FAILED MALLS GETTING NEW OWNERS

New owners are in the process of taking over two shopping centers in Prague 13:  Tesco Stodůlky and Galerie Butovice.

In the first major Czech foreclosure of this crisis, Galerie Butovice was recently confiscated by its lender, ING Finance. ING is now working with DTZ on a new concept to stabilize the center and sell it within three to four years, and hopes to do better than simply reclaiming the loan. The outstanding balance is €75m, according to former owner, the Australian pension fund GPT.

GPT and co-owner Babcock & Brown, also an Australian pension fund, seemed to be inexperienced in the regional property markets and unwilling to make the necessary improvements. Discussions with ING about the new strategy are allegedly scheduled to be completed by September.

At Stodůlky, negotiations are still underway. The potential new owner of the 25,000 sqm building, XXXLutz (which, despite the name, is a family-friendly furniture retailer), has already concluded a deal with Tesco to purchase the hypermarket but it's still discussing the fate of the remainder with owner Bainbridge. The Austrian company will likely use the space to open its first store in the Czech Republic.

NEXT CHAPTERS OF RZESZOW MILLENNIUM SAGA

The troubled history of Millennium Hall, a massive retail project in the southeastern city of Rzeszów, has seen another twist. Rzeszów-based film manufacturer Marma Polskie Folie is now rumored to be taking over the project from its main stakeholders, Conres and the family of Ryszard Podkulski, also both based in Rzeszów. The unfinished development, with planned lettable space of 89,000 sqm, was originally expected to deliver back in late 2007, but the project has since been riddled with problems. Construction is currently stopped, with the shell almost finished.

Conres, the original investor in the project with a 60 percent stake estimated at roughly PLN 500m (€112m) was, like Marma, a complete newbie to the development business, having made its name in clothes manufacturing. Last year, local retail mogul Ryszard Podkulski bought into Millennium Hall with a 40 percent stake, bringing his adjacent plot into the development. According to local media, however, Conres and Podkulski had serious trouble forming a viable business partnership. Podkulski, for example, was pushing for dropping a 4,000-seat entertainment hall in favor of introducing more retail space.

As soon as the crisis hit last September, the reported antagonism between the two partners was overshadowed by financing issues. The project has been in limbo ever since, until the recent Marma takeover rumors revived an interest. Interestingly, Millennium is already 90 percent preleased, according to DTZ, which took care of the commercialization process.

SKELETON RESURRECTED IN KRAKOW

The construction of Orco's Złota 44 luxury residential tower in Warsaw has been on hold for weeks now. But down in Kraków, an unfinished high-rise development that has marred the skyline for 30 years is set to be brought back to life.

A joint venture between Iranian developer Verity Development and the Kraków-based GD&K Group has received the final nod from Kraków's conservation office and will now proceed to obtain a construction permit for the project, known locally as the Skeleton. The plan is to raise the existing shell from its current 92 m to 102.5 m and add four to six smaller buildings around the base, at a total cost of roughly €100m.

Unlike Orco, the complex won't just be betting on residential. With offices and a hotel dominating the space, Monika Madej, business development manager at Verity, isn't worried that the revamp of the tower will face the same risks as Złota 44.

“The only tall building in the most central location is to be exceptionally prestigious, and given the vacancy rate of 1.8 percent in Kraków, which is the lowest in Poland, the investment looks rather promising. We are already receiving inquiries from potential tenants,” she says.

K&H BUYS K, WILL RENT H

Just before the end of June, TriGranit and K&H Bank signed a purchase agreement for the bank’s new build-to-suit headquarters, to be part of TriGranit’s Millennium City Center development in Budapest.

Construction on the 52,000 sqm Building K will begin by the end of the year. TriGranit aims to use features like geothermal heating and rooftop gardens to achieve a LEED gold level certification for the building, which development director László Hajdu says will be a first for Hungary. Work will also start nearby on the 22,000 sqm Building H, of which K&H plans to lease about 9,500 sqm. Both projects are slated for completion in late 2011.

Transaction details and building cost estimates remain confidential, though Hajdu says the value of the two buildings together will be around €120m.