Project Falenty
Real Estate Investment Project – Falenty, Poland Falenty PROJECT LOCATION – high level view
MAZOWIECKIE VOIVODESHIP Pruszkowski county RASZYN commune Falenty PROJECT LOCATION – warsaw perspective Western main City center Railway station district
Major business district
Main Warsaw Airport
Project location
Major shopping Nature Warsaw city Center reserve border Falenty Project location – local perspective Raszynskie PONDS Nature reserve A beautiful and picturesque ornithological reserve constituting a rich ecosystem for water and marsh birds with 11 ponds. One of only 5 reserves in mazowieckie voivodship that protects nature related to the functioning of fish ponds.
Janki shopping center One of the major shopping centers in Poland with 94 000 sq m of usable area and over 170 shops and stores.
Other Orhol & Olsen Projects Orhol & Olsen is currently investing in construction of 12 houses in semi detached form on two lots located in Falenty Duze. Project cost estimated at 6,8 M PLN total.
Route 665 Krakowska ALLEY PROJECT LOCATION Former provincial road Main street of the Warsaw 9011 sq m of land located in Falenty Duze leading to Expressway S8 that district of Wlochy, 25 minute – a village in the administrative district of connects agglomerations of: drive direct route to city Gmina Raszyn. Wroclaw, Lodz, Warsaw and center. Bialystok. PROJECT CONSTRUCTION PLANS
Local spatial development regulations Although there is no approved urban development plan by local authorities for this lot, there are certain limitations in this zone. Key limiting regulations are: • Building coverage allowance of total lot area – 26% • Maximum building hight – 9,5m • Parking space requirement – 2 spaces per household • Maxium building width (Źrodlana roadside) – 10m • Angle of roof slopes – 10-45 deg. • Distance from Zrodlana road – 8m
Proposed development solution Our proposal is based on verified construction solution currently being developed in our ongoing project in Falenty. We recommend best value solution focused on constructing 26 semi-detached houses, 133 sq.m. per house including garage, two-storey building, each house with 164-290 sq.m. of garden area. BUILDING SUMMARY
FLOOR PLAN SUMMARY GROUND FLOOR USABLE AREA: NR ROOM NAME AREA (sq.m.) 0.01 VESTIBULE 3,91 0.02 TOILET 1,73 0.03 STAIRCASE 4,05 0.04 KITCHEN 7,71 0.05 LIVING ROOM + DINING 24,9 0.06 OFFICE 12.82 GROUND FLOOR USABLE AREA 55,12
GROUND FLOOR FACILITIES AREA: NR ROOM NAME AREA (sq.m.) 0.06 BOILER ROOM 3,42 0.07 GARAGE 15,50 GROUND FLOOR FACILITIES AREA 18,92 NET TOTAL AREA GROUND FLOOR 74,04
FIRST FLOOR USABLE AREA: NR ROOM NAME AREA (sq.m.) 1.01 STAIRCASE 3,81 1.02 BEDROOM 11,78 1.03 BEDROOM 11,41 1.04 CLOAKROOM 5,96 1.05 MASTER BEDROOM 10,47 1.06 BATHROOM 5,15 1.07 BATHROOM 5,80 1.08 CORRIDOR 4,89 FIRST FLOOR USABLE AREA 59,00
TOTAL FACILITIES AREA 18,92 TOTAL USABLE AREA 114,12 NET TOTAL AREA 133,04 BUILDING VISUALS Project timeline
STAGE 1 STAGE 2 STAGE 3 STAGE 4 3 – 6 months 6 -9 months 9 -12 months 3 months ● Investment contract ● Project adaptation and ● Construction finalization ● Investment payout to conclusion construction approvals investor ● Sales finalization ● SPV establishment ● Construction contract ● SPV liquidation ● Release of fixed assets to conclusion ● Capital allocation and respective house buyers transfer ● Commencement of construction ● Land acquisition and title transfer ● Marketing and sales Market overview GDP GROWTH FORECAST MAJOR PRIMARY MARKETS OFFER PRICES FLATS SOLD ANNUALLY VS. OFFER AT THE QUARTER-END
4,5% 3,6% 3,5% 3,3% 3,1%
2019 2020 2021 2022
-3,6%
Pre-Covid Forecast Current Forecast Source: European Commission, Economic Forecast for Poland Source: EY, PolishReal EstateGuide 2020 Source: JLL, Q3 2020
