqm currently under construction within a built-to-suit project for electronics retailer TERGMediaexpert, the new scheme will bring the total area of the logistics center to nearly 163,000 sqm. Meanwhile, MLP Group is mulling over launching new logistics projects in Wrocław in addition to the five logistics parks it has in its portfolio – two in Pruszków, near Warsaw, one in Poznań and two more in the Silesia region. The developer is also considering expanding its operations into eastern Poland. “We are considering launching a logistics park near Wrocław as well as in Upper Silesia, which would solidify our position in the region. We are also analyzing a potential expansion in the eastern part of the country, which we believe will become increasingly popular with prospective tenants,” said Radosław Krochta, deputy CEO of MLP Group.

Images: Cushman & Wakefield, Jones Lang LaSalle

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SPECIAL EDITION

REAL ESTATE NEWS

Pozna? Polska Centralna Trójmiasto Górny ?l?sk Opole Warszawa Szczecin 0

Demand down, but strong The overall demand for warehouse space could reach 1 million sqm this year, down from 1.26 million sqm in 2013. Even though lower than in 2012, it is still a strong number, especially considering that last year’s result was 66.3 percent

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Wrocław

Wrocław Poznań

Warsaw

Central Poland

Upper Silesia

Tri-City

Central Poland

Upper Silesia

Tri-City

Opole

Szczecin

Warsaw

Poznań Kraków

Szczecin

40000

Stock completed in 2013

Warehouse space under construction

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Source: Jones Lang LaSalle, Q4 2013

Wroc?aw

Go east? Eastern Poland is still virtually nonexistent on Poland’s warehouse map, but the strong retail expansion in theWroc?aw area may soon create demand for warehouse Warsaw space. Upper Silesia “There isn’t much development activCentral Poland ity in eastern Poland, however, we may Tri-City expect that to change over the next three Szczecin years as this region will become more interesting, with the developmentPozna? of infrastructure. For instance Rzeszów may Kraków become important for distribution to 50000 100000 150000 200000 250000 300000 0 20000 and from Ukraine,” said Olsen.

50,000

60000

100,000

80000

150,000

100000

200,000

120000

250,000

300,000

higher than net demand for warehouse space in 2012. “2013 closed with a great result, which could be difficult to repeat despite the current favorable economic conditions,” the JLL report read. “Last year’s figure was strongly defined by Amazon

20,000

40,000

60,000

80,000

100,000

120,000

entering the Polish market, and the probability that an investment of a similar magnitude is repeated is rather small. Therefore 1 million sqm is a rather optimistic scenario,” JLL experts explained. – Beata Socha

WBJ OBSERVER • march 2014

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inter v iew

Artur Lebiedziński has been at the helm of PHN, one of Poland’s largest real estate groups, for only a few months but is already up to speed with the changes the company is going through. After several years of write-offs, its portfolio has finally stabilized and the firm is poised to make new acquisitions Interview by beata socha PHN Key data

PLN 2.2 bln

assets under management

PLN 140-160 mln in acquisitions in 2013

PLN 100 mln net profit in 2013

PLN 178 mln net loss in 2012

You’ve held the position of CEO at Polski Holding Nieruchomości since September 2013. How do you find your new post? I started as an interim CEO in September, then in November I was officially appointed as the CEO. I find my job very exciting, particularly now. It’s a historic moment. We have a number of topics we’re dealing with. We are launching new projects, closing deals, and we are in the process of restructuring our portfolio and the company itself. Our entire team is working hard to make PHN shine among its peers. Can you tell us more about your portfolio restructuring? The main idea of the restructuring process is what I call “capital recycling.” We are meticulously analyzing each of our 171 assets and identifying those that are under-performing in terms of yields. We want to increase our yield rate, by selling the assets with the lowest economic value added, and reallocating the capital into either our development projects built on our own plots or into assets we want to acquire that fit our portfolio. This is a continuous effort, as

march 2014 • WBJ OBSERVER

we have some 90 properties for sale. When assessing the “salability” of our portfolio, we also have to consider the outside changes that influence our assets: new projects in the neighborhood, new infrastructure investments, new roads. These changes impact the value of our plots, so nothing is set in stone. Our situation is comfortable enough so that we are in no way under pressure. We don’t have to sell immediately, we can wait for some assets to increase in value. Besides, among our transactions to-date, all of the assets have been sold above their book value. Last year we sold approximately PLN 70 million worth of real estate, significantly above the book value of these properties. What kind of assets are you looking for? We want to buy investment assets, Aclass. We’ve analyzed dozens of properties in terms of location, size, transaction potential, tenant mix, etc. We have received the green light from our corporate bodies to proceed with due diligence on selected assets, which we are doing now. We are looking primarily at Warsaw’s office market.

Image: Bartosz Bajerski

Capital recycling

“

Artur Lebiedziński, CEO of Polski Holding Nieruchomości

Why Warsaw? It’s our core market. Over 75 percent of all our business is located in Warsaw. Most of our tenants are located here. We have a number of tenants who are considering moving from their current offices to modern A-class space. We do not have enough A-class properties and that is why we need to buy more. Secondly, the Warsaw market has the highest institutional transaction liquidity. Whatever the strategy of our new shareholders may be, they will always have an option to sell these assets profitably. Any other potential locations? We are looking at the biggest regional cities, like Wrocław, Kraków, Tri-City. We’re considering other types of assets as well. Our strategy also includes expanding our logistics and retail portfolio. Yet, the first transaction we make will likely be an office project. What kind of property are you targeting? We are looking for A-class properties from 8,000 sqm to 15,000 sqm of GLA. The value of your asset portfolio is currently valued at over PLN 2.2 billion. Is

SPECIAL EDITION

REAL ESTATE NEWS

CIAL

ITI

The Warsaw market has the highest institutional transaction liquidity. Whatever the strategy of our new shareholders may be, they will always have an option to sell these assets profitably.

