September 30, 2013
Architect Michał Borowski, CEO of developer Tacit Development Polska, which is building a 44-story residential high-rise in Warsaw, talks to Andrzej Jonas and Andrzej Ratajczyk.
You have had a unique opportunity to be part of the development of Warsaw from two different angles. You were the chief architect of Warsaw for several years. Today you head a company that is building the Cosmopolitan, a 44-story residential high-rise in the heart of the capital. What made you take up such a challenge?
I spent most of my professional life abroad, working as an architect, but I was familiar with the work of a developer. That’s why I accepted the proposal to manage this very special project, aware that it could be the last opportunity in my career to take part in building a residential high-rise. This is an extraordinarily interesting challenge.
What is your opinion of Warsaw’s development in recent years from an urban planning point of view? Is this a good time for Warsaw?
On one hand, it’s good because a lot is being built. The development of residential, office and shopping mall construction is impressive. But I think that with more responsibility shown for urban space, this time could be used much better. I sometimes feel that most politicians’ lack of interest in urban space is shocking.
Is this a good time for doing business in Warsaw as an investor?
The aim of any investor is to obtain a specific return on their investment. The task of the city authorities, on the other hand, is to shape the urban space. Of course, the city should also create suitable conditions for investment. In practice, however, the interests of developers are not always compatible with the city’s interests, and the other way round.
Is the Cosmopolitan project a good business deal for both the investor and the city?
It’s certainly good business for the city, if only because the city will earn income from perpetual usufruct of the land. This will be a considerable amount, a few million zlotys per year. The city coffers will also receive money from real estate tax. In addition, the city will gain a building that is top of its class in every respect, fulfilling all international standards, and one that could become a showpiece for the city. I think Cosmopolitan Twarda 2/4 will be a unique project, if only because not all that many residential towers will be built in Warsaw. Today, besides the Cosmopolitan, only one other building of the same size and class is being built. In my view, only two more can be constructed over the next 50 years. Building this kind of project is a very risky business.
And is it good business for an investor? That will be known in a few years, when we manage to sell all the apartments in the high-rise. We are optimistic because we believe that the people buying these unique, fully finished and fitted apartments priced at 5,000 euros per sq m are getting a very good deal. Experience around the world shows that the prices of apartments in this type of building grow by at least 100 percent over 10 years.
What makes this project different from others being completed in Warsaw and elsewhere in Poland?
I think it’s a special project in at least two aspects. The first is the way it is being financed. The developer is building it wholly from its own funds, which required a special ownership arrangement to be set up. A traditional developer wouldn’t be able to construct such a building because that would be too risky. To begin construction of this kind of building, you need to have guaranteed funding of around zl.500 million. And, these have to be the company’s own funds, because obtaining a loan is unlikely. Financing this kind of project on credit is almost impossible because banks require staging of work and advance sales. In the current market situation it would be hard to conduct advance sales of apartments in such a building. The problems other investors have had with completing similar projects have made people afraid to put up their money if they cannot be certain a project will be finished. Without the investor behind the project putting up his own money, this high-rise wouldn’t have gotten off the ground. This is an exceptional case on the Polish market.
The structure of the building is also exceptional, very original but also a great challenge for the contractor. The design by Helmut Jahn, who is world-famous, has one-third of the building sort of overhanging, protruding from the mass of the building. This lends the building a special identity but is extremely difficult to carry out technically.
What else will be special about the Cosmopolitan?
First of all, it’s a building rising above the other residential buildings in Warsaw. In this high-rise the residential part starts with story 8 and ends on 44. The fully glazed facade with different textures gives those inside an extraordinary view and lets in the maximum amount of light inside. Secondly, it’s a building with the highest possible standard of finishing, with all amenities available on the market, starting from windows that open, which is very rare in this type of high-rise, all the way to the option of controlling lighting, air conditioning and TV using a smartphone. The apartments, 252 of them in total, will be delivered as turnkey homes, fully finished and fitted with essential equipment, except furniture, of course. The building will include club, recreation and workout rooms. The non-residential part will house offices, restaurants, coffee shops, stores and other service outlets. Cars will be able to park in the four-level underground garage.
How long did it take to build the Cosmopolitan and when will people start moving in?
Construction began three years ago. The first residents will get their keys in May next year.
Has the crisis affected the luxury apartment segment? How much interest is there in apartments in the Cosmopolitan?
As far as unique apartments are concerned, in practice there aren’t all that many on the Warsaw market. That’s why this segment hasn’t felt the impact of the crisis, all the more since—as global experience shows—such apartments are an excellent investment. No wonder we have already sold about a third of the units in the building. I think that by May, when the building will be ready for use, at least half the apartments will have been sold.