Passing: The amended building code will be a mess
Construction of your long-planned Roztyly Plaza project has begun. When are you planning to start construction of the residential part of the Arboretum, which is to stand nearby?
By the end of June, we should have a change in the zoning plan, which is essential for us to start the other parts of the project preparation. I think that the Sequoia office building, which already has a zoning plan, should be launched at the turn of this year and next, if there is no unexpected problem. Of course, the main issue is the development of prices of materials and construction works and their predictability. I think this is a key issue for many investors in our region now.
As far as the Arboretum is concerned, I expect that the preparation of the zoning plan that I am building on will take another two years, because we must first ask for an EIA assessment and a zoning decision, and then it will come. We aim to be able to start building in the middle of 2024. For those two years, we made such a “cell pool” on that plot for Ukrainian mothers with children to have a school and a kindergarten.
Has there been a major problem with the change in the zoning plan that this process has been going on for over fifteen years?
We Czechs are world champions in how to punish ourselves. In other words, we are fighting to block the development of Prague, which has basically been operating here for thirty years after the revolution. We are faced with a completely incompetent decision on how the city should develop, as if it had a vision for Prague to be a city for at least two and a half million people. It should adapt its transport infrastructure and all spatial planning accordingly. Because this is not happening, and in the thirty years since the revolution there has been no vision, there are such absurdities as fifteen-year-long changes in the zoning plan, which are no request in Prague.
How do you view the metropolitan plan? Is this a key step in changing the situation in Prague?
The metropolitan plan is one of the necessary key steps. But it will definitely not be enough on its own. The metropolitan plan must emerge, it must be good and it must allow construction, it is clear, without which our capital will remain an open-air museum. The metropolitan plan must also enable Prague to reach its heights. The second thing that is necessary is a quality building law. If it does not, it is another elementary obstacle in the development of Prague. The third thing is labor shortages. It was already clear in the mid-1990s that we would find ourselves in the situation we have here today, and that is a shortage of manpower. It is the basic responsibility of all our post-November governments to have caused this situation. After the disintegration of apprenticeships in the early 1990s, they did not establish an immigration strategy for a stable and coordinated supply of labor from culturally related countries, so that we would have the necessary labor in all professions that the Czechs did not want to pursue. Before the pandemic, we missed almost half a million people across manufacturing industries.
And then there are such things that happen, say, without causing the Czech Republic. This is a lack of building materials, unpredictability in logistics or a war just beyond our borders. These are all things from this line of business making it more difficult to predict.
You mentioned the building law. What is your opinion on its changed form?
Without wanting to adore the previous government, the new building law approved in the last election period is the best law with a positive impact on the state budget, which was created in the Czech Republic in the post-revolutionary period. And the reason is simple. The competent private sector was given the opportunity to participate in it, so no misery arose. Until then, each new law meant a worsening of the situation in our field of business.
I have not very positive information from lawyers about the forthcoming amendment to the new Building Act. This will be such a mess that will worsen even the current situation. And as I said a moment ago, we are world champions in punishing ourselves, and in the field of private construction, there is no worse country in the first and second civilized worlds than the Czech Republic.
Do you mean the amendment to the Building Act, which was prepared with his team by Minister Bartoš?
Yes, it is prepared again without professional competence. Politicians who may feel that they are the smartest and that they can do without the expertise of the private sector bury the sustainable prosperity of the Czech Republic. No human law is flawless, but one that has already been approved has certainly meant a change for the better. On the contrary, what is being prepared now is actually an attack on the private sector, from whose taxes all our politicians are paid.
I think that here in the Czech Republic, neither our political establishment nor the mainstream media have yet tried to understand what private construction is or investing in private construction, and they have absolutely no benefit to the state budget. The long-term underdevelopment of Prague costs the state coffers every year 120 billion crowns on the basis of unrealized residential and office projects alone. For that, Prague would have long ago made a completely new metro circuit, the Prague ring road and a dignified connection to the airport.
What is your view on the amendment to the ordinance concerning spatial planning? Do you share the opinion of Prague, which is afraid of stopping urban development?
If our politicians refuse to use common sense, a similar situation will not cease. Prague is the capital and by far the largest settlement in the Czech Republic. He is and needs something specific. Small towns and villages, which in turn have their own specifics, need something else. If the Czechia is to be a country for fifteen million people, then in fact, every region and every region should know where the forty percent of people can live and work. And this should be the basic vision from which our politicians at parliamentary and municipal level should reflect.
You mentioned the unpredictable situation with building materials. Does it complicate you have any of your buildings you start?
I think it complicates every construction for every investor. Of course, those who are currently completing the construction are better off. There are fewer of those complications. We have one such construction, yet it is not an easy situation for our supplier. We certainly do not want to be unobtrusive and inaudible when suppliers tell us they are in trouble. We want to sit down at the table with them and resolve the situation. On the other hand, we have a construction that started recently, where it is worse for the contractor. I would say that one of the key problems of the current construction is the increase in iron prices by one hundred percent, basically day in and day out, due to the Russian aggression in Ukraine.
Has it happened to you that the supplier withdrew from the contract due to rising market prices?
I would say it’s about the investor’s relationship with the supplier. If the relationship is long-term and serious, then the contractor should not do so to leave the investor for the construction. But I can imagine that such things happen. This is certainly the case in relations between general contractors and subcontractors. If we are talking about cases where the company prefers to withdraw from the offer, because it can be liquidating for it, it is understandable in some respects. For example, for large general contractors who have multiple constructions under them at the same time and charge all the increased costs, the financial problem can be huge.
Both in the project in Roztyly and in your two upcoming buildings in Brumlovka, you have part of the apartments designed as rental housing. Is this the direction you want the market to be unbelievable?
Rental housing works in every developed civilized country, but not in the Czech Republic, because it is still not a developed and civilized country in terms of predictability of the business environment. The moment the Czech National Bank does what it has done with interest rates, it has essentially wiped out any idea of commercially built rental housing. Although I understand that there is inflation, interest rates will not solve the current situation.
If you want to collect rental housing in crowns, not in euros, then you must have koruna financing. When the koruna financing is where it is today, you have no financial leverage and you can just dream of rental housing. The moment you have euro funding at the level of two to two and a half percent, you can still do it.
So you, like other developers, have approached him in your familiar projects?
No, we still plan it, but we only plan it in projects where offices play a dominant role and rental housing has an associated role. The offices generate euro income for us, so we can have euro funding for the whole project, because the euro income from the office will cover what is needed to cover it. Twenty to thirty percent of rental flats there will not bother the financing bank.
Within Brumlovka, this is an activity we want to engage in, but I would say that it is the first example of its kind on the market. Here in Roztyly, we are planning about two hundred rental apartments, but we want to make basically as private investments. In other words, if we were dependent on bank financing, we could never go for it. Everyone has to think about whether it makes sense to bear all the risks of private investment in rental housing when the yield is four and a half percent. If you put money without work in the bank today, you have a percentage of five.
See in the video what the new office building in Roztyly will look like
Radim Passer (58) He is the founder and CEO of the real estate company Passerinvest, which is mainly associated with the construction of a large multifunctional complex Brumlovka in Prague 4. This year, construction is starting at its second location in Prague, near the Roztyly metro station. Passer demands that all his property belong to God. He spends his free time watching, among other things, Lionel Messi’s football art and riding in the super-fast Bugatti Chiron. |