The Polish economy is one of the most The Polish residential market is the largest in Central and The number of units launched for sale in Q3 was similar to the results achieved in the first two sustainable ones within the EU with positive mid- Eastern Europe, however it still lags behind Western EU in quarters of 2020 and amounted to slightly over 4,000 units. Compared to several previous years, term outlook. Poland was the only country within terms of ownership structure (with a predominant share of the number of new units was reduced, which was directly related to the restrictions introduced in the EU to avoid recession over 2008-2010 and owner occupied housing stock), age of housing stock and response to the COVID-19 pandemic. In the last three months, 63% more units were sold than in has been outpacing EU-average GDP growth for level of market saturation. However, last 5 years many years. particularly year 2019, showed that Poland is on track for Q2 2020. A similar quarterly sales volume of 4,500 units was registered in 2015. The offer volume catching up with more developed western markets. in Warsaw remained at a relatively low level of approx. 15,000 units, which translated into an Globally, the COVID-19 pandemic will result in offer that was 25% smaller than in the boom period. Units in the most expensive price range economic regression – which is also the case for At the end of Q1 2020 for the first time the average offer above PLN 15,000/m² became a large portion of the total number of units Poland. GDP is projected to decline in 2020 by price of flats available in Warsaw exceeded the level of on offer (9.9%) about 3,6% due to a disruption in economic PLN 11,000/sq m. Demand reduction and downward activity caused by the lockdown measures and an pressure on the prices will depend directly on the duration Increased interest in the living sector can be observed in Poland. Prime multifamily yields stand unprecedented fall in external demand. In 2021, of the epidemic. Offer prices remain stable or even might GDP should bounce back by 3,5% driven by a statistically rise but the sales period will be extended. at 5.25% for single assets in forward funding deals in central Warsaw, while sub-central Warsaw strong recovery in household consumption. are discussed around 5.5%. REAL ESTATE DEMAND – COMPARISON H1 2020 vs. H1 2019
150% Market overview 128,2% 110,1%
100%
HOUSE DEMAND STRUCTURE Q2 2020 52,0% 48,9% 50% 31,6% 60,00% 21,1% 48,8% 9,1%11,1% 10,3%11,5%
40,00% 0% 32,4% Jan Feb Mar Apr May Jun -10,4% -13,0% -17,3% -15,1% 20,00% 15,9% -21,8% -24,0% -25,1% -50% 6,9% -38,0%-33,5% -33,4% -38,4% -33,5% -49,8% 0,00% -56,7% <100 sq.m 101-200 sq.m 201-300 sq.m >300 sq.m -100% Source: Morizon.p, Rynek nieruchomości w I półroczu 2020 Apts for sale Houses for sale Lots for sale Apts for rent The outbreak of the coronavirus epidemic and the resulting restrictions on movement or the use Source: Morizon.p, Rynek nieruchomości w I półroczu 2020 of parks and forests significantly influenced the perception of the benefits of having a house and It was an exceptional six-month period for the Polish real estate market, The economic development that has been going even a piece of your own lawn. The possibility of unhampered going outside, playing with on for years, the progressive increase in the wealth of citizens and the undisturbed prospect of further growth in prosperity children in your own sandbox or meeting friends at the grill near the house became a priority meant that no one - except perhaps the born pessimists - expected significant changes on the market. overnight for those looking for their own place. High demand for real estate - both those intended for living needs and those purchased for investment purposes - could In a recent survey performer by a leading real estate agency – Metrohouse, 40.2 percent hardly be satisfied by the supply and prices were systematically rising. Metrohouse agents admit that customers are changing the search for a flat into segments and houses, and at the same time 35.4 percent. agree that instead of buying a flat, the interest in This was the case until the beginning of March, when the Covid-19 virus appeared in Poland. The fear of the coronavirus buying a plot and building a house is increasing. There is a visible trend of looking for real estate and the measures taken to prevent its spread have hit many sectors of the economy, leaving a clear mark on the real where you can enjoy your own "piece of land" in the event of a possible quarantine. estate market mainly due to lockdown and severe restrictions in mobility. This lockdown, although critical in slowing down Given the shift in buyers preference from apartments to houses, the matter of affordability is of the industry, has also affected the preferences of potential real estate buyers. also key in