”

your asset portfolio going to increase? Are you buying more or selling more? I believe that at the end of the year the value of our purchases will be somewhat bigger than of the sold assets, i.e. PLN 140160 million worth of acquisitions against PLN 70-100 million worth of disposals. The value of our existing portfolio is stable and will likely remain that way. The time when we had high write-offs on our assets is gradually coming to its end. What locations are you considering for your logistics investments? We already have a logistics park near Wrocław, close to the A4 highway, in a joint venture with Segro. The development of the park is proceeding ahead of schedule. We are also working on a project located in Parzniew, in the Warsaw agglomeration. We have just signed a letter of intent with an experienced, well-known partner who is going to help us to construct warehouses in this prime location, just next to the A2 highway. We believe that the new park will be as successful as the one near Wrocław. The two locations will give us several thousand sqm of roofed area.

It’s been a year since PHN’s IPO on the Warsaw Stock Exchange. Was it a good year? Our company is doing very well. PHN’s shares over the past year were performing above the benchmark. Secondly, we started the process of replacing warrants with PHN shares. The lock-up periods have come to an end and our employees are becoming shareholders. Finally, being a listed company has introduced an additional layer of discipline and compliance, which is good for the company. Currently 73 percent of the company’s stock is held by the State Treasury. How is the privatization process proceeding? The privatization process in on schedule. The virtual data room is in operation and we are in regular contact with the transactional advisers. We have certain milestones to reach, and we are doing that. As far as our main shareholder is considered, the transaction to sell up to 73 percent held by the Treasury has been set by the State to be completed around mid-year of 2014. u

WBJ OBSERVER • march 2014

lokale immobilia

r eta i l

Expand and re-market Another 500,000 sqm of retail space will be delivered this year, with expansions of existing schemes and new ones in smaller cities some of the key trends in 2014

Expand, expand, expand Expansions of existing retail schemes, looking to strengthen their position on the local market, will be one of the key trends this year. The time has come to refurbish Poland’s first and second-generation shopping centers, which, albeit dated and often unsightly, enjoy the best locations in major Polish cities.

march 2014 • WBJ OBSERVER

A good example of a nearly 20-yearold project in need of a facelift and some more space is the Auchan hypermarket in Piaseczno, on the outskirts of Warsaw. Developer Immochan is currently working on a major extension of the scheme, scheduled for completion in 2016. It plans to add nearly 40,000 sqm to the existing 44,300-sqm scheme, with the additional area housing over 170 stores, mostly fashion. Echo Investment is also currently expanding its shopping center in Jelenia Góra, one of its first investments in Poland. Keeping the upper hand Even newer schemes are being refurbished to keep up with the competition. Atrium is nearing the completion of its Galeria Copernicus center extension project, located in downtown Toruń. The mall, first opened in 2005, will increase its GLA by 17,000 sqm up to a total of 47,000 sqm, housing 145 stores, 55 more than at present. The work commenced in July 2013 and is scheduled to be completed in early 2014. Even the ten-year-old Arkadia mall in Warsaw is scheduled for a minor makeover. Unibail-Rodamco has launched a

PLN 20 million refurbishment mainly focused on its food court area. “This is a part of our strategy of re-tenanting and re-marketing our centers,” said Arnaud Burlin, the company’s managing director. Going smaller Another major trend expected this year is the expansion of retail space development in towns and smaller cities. “The retail offer in eastern Poland and in towns with less than 100,000 residents will grow,” said Potera. One such example is the Galeria Stara Kopalnia, currently being developed by Developer HRS Grupa, in Wodzisław Śląski, near Katowice. The mall, scheduled to open at the end of 2014, will feature 10,000 sqm of GLA, which isn’t small for a town of 50,000. The developer is counting on attracting customers from the Czech Republic via the A1 highway, which would increase the mall’s catchment area to 160,000. In 2013 the retail segment grew by 459,000 sqm, with over a half of the space (275,000 sqm) completed in Q4 2013, the bulk of which was delivered in major Polish cities: Poznań, Kraków, Warsaw and Tri-City.

– Beata Socha

Image: Immofinanz Group

etail space construction will remain strong this year, as 610,000 sqm is currently in the pipeline, with 500,000 sqm set to be delivered to the market in 2014. This year will see a lot of new retail developments in eastern Poland and smaller cities, as well as extensions of existing schemes across Poland, according to a report by Jones Lang LaSalle. “2014 will be the second very intensive year in a row for Poland’s retail market,” Edyta Potera, national director, retail agency at JLL, said. The largest new projects scheduled for 2014 include two malls in the eastern city of Lublin: Atrium Felicity, set to open on March 20, and Tarasy Zamkowe. Galeria Warmińska in Olsztyn, Galeria S in Siedlce and Galeria Amber in Kalisz will also open their doors this year.

METRO PROPERTIES Complex solutions for commercial properties

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* The M1 Shopping Centre brand, managed by METRO Properties, was recognized by more than half of the 15 000 consumers as highly recommendable brand, therefore received “Created in Poland Superbrands 2013/2014” certificate.

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H I GH S T R E E T S

The High Streets: Pl. Trzech Krzyży Part two of a series

very city has a destination for the posh crowd. It’s the place where people go not only to do their business but to see and be seen. In Warsaw it’s most likely Pl. Trzech Krzyży where you’ll find the highest concentration of high heels and

suits. Apart from the widest selection of high-end fashion brands in Warsaw, the place has its stylish restaurants, like AleGloria, and chic cafes, including Szpilka and Szpulka, which have long been some of the hottest and most glamorous meeting points in the city. No wonder then that as many as 94 percent of the city’s residents prefer high streets to shopping malls when looking for a restaurant or a cafe, according to the data compiled by Colliers. Foodies tend to generate a lot of traffic in major city streets, which also translates into higher revenue for other high-street stores. In fact, 63 percent of people who shop in high streets say they “just happened to be there,” and only 33 percent of high-street shoppers “went there on purpose.” When they do shop in high-street locations, 65 percent of people go to fashion, shoes as well as accessories & jewelry stores, which Pl. Trzech Krzyży offers in spades. u

Developing fast

Major recent openings on Warsaw high streets

Brand

Location

Marciano Guess

Pl. Trzech Krzyży

COS

Mysia 3 (Plac Trzech Krzyży)

New Look

ul. Marszałkowska

iMad

Nowy Świat (Pl. Trzech Krzyży)

Food&Joy

Nowy Świat (Pl. Trzech Krzyży)

Starbucks

Pl. Trzech Krzyży

Cukiernia Sowa

ul. Chmielna

Gucci

Vitkac (Pl. Trzech Krzyży)

Yves Saint Laurent

Vitkac (Pl. Trzech Krzyży)

Giorgio Armani

Vitkac (Pl. Trzech Krzyży)

Lanvin

Vitkac (Pl. Trzech Krzyży)

Bottega Veneta

Vitkac (Pl. Trzech Krzyży)

Diesel

Vitkac (Pl. Trzech Krzyży)

Louis Vuitton

Vitkac (Pl. Trzech Krzyży)

Source: Jones Lang LaSalle, 2013

‘Bold and beautiful’ Pl. Trzech Krzyży and neighboring streets ul. Mysia, ul. Bracka and ul. Książęca are relatively new locations for inner-city retail. They started gaining popularity in 2005-2006 once the first luxury brands moved in. It’s a quiet and elegant neighborhood with good access to public transport. What is typical of this location are department stores, including Vitkac which opened in 2011, and Mysia 3, launched in 2012. They have built their highend reputation through an offer based on premium brands. Another scheme in the area, called Ethos

(previously Holland Park) is scheduled for refurbishment. Our 2013 analysis showed that the area surrounding Pl. Trzech Krzyży is favored by fashion, footwear and accessories stores (some 44 percent) as well as gastronomy (28 percent). The destination is also home to top international brands, including Louis Vuitton, Gucci and Bottega Veneta in the Vitkac department store, as well as Ermenegildo Zegna, Burberry, Ralph Lauren Polo, Carolina Herrera, MaxMara and Pinko. The planned redevelop-

march 2014 • WBJ OBSERVER

Bank and Finance Center

Recently: Anna Wysocka, Head of Retail Agency Poland, Jones Lang LaSalle

ments, including expanding the retail area in the Ethos building, as well as new investments, like the Bank and Finance Center currently under construction, will open up new growth opportunities for Pl. Trzech Krzyży. u

ulczyk Silverstein Properites K announced it will refurbish its office/ retail building, dubbed Ethos, adding over 1,000 sqm of retail space and 3,000 sqm of office area ouis Vuitton opened its first store in L Poland in the Vitkac department store Retail segment: Premium and luxury brands Top tenants: Gucci Louis Vuitton Giorgio Armani Ferrari Ralph Lauren

Images: Jones Lang LaSalle, Kulczyk Silverstein Properties, Wikimedia

lo k a L E I M M O B I L I A

SPECIAL EDITION

KSP plans to refurbish Holland Park, which it purchased in 2013, adding over Aleje Jerozolimskie 1,000 sqm of retail space and 3,000 sqm of office space

vitkAc Gucci Giorgio Armani

Bracka

Yves Saint Laurent Lanvin Bottega Veneta Diesel

Ferrari

Louis Vuitton

Glampire

Mysia Nowogrodzka

Deutsche Bank

C. Herrera

Galeria Wypieków

Mysia 3

Spain - Deli

Pinko Ex clusive Optique

Ole!Tapas&Steak

Shoes&Co

iat Nowy Św

cka Bra

Avangarda

LaCasa Del Habano Max Mara Intenso

Rayban

SirArthur

Park House

Food&Joy

Organic Bistro

Minty Dot

Mont Blanc

(e.g. COS, Nap, UEG, M u j i )

i-Mad

Millenium Bank Salamander

Starbucks

Atelier Zabotny

Plac Barcelona

ICBC

Szpulka

Szpilka

BZ WBK

Sal

Plac Trzech Krzyży

Żurawia Coffee Heaven

Prêt-à-porter

Marciano Guess W Biegu Cafe

Pl. Trzech Krzyży retail units by category Clothing, footwear and accessories

Groceries Banks and financial services

Gastronomy Groceries 44%

12% 3% 12%

44%

8% 28%

44%

28% 28%

Banks and financial services Gastronomy 44% Health & beauty Groceries goods & accessories Household Jewelery & accessories 28% Services Banks and financial services Other Health & beauty Household Vacant unitsgoods & accessories Jewelery & accessories Services Other Vacant units

Clothing, footwear and accessories Gastronomy 44% Groceries

Hoża

Health & beauty Household goods & accessories Jewelery & accessories Services Other

Ralph Lauren / Banks andfootwear financial services Clothing, Polo / Tod’s and accessories Vacant Health & beauty Household Gastronomygoods & accessories Jewelery & accessories Services Groceries Other Vacant unitsfinancial services Banks and

Health & beauty Banks and financial servicesHousehold goods & accessories Jewelery & accessories Health & beauty Services Household goods & accessories Other Jewelery & accessories Services Vacant units Other

Mok otow ska

28%

LaSalle

How do you see the potential of Pl. Trzech Krzyży as an investor? Pl. Trzech Krzyży is one of the most prestigious and unique locations in Warsaw. It’s the capital’s flagship location for foreign guests and tourists. For an investor this is a one-of-a-kind location that combines business and retail with culture and entertainment. The Warsaw Stock Exchange, the Parliament, the National Museum are all located in the area, next to Warsaw’s top restaurants and numerous luxury brands. Parks and green areas surrounding Pl. Joanna KowalskaTrzech Krzyży further Szymczak, enhance its investment investment director, potential. The historic Kulczyk Silverstein and symbolic value of Properties the place makes it very popular among tourists. You could say that the heart of Warsaw, both in its historic and modern dimension, beats on Pl. Trzech Krzyży.

Your group purchased Holland Park a year ago and now you want to refurbish it, renaming it Ethos. Why did you decide to invest on Pl. Trzech Krzyży? We have decided to launch our investment on Pl. Trzech Krzyży to create a modern and prestigious office and retail space in this historic and central location. In a little over a year, the new Ethos complex will become one of the most recognizable addresses in Warsaw, combining business and retail. It will house renowned Polish and international firms and luxury boutiques. Clothing, footwear and accessories We want 44% the scheme to become the Polish version of one of the world’s top high streets. Gastronomy 28% Groceries 8% Warsaw doesn’t have a world-class high street Banks and financial services 5% yet and it definitely deserves one. u

units

Burberry AleGloria E.Zegna Czaji

Clothing, footwear and accessories Gastronomy 28% Groceries 8% Banks and financial services 5%

Health & beauty 12% Household goods & accessories Jewelery & accessories 12 Clothing, footwear and accessories Clothing, 44% Vacant units footwear and accessories Services Gastronomy 28% Gastronomy 28% Other Groceries 8% Groceries 8% Clothing, footwear and accessories 44% Banks and financial services 5% Banks and financial services 5%Gastronomy 28% Vacant units 3% 8% Clothing, footwear and accessoriesGroceries 44% Health5% & beauty 12% Health & beauty 12% Banks and financial services Gastronomy 28% Household goods & accessories Household goods & accessories Groceries 8% Jewelery & accessories 12 Jewelery & accessories 12Health & beauty 12% Banks and financial services 5% Services Services Household goods & accessories Other Other Jewelery & accessories 12 Health & beauty 12%

44%

Krzyży

Clothing, footwear and accessories

3% 12%

12%

ITI

ch Plac Trze

Plac Trze ch

44%

Clothing, footwear 3% and accessories 12% Source:Gastronomy Jones Lang 3% 28% 5% Clothing, footwear Groceries and accessories

J.M. Weston / Church’s

Gastronomy

CIAL

W.Kruk

12%

ak Rob an n’s ti ci istia use Op Chrakerho B Książę ca

a ew

‘Warsaw’s heart beats on Pl. Trzech Krzyży’

REAL ESTATE NEWS

Health & beauty 12% Household goods & accessories Jewelery & accessories 12 Services Other Vacant units

WBJ OBSERVER • march 2014

o b ser v er ran k in g

OBSERVER TOP 5 RANKING office property developers

Aiming high

Ghelamco Poland

Office investments completed in 2013:

56,524 sqm of GLA

T-Mobile Office Park offers 40,000 sqm of office space

arsaw is the most popular market for office property, with buildings going up across the city each year. Ghelamco, the biggest office developer in Poland in terms of GLA in 2013, is now building the highest office block in the city. The Warsaw Spire is scheduled for completion in 2015. The scheme will not only be the tallest office building in Warsaw, but also one of the tallest in Europe. The main tower will have 48 floors and reach up to 180 meters in total height. There will also be two smaller buildings in the complex, each of them 55-meters high. The three buildings

march 2014 • WBJ OBSERVER

combined will offer 100,000 sqm of office, retail and service space. This flagship project is being built in Warsaw’s Wola district, an area well known for its business opportunities. Not far from the scheme will be the entrance to one of the stations of Warsaw’s new second subway line, scheduled to open in late 2014. Ghelamco started out in Belgium as an industrial property developer in 1985 and by 1991 it was already operating in Poland. In those early years of post-communist transition, it focused on getting to know the market and preparing the ground for future investment.

Since then Ghelamco has managed to deliver more than 400,000 sqm of office space in Poland, and has sold 15 of its projects here, generating some €850 billion in transaction proceeds. The company focuses on the office market in Warsaw. However, it is also present in major Polish cities such as Wrocław and Katowice, and it has finalized logistics and residential developments as well as office projects. Office schemes currently in the company’s pipeline include Synergy Business Park in Wrocław and three developments in Warsaw: Spinnaker Tower, Sobieski Tower and Sienna Towers. u

Images: Ghelamco, HB Reavis

Projects completed in 2010-2013: T-Mobile Office Park (Warsaw; 40,000); Łopuszańska Business Park (Warsaw; 16,524); Senator (Warsaw; 25,566); Mokotów Nova (Warsaw; 41,413) Key current investments: Warsaw Spire (Warsaw; 100,000) Total number of employees: 200 Year founded in Poland: 1991

Key market position 2

HB Reavis Poland

Office investments completed in 2013:

48,000 sqm of GLA

Konstruktorska Business Center offers 48,000 sqm of office space

B Reavis has been active in Poland since 2008 and has, to date, acquired projects with almost 340,000 sqm of office space in Warsaw. With two projects and over 90,000 sqm of space under construction, the group is the leading office developer in the city. “Warsaw is the most important location for HB Reavis because it boasts the biggest office space growth in Europe, which gives

the city the key market position within the CEE region,” said Stanislav Frnka, country CEO at HB Reavis Poland. Gdański Business Center is a modern office complex with a total of over 46,000 sqm GLA, scheduled to be delivered in 2014. It is located on the edge of Warsaw’s CBD, next to the Dworzec Gdański subway and suburban railway station. The complex comprises two buildings, a 17-floor and a 9-floor one, equipped with

Projects completed in 2010-2013: Konstruktorska Business Center (Warsaw; 48,566) Key current investments: Postępu 14 (Warsaw; 34,445); Gdański Business Center I (Warsaw; 46,348); Gdański Business Center II (Warsaw; 50,127); West Station I-II (Warsaw; 63,305) Total number of employees: 70 Year founded in Poland: 2008

a number of sustainable features. They will be powered exclusively with renewable energy sources. KPMG, one of the biggest audit and advisory companies in the world, will be one of the key tenants in Gdański Business Center. The other HB Reavis project, Postępu 14, is located in Warsaw’s southern Służewiec Przemysłowy business district. The building totals 33,000 sqm GLA and is set to be completed in 2015. u

Office investments completed in 2013:

sqm of GLA

Skanska Property Poland

41,364

Projects completed in 2010-2013: Green Towers (Wrocław; 30,302); Malta House (Poznań; 15,804); Green Horizon (Łódź; 33,380); Nordea House/Green Corner (Warsaw; 28,493) Key current investments: Silesia Business Park (Katowice; 48,472); Dominikański (Wrocław; 39,970); Kapelanka 42 (Kraków; 30,491) Total number of employees: 74 Year founded in Poland: 1997

Liebrecht & wooD Poland

41,300

Projects completed in 2010-2013: Plac Unii (Warsaw; 41,300) Key current investments: Flanders Business Park C (Warsaw; 7,395) Total number of employees: 50 Year founded in Poland: 1994

EURO Styl

19,724

Projects completed in 2010-2013: Opera Office (Gdańsk; 8,291); BPH Office Park (Gdańsk; 19,724) Key current investments: Centaurus (Olsztyn; 15,360) Total number of employees: 22 Year founded in Poland: 2007 Data source: Warsaw Business Journal Book of Lists; www.bookoflists.pl

This ranking is based on a survey conducted by the Book of Lists team. Companies not responding to our survey are not listed.

WBJ OBSERVER • march 2014

cit y scape

l u b lin

Did you know?

ublin is prominent in Polish history, having served in 1569 as the site for the formal signing of the union between Poland and Lithuania. For a short period in 1809, when Poland was partitioned, it was also the unofficial Polish capital after Polish forces regained the city following the defeat of Austrian troops. In November 1918, just a few days before Poland regained independence, a temporary government under Prime Minister Ignacy Daszyński was formed in Lublin. Finally, in 1944 this was the place where the first communist regime had its headquarters. The castle in Lublin served as a residence for many Polish kings

Favorite son

ublin is one of the oldest settlements in Poland, with archeological evidence suggesting that people were living there as far back as 3,000 years ago. The first mention of the name Lublin dates to the late 12th century. Legend has it that Julius Caesar’s sister found her way to Polish territory and founded two cities – Lublin and Lubusz – old spellings which reflected her brother’s first name. Lublin is also the biggest city in Poland east of the Vistula River, which in the past caused much trouble for its inhabitants as it was constantly attacked by various aggressors, from Lithuanians to Mongolians, who completely razed the city in 1241. Lublin was granted municipal

march 2014 • WBJ OBSERVER

rights in 1317 and, according to documents from that time, encompassed 24 square kilometers. Currently it comprises 147 square kilometers, which means it has grown seven-fold in approximately 700 years. Thanks mostly to EU funds, modern-day Lublin has been closing the gap separating it from the more developed western Poland. As late as December 2012, a new airport was opened near the city. Businesses currently based in and around Lublin include pasta maker Lubella, herb and tea producer Herbapol, and AgustaWestland-owned aviation producer PZL Świdnik. Farm machinery producer Ursus relocated there a few years ago. u

Stanisław Kostka Potocki A true renaissance man. He was a writer, politician, military man, and even an architect. Born in Lublin into a noble family he had a long and successful career. He co-founded the Polish Society of Friends of Science, was a member of the Governing Commission, chairman of the Education Chamber and the director of the Commission of National Education. He was also the chairman of the Council of State and the Council of Ministers. In 1818-20 he was chairman of the Senate. He was also a general of the Polish cavalry. He wrote numerous poems, editorials, speeches and articles. An art expert and historian, he established a huge collection of art pieces, which he exhibited in Warsaw district of Wilanów. His residnce became one of the first museums in Poland.

Images: Anton Graff, Marketing Miasta Lublin, Wikimedia

Poland’s eastern stronghold

London 1,786 km Paris 1,744 km Berlin 730 km

Moscow 1,209 km

Prague 832 km

Rome 1,877 km

Mayor: Krzysztof Żuk area code: 81 Area: 147.5 sq km Nearest ariport Lublin-Świdnik

Population (dec. 2012) 347,700

Distance to the city center 15 km

expressways S17 and s19

working-age Population (dec. 2012)

223,600

unemployment rate (DEC. 2012)

9.9%

median pay (dec. 2012)

PLN 3,710

number of universities

number of students

number of graduates a year

77,173

24,000

Percentage of city covered by zoning plans: 45.3% major inDUSTRIES: BPO/ICT, automotive, aviation Recent major investors ABM Greiffenberger Alior Bank Proama Sii

Modern office space 110,400 sqm office vacancy rate 15.9% prime headline rents €8.50-€13.30

Special Economic Zone EURO-PARK MIELEC Industrial and Technology Parks Lublin Science and Technology Park pnt.pl/en

WBJ OBSERVER • march 2014

w b j o b ser v er con f erence

New beginnings

conference

arsaw Business Journal Group celebrated the launch of the new WBJ Observer monthly with a conference jam-packed with expert panelists. The event was started with WBJ group publisher Morten Lindholm, who introduced the new publication and presented plans for the future, with the daily, online news service being the cornerstone of the group. Failure can be an option The first panel was focused on the IT sector and its problems in Poland. Panelists included Tomasz Snażyk, managing partner in Cytowski LLC, Adam Bergmann, COO at IN2KNO, Krzysztof Kowalczyk, partner at HardGamma Consulting and Magdalena Ostoja-Chyżyńska, a UI engineer from Polidea Software. The

march 2014 • WBJ OBSERVER

Warsaw Business Journal Group publisher Morten Lindholm introduced the new monthly magazine, WBJ Observer

Piotr Krawczyński, managing director and management board member at Kulczyk Silverstein Properties

Images: Roxana Dawid

2014 is a year of anniversaries for Poland as it celebrates the 25th anniversary of its transformation to the free market economy, 15 years in NATO and 10 years in the EU. It’s also a significant year for the Warsaw Business Journal Group as it enters its 20th year on the market with a brand new monthly

discussion focused on Polish start-ups and the problems they encounter. One problem many pointed out is that out of the 3,500 IT start-ups in Poland, only a few are actually worth something. Most of the new IT companies are focused on getting EU grants and as soon as the money dries up, the company folds. Which is why, the experts said, private funding is much better as investors need something more in return than properly filed paperwork. The other message to IT engineers is that they should not be afraid of failure as Bergmann pointed out that “before Edison invented the light bulb, he invented 99 other things that weren’t the light bulb.”

“

Before Edison invented the light bulb, he invented 99 other things that weren’t the light bulb.

Adam Bergmann, COO at IN2KNO

Painting the picture The defense panel with Adam Bergmann, Krzysztof Krystowski,

KIELCE - 19 MARCA 2014 TARGI KIELCE CENTRUM KONGRESOWE

”

former CEO of Polish Defence Holding and Marek Matraszek, founding partner of CEC Government Relations, concentrated on the PLN 131 billion Poland plans to spend on new equipment over the next decade. The matter of what the armed forces or military will buy for that amount is more or less known. The question remains, however, who they will buy it from. Most of the high-tech equipment is produced by international companies but the Polish government, would like to have as many of the big domestic companies as possible participating in the modernization of the Polish defense industry. “International companies, that have Polish management are situated in Poland and pay taxes here,” said Matraszek, explaining that there are already many foreign companies that have acquired Polish arms producers and are making its equipment here. “It’s crucial

KONGRES SMART CITY

Organizatorzy:

Patronat honorowy:

www.smartpl.eu

WBJ OBSERVER • march 2014

w b j o b ser v er con f erence

“

Krzysztof Krystowski, Former CEO, Polish Defence Holding

(L-R) Adam Bergmann, COO, IN2KNO; Tomasz Snażyk, managing partner, Cytowski LLC; Krzysztof Kowalczyk, partner, HardGamma Consulting; John Beauchamp, WBJ; Magdalena Ostoja-Chyżyńska, UI engineer, Polidea Software

” that Poland uses this opportunity, not only to modernize our army, but also the whole industry,” said Krystowski, jokingly adding that he hopes Poland’s role in the modernization process will go “beyond just painting the missiles.”

New Beginnings Conference P anels

Polish IT – Coming of age? Battle ready? Real estate: City center revival Poland’s energy future

march 2014 • WBJ OBSERVER

Parking slalom The next panel was on real estate and came packed with experts. Piotr Krawczyński, managing director and management board member at Kulczyk Silverstein Properties, Edyta Potera, director at Jones Lang LaSalle, Maciej Zajdel, managing director in IVG Poland, Robert Mandżunowski, CEO of LHI, Michał Leszczyński, CEO of Grupa 5 Architekci and Paweł Laskowski-Fabisiewicz, deputy CEO of PHN, all discussed how Warsaw’s city center should develop so that its citizens can be proud of it. Panelists all agreed that high streets are becoming a more important element of the city, although some patience is needed for them to be completely accepted by Poles. “High streets are becoming more interesting for Polish customers, but it’s a long way to go before they fully catch on, I expect that we still need 10-15 years for this to happen,” said Potera. Warsaw is filled with shopping malls with every major district boasting at least one big shopping center, but despite high saturation levels there is still demand for premium brands. “High streets attract a completely different set of clients and brands than shopping malls do, they’re mutually exclusive,” said Kawczyński,

whose company is working on the Ethos high-street shopping center. All panelists pointed out that parking space in the city center is currently very scarce, and this hampers urban development. Underground parking would solve most of the problems but it’s an expensive option, time-consuming and difficult to install in highly populated places like Pl. Trzech Krzyży. It looks like people will have to continue to slalom through the parked cars. Shale revolution? Last but not least, was a panel on Poland’s energy future. Łukasz Jankowski and Jakub Krasnowski from Wierzbowski Eversheds showed a presentation on recent developments in shale gas and renewables. Both sectors have been neglected by Poland’s authorities, with essential laws still missing. But it looks like momentum has swung in the right direction in recent months and while all the needed bills have not yet been pushed through parliament, it looks as if it’s only a matter of time before both energy sectors will finally pick up the pace. Commercial shale gas exploration in 2014 is still a possibility, according to Krasnowski, although the real shale gas revolution is still a long way off. The “New Beginnings” conference was the first event of 2014, organized by the Warsaw Business Journal Group, but definitely not the last, we’re already preparing our next event – the launch of the Made in Poland 2014 publication. Stay tuned. u

Images: Roxana Dawid

It’s crucial that Poland uses this opportunity, not only to modernize our army, but also the whole industry.

Łukasz Jankowski, head of the energy practice at Wierzbowski Eversheds

The conference was jam-packed

(L-R) Michał Leszczyński, CEO of Grupa 5 Architekci; Edyta Potera, nationa director, Jones Lang LaSalle

(L-R) Maciej Zajdel, managing director, IVG Poland; Robert Mandżunowski, CEO of LHI; Paweł Laskowski-Fabisiewicz, deputy CEO, PHN

“ (L-R) Krzysztof Krystowski, former CEO, Polish Defence Holding; Marek Matraszek, founding partner, CEC Government Relations; Adam Bergmann, COO, IN2KNO

High streets are becoming more interesting for Polish customers, but it’s a long way to go before they fully catch on. Edyta Potera, National director, Jones Lang LaSalle

”

WBJ OBSERVER • march 2014

c u lt u re

Polish beginnings Krzysztof Penderecki

Get in tune with three eminent contemporary Polish composers via a website (threecomposers.pl) recently launched by the National Audiovisual Institute (NIA). The site features extensive background, biographies and an online collection of 320 recordings by Krzysztof Penderecki, Witold Łutosławski and Henryk Mikołaj Górecki, most of which are from the archives of Polish Radio. Included are the more popular works of the three composers as well as more obscure scores for film, theater and radio. A fascinating timeline puts the three composers in the context of major historical events of the 20th century, beginning in 1913.

Jack Strong opens strong

A new movie by Polish director Władysław Pasikowski telling the story of Ryszard Kukliński, a Polish colonel who spied for the CIA during the heyday of the Cold War and who passed on top-secret documents to NATO including ones for the imposition of martial law in Poland, has become an instant blockbuster. During its first weekend of screening 218,676 saw the biopic, which is the second best result of the year so far. Only “Under a Mighty Angel” (Pod mocnym aniołem) had a better opening weekend. u

march 2014 • WBJ OBSERVER

PHILIP SEYMOUR HOFFMAN during the 78th Annual Academy Awards at the Kodak Theatre in Hollywood

atch the 1994 Polish film “Szuler” closely and you’ll see him there. Academy Award winner Philip Seymour Hoffman, who passed away last month, got his start in the acting business in the Adek Drabiński film, in which he played a stagecoach driver. He nabbed the role after a casting session in New York. “I hired him immediately. He didn’t have any experience as he’d just gotten out of acting school, but I could see there was a great actor hidden inside, waiting to be discovered,” the Polish director told movie site stopklatka.pl. “We clicked on the set immediately,” said Jan Zielnik, one of the stars of the movie. “He was some 20 years younger than me, and already a fantastic actor. Drabiński told me one day that we will hear about Hoffman in the future,” Zielnik added “Szuler,” shot in Poland, was a period

piece set in the 18th century. It tells a story of two gamblers and their trials and tribulations. Hoffman did not get much screen time, but he did have a love scene with Polish actress Ewa Gawryluk. Off-screen, Hoffman was remembered as quiet and humble. While other actors spent the nights partying, he preferred to play bridge with some of the cast he befriended on the set. “We could stay up until 3 a.m.,” recalled Joanna Sokalczuk, who also starred in the movie. Later in 1991, Hoffman acted in “Triple Bogey on a Par Five Hole,” his first released film. He also got his TV acting debut that year in one of the episodes of the long-running American cop serial “Law and Order.” In 1992 “Szuler” received an award for best movie debut at Gdynia Film Festival, and got a wide release in 1994. Hoffman passed away Feb. 3, from an apparent heroin overdose, at age 46. u

Image: WIkimedia, Shutterstock

National treasures

A journey through Jewish Poland

hy would a young Jew come to Poland? Obviously in order to pay respects to Holocaust victims in Auschwitz, most people would reply. But French-Jewish graphic artist and comic book author Jérémie Dres does not follow that pattern. Together with his brother Martin, he comes to Poland to trace his family’s past and refuses to include Auschwitz on his tight travel agenda. Thérèse Dres, née Tema Barab, was born in Warsaw and lived in Poland until 1931, when she left for France. It was in France that she met and married Simchy Dres, a Jew from Żelechów in Poland, the

author’s grandfather. It is her roots which were the main inspiration for the graphic novel “We Won’t See Auschwitz.” Jérémie and Martin visit Warsaw, Żelechów and Kraków. They encounter a different image of Poland than the one they had expected. Though the country’s Jewish past is not so visible, there are many people they can meet to talk about both that past and the equally intriguing present. We follow their journey as they meet young Polish-Jewish activists, migrants who returned to Poland, rabbis and historians. We visit two of Poland’s main cities and the small town of Żelechów, each of them drawn in a characteristic, but also

realistic manner. What’s most important, however, is the author’s mental journey. It is not only a journey into his family’s past, but also one that explores Jewish-Polish relations and the condition of Jewish identity and culture in Poland. The conclusions are not obvious. Jérémie discovers how varied the PolishJewish community is, and how Polish reality differs from what he had been told in France. For the reader who knows Poland, the book brings a fresh view of the country from an uncommon perspective.u Available at Amazon.com at $17.96. Also published in Polish as “Nie pojedziemy zobaczyć Auschwitz.”

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WBJ OBSERVER • march 2014

li f est y le

Looking for a discreet restaurant in which to scheme and schmooze? The Polish capital has these in abundance, unfortunately most don’t pass muster – in this issue we sift out the ripoffs and the rubbish to bring you three of the best for a working lunch.

NOLITA

BUTCHERY & WINE

SIGNATURE

Looking swank and chic, Nolita is the one everyone’s talking about. Winner of the Warsaw Insider’s 2013 Fine Dining Award, those who have eaten here call it Michelin standard. Jacek Grochowina, formerly of The Ritz, London, has created a breathtaking experience. Displaying remarkable flair and an exceptional eye for tastes and combinations, this chef holds Warsaw in the palms of his hands. For mains, the aged beef fillet is a must.

If you’re vegetarian, look away – now. Butchery & Wine was constructed on a firm foundation that places an emphasis on red meat and red wine. And my, what steaks – served on wooden boards by staff dressed in stripy aprons, the meat is flawless; according to some, the best you’ll get in Poland. In spite of the corporate environment, the setting feels relaxed and chatty, and is a well-designed setting to combine work talk with pleasure.

Insider Knowledge Reservations recommended for the evening – a few days’ notice is usually enough Six and nine course tasting menus are available in the evening (PLN 195 & 255) Set “business lunch” available for PLN 69-79

Insider Knowledge Reservations for evening remain essential Wine by the glass from PLN 14 Starters from PLN 15 to PLN 70. Steaks begin at PLN 42 (bavette), and top out at PLN 250 for rib-eye for two

Sensitive restoration has maintained original friezes and reliefs from the time this was the address of the inter-war Soviet Embassy. Other touches inlcude lighting by Serge Mouille, lavish 1950s chairs from Oswald, not to mention five photos of Marilyn shot by the acclaimed Milton Greene. It’s a sensory joy, yet for all these fine details at no time does Signature feel too heavy. And the same goes for the menu; the work of Wojciech Kilian – one of the big breakthrough talents of 2013.

Dress to impress Wine by the glass from PLN 29 Starters average out at PLN 50 and mains about PLN 100 ul. Wilcza 46, nolita.pl

march 2014 • WBJ OBSERVER

Smart casual No luck with a booking? Try their sister haunt Brasserie Warszawska ul. Żurawia 22, butcheryandwine.pl

Insider Knowledge Reservations recommended Wine by the glass from PLN 18 Starters average PLN 30, mains about PLN 65 The best lunch deal in Warsaw. Daily set menus during the week are priced PLN 37 for three courses Smart casual / upscale Need to sleep off the meal? Poland’s best hotel, H15, is upstairs ul. Poznańska 15, signaturerestaurant.pl

Images: Shutterstock, Nolita, Butchery & Wine, Signature

Working Warsaw Lunch Three of the Best

li f est y le

Hotel Spotlight: Andel’s Hotel Łódź

Image: xxxxxxxx

Raw industrialism meets contemporary chic to form one of the most celebrated design hotels in Poland.

punches of lime, lemon and mandarin. The two-floor maisonettes are a must, and have in the past been enjoyed by the likes of Shakira, all the way down to wretched pop brat Justin Bieber. But if you don’t want to splash out,

then do at least splash down: the top-level pool is a masterpiece, and inventively constructed with a section jutting out from the roof. As for business, 3,100 sqm of conference space awaits, spread over eight rooms of varying dimensions. u

Andel’s Hotel

The top floor spa and swimming pool is a stunning glass-enclosed space with a bird’s eye view of Manufaktura below.

march 2014 • WBJ OBSERVER

Number of rooms: 216 Number of suites and apartments: 52 Distance from the airport: 10 kilometers Distance from the train station: 5 kilometers ul. Ogrodowa 17, Łódź

www.andelslodz.com

Images: Andel’s Hotel

hen I first visited Łódź I checked into the Światowit and found, to my surprise, a lobby littered with cans, pans and trays. They were there to collect the water that was seeping through the ceiling. Later that night, a pissed British copper trapped me in a headlock. Jump forward ten years and the hotel offer has improved beyond imagination. Recent additions number a sparkling Holiday Inn and a not-so-little baby Hilton, though for me, my lodgings of choice are at the Andel’s Hotel. Opened in 2009, the Andel’s forms the cornerstone of the Manafaktura complex, the retail/leisure compound that kick-started Łódź’s modern evolution. Flanking this gargantuan development is the red brick Andel’s, a one-time textile mill owned by industrial revolutionary Izrael Poznański. The refit was left to Jestico + Whiles architecture studio, and they’ve utilized the vast open areas to create a lobby defined by its soft lunar lines and sense of space. Guests wander through infinite corridors that pulsate with softly changing lights, before eventually arriving at pristine rooms whose color palette offsets charcoal gray and patches of brickwork against

WBJ.PL TO ADVERTISE: AGNIESZKA BREJWO, ABREJWO@WBJ.PL, PH. +48 504 201 007 SUBSCRIPTION: AGNIESZKA MICHALIK, AMICHALIK@WBJ.PL, PH. +48 797 634 123

li f est y le

alex webber on living in POLAND

eard a great story the other day. It’s the late 90s and the setting is Warsaw’s Forum Hotel – now the Novotel. Our accidental hero is Max, described by my mate as one of these benevolent Oxbridge types found in a perpetual state of gentle bewilderment – basically a caricature of Hugh Grant before he reinvented himself as a paparazzi-thumping hard man. “Max was new to Poland, and our office had arranged for him to meet an estate agent to view a flat,” started my friend. “All he knew at the time was to look for a blond woman called Aga.” The meeting point was the Forum bar, which in those days had a wellearned reputation as a thriving marketplace for intimate favors: through a heavy fog of cigars and perfume you’d just about make out hooting, jabbering suits and demure, Dynasty blonds with animal print skirts and dangerous heels. “So Max is sitting down, fiddling about with his cuff-links, when one of these women gives him a sly little smile and a coy come-hither wave. Not knowing any better Max approaches the woman and asks if she’s Aga. On confirmation he gets straight to the point. “Pleasure to meet you,” he blurts, “so, how about seeing this flat of yours...” Well, you can guess what happens next – the moment the apartment door shuts she’s out of her undies in four seconds flat. At the same time the real Aga has arrived at the bar, and asks the barman if he’s seen an immaculate English gent. “Yes,” nods the barman, “he left ten minutes ago with an escort girl.” Why am I telling you this? Firstly, in the hope of a cheap laugh. Secondly, because it seems that reminiscing about the old days is now the most popular sport among veteran expats. And yes, they were heady times to be in Poland. As for myself, I remember my first day,

march 2014 • WBJ OBSERVER

sitting in a Marriott suite staring glumly at the gray tundra below. My sense of emptiness didn’t last long... Flicking the news on I discovered the local channels had a red hot story on their hands – two tigers had escaped from a circus and were causing havoc on the streets of Tarchomin. Yet rather than hiding in an attic, local shopkeepers were actively engaged in shambolic attempts to recapture the cats. Clearly, this was a city worth getting involved with. In those days, there was a sense that anything could happen (and it usually did). Warsaw was a city molded from concrete, concrete that was in varying stages of rot and ruin. Yet while it looked hideous and decrepit, there was an atmosphere and magic that seduced all those out here. Nowadays, the stories of yesteryear are warmly retold like fond recollections from a colonial war. But eavesdropping on the sentimental tales, you get the idea the expat glory years have been and gone – that the good times are over. Where do I stand on that? Sure, I miss the murk and the madness that were symbolic of such times, but the trade-off has been fair. The “Poland of Now” might lack the volatile chaos of old, but that’s been substituted for meteoric advances that make it so liveable – you know, good restaurants, clean(er) streets, decent shops and better staff. I could go on. But most importantly, those expats who live in the past do so at a cost of ignoring the present. Modern Poland continues to thrill in its role as an exhilarating nation in constant motion. My message to the moaners, to those clutching at their memories like shipwrecked monkeys: open your eyes, for the most exciting chapter has yet to be penned... u Alex Webber is an editor-in-chief at Warsaw Insider

Image: Shutterstock, Ed Wight

on a final note

A new gallery in Bydgoszcz

Galeria Dominikańska, Wrocław, 2001

Galeria Łódzka, Łódź, 2002

Galeria Krakowska, Kraków, 2006

Alfa Centrum, Gdańsk, 2006

Galeria Bałtycka, Gdańsk, 2007

Galeria Kaskada, Szczecin, 2011

ECE is developing a new retail centre in Bydgoszcz at al. Wojska Polskiego. The scheme will consist of 200 stores totalling ca. 50,000 sqm of leasable space and will off er 1200 parking places. It will be the biggest shopping, leisure and service centre in the voivodeship of Kujawsko-Pomorskie. ECE Projektmanagement Polska Sp. z o.o. ul. Fabryczna 5a, 00-446 Warszawa, Poland Phone +48 22 310 60 00, fax: +48 22 310 60 02 www.ece.pl, info@ece.pl

WBJ Observer #2 March 2014

Published on Mar 6, 2014

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