understanding the size preference of new houses. Majority of houses sold are within close range from 100 sq.m. With high prices of land and buildings within city centers – potential For this reason, many clients who have so far considered buying a flat have turned their interest towards offers for the sale buyers seek more affordable solutions further away. With today average prices of new of houses (and construction plots). This is confirmed by the statistics of demand for this type of real estate, which, although apartments within the city borders starting from 12,000 pln (Warsaw), a potential buyer can systematically growing for a long time, in May and June were higher than the year before by 31.6% and 21.1%, respectively. reconsider acquiring a 65 sq.m apartment and get a 130 sq.m house with garden only 15 minutes away from the city (Falenty). Local competition
1. Sosnowa dolina – slomin • 17 unitsof 126-152 sq.m semi detached houses 4 5 6 • Price 700,000 pln/126 sq.m - all sold out
2. Osiedle jendosci 47 -janczewice • 15 unitsof 126 sq.m detachedhouses– • Price - 690,000 – 750,000 pln dependingon lot size 3
3. Osiedle falenty– Falenty duze • 27 unitsof 152 sq.m semi-detached houses(woodenconstruction) • Price - 649,000 pln/unit
4. Domy przy willowej II – Falenty nowe • Massive housingdevelopment with total of 151 semi-detached housesfrom 68-114 sq.m • Current offeringprices from 487,000 pln/75 sq.m to 586,000pln/95 sq.m 1 5. Osiedle panoramy – Falenty nowe • 40 unitsof semi-detached houses156 sq.m on 475 sq.m lots 2 • Price - 780,000 pln/unit
6. Osiedle droga hrabska – Falenty nowe • Planned investment of 10 semi-detached houseswiht 173 sq.m. • Current phaseoffers 4 units– price 890,000 pln/unit
7. Willa mirabelka III – lesznowola • 54 unitsin terraced form with 93 – 145 sq.m per unit. • Price - 569,000pln/93 sq.m and 649,000pln/124 sq.m 7 INVEstment collateral & Investor capital security
REAL ESTATE COLLATERAL Investor Designated bank Investor will be written as creditor in land Project accounts will be opened in Investor register for Project Real Estate designated bank • Investor as primary creditor in case of liquidation • Complete insight into Project expenditures • No possibility of sale of land without Investor consent • Project accounts pledged as collateral • All buildings constructed also serve as collateral • Investor consent for large sum payouts
Tranche-basedinvestment Open housing Escrow account Total capital investment divided into four Open type escrow account enables the tranches based on phases usage of client’s funds • Total required investment divided into smaller tranches • As per Developers contract with client – the Developer can use • Capital risk exposure limited to given investment tranche accumulated funds to finance construction phases • Completion of each phase serves as basis for next-phase • Offers possibilityto further limit Investors capital exposure investment tranche Project Risks Materials price change Epidemic lockdown
According to the PSB Group's analysis, in 2019 the average increase in the The current period of restrictions related to the coronavirus pandemic shows that prices of building materials was only 3.6%. So far, 2020 shows even slower the construction industry is a sector of the economy that, despite initial fears, has dynamics of price changes. So far, prices in the period January-November, been able to withstand the "lockdown" period quite well. A 3.7% y/y increase in compared to the same period of 2019, increased by an average of 1.4%, March indicates that restrictions on construction sites did not lead to a freeze of which is the same as in August, September and October (in July, the construction works. Similarly also in April, there was no panic in the building indicator was 1.5%). Covid related price stabilization is not expected to last – materials industry and there was no significant drop in construction activity. At the further price increases are to be expected for 2021. In order to hedge against end of 2020 the Polish Government officials are not indicating any necessity to the price increases the agreement with the contractor will stipulate the introduce severe restrictions due to Covid. maximum price increases allowed. This will prevent the Investor from exceeding the budget.
WARRANTY CLAIMS CONSTRUCTION DELAYS
With the development of the construction industry segments and the Construction investments, even perfectly planned and organized, carry the risk of growing expectations of customers and contractors, it is more and more unforeseen events and problems that may, as a result, become the cause of delay. common to provide guarantees for construction works performed by Responsibility for delays depends on the provisions contained in the contracts contractors. These warranties will be enforced in the contract, however an between the contractor and the investor. Well-prepared contract will keep the independent construction inspector will be hired to supervise and receive balance between the requirements and interests of the parties and equitably share the buildings from the contractor in order to quickly identify any potential the risks, threats and responsibilitiesrelated to the execution of construction. claims prior to release to the client. Legal framework – key points developers act Who is subject to the developers ACT? All terms and conditions of concluding contracts with developers and the The act defines a developer as an entrepreneur within the meaning of the Act of 23 April 1964 of scope of obligations of the parties to the contract are regulated by the the Civil Code, as part of his business, he undertakes, on the basis of a developer agreement, to Developer Act. This is the unofficial, colloquial name of the Act of September establish the right to real estate and transfer it to the buyer. The other party to the developer 16, 2011 on the protection of the rights of buyers of a flat or a single-family contract concluded on the basis of the aforementioned Act is the buyer, i.e. a natural person house (Journal of Laws No. 232, item 1377). In terms of the material scope, who, under this contract, is entitled to transfer the property right to it. It also undertakes to pay this act regulates the principles of protection of the rights of the buyer, the developer a cash payment towards the purchase price of the right. towards which the developer undertook to: establishing separate ownership of a dwelling and transferring its ownership to the buyer, transferring the When, according to the act, can a developer start selling ownership of real estate developed with a single-family house to the buyer, property? establishing perpetual usufruct of land and ownership of a single-family house erected thereon constituting a separate real estate. The developer starts selling property by publishing information about it. He must first prepare an The purpose of its enactment was an improved, comprehensive protection information prospectus for a given development project in which the deadline for handing over of the rights of buyers of apartments or single-family houses from the the property to buyers will be indicated. primary market. Thanks to its regulations, the funds paid to the developer's Withdrawal from the contract in accordance with the account by buyers of new apartments are better protected. All because developers are obliged to keep an escrow account for each investment, developer act thanks to which the money paid by buyers does not immediately go into Withdrawal from the developer contract is possible pursuant to Art. 29 of the aforementioned developers pockets and cannot be freely disposed of. The Developer Act Act, if it does not contain all the required information or the information is incorrect - obliges developers to include in the information prospectus, constituting an inconsistent with the data included in the prospectus or in the attachments. The buyer also has integral part of the agreement in the form of an attachment, the deadline by the right to withdraw from the developer agreement if the developer has not provided him with which the property title will be transferred. If he fails to do so, the buyer is an information prospectus with attachments or the information contained therein is entitled to withdraw from the contract immediately. inconsistent with the factual and legal status on the date of signing the developer agreement. The withdrawal is possible in the event that the ownership of the real estate is not transferred to the buyer. Legal framework – key points The developer's escrow account Information prospectus from the developer A detailed description of the developer's escrow accounts is included in the One of the most important provisions of the developer law is the obligation to prepare and Developer Act. Art. 4 of this law states that the developer must provide present an information prospectus to customers interested in buying a new apartment. The buyers with at least one of the following protection measures: developer law provides a complete definition of the prospectus. • closed housing escrow account, It is a document that a developer must prepare before starting the sale of apartments in a • open housing escrow account and insurance guarantee, given development project. It is also an integral part of the contract. The information • open housing escrow account and bank guarantee, prospectus should contain such information as: • an open housing escrow account. • Property purchase price; All costs related to escrow accounts are borne by the developer. The • Construction work completion date; developer receives the money paid by the buyer of the property either in full • Time limit for the transfer of ownership of the property to the buyer; after the investment is completed (closed escrow account) or in tranches • Information on the real estate under construction, along with a detailed description of after the completion of subsequent construction stages (open escrow the scope of finishing works in the so-called developer status; account). • Specification of the method of transferring funds by the customer; • Terms of withdrawal from the developer contract on the part of the client. Guarantee resulting from the developer act Upon receipt of the property by the buyer, a protocol is drawn up, to which the buyer has the right to report the defects of the premises, and the developer is obliged to deliver to the buyer a declaration of defects or a declaration of refusal to recognize the defects and its reasons within 14 days from the date of signing the protocol. The Developer Act requires the developer to remove defects in the apartment. He is obliged to remove any recognized defects of a flat or a single-family house within 30 days from the date of signing the report. If the developer, despite due diligence, fails to remove the defects within 30 days, he may indicate a different date for their liquidation together with the justification for the delay. The developer is liable to buyers for his building upon receipt of the property. The scope of his responsibility for physical and legal defects of a flat or a single-family house is indicated in the Civil Code in the provisions on warranty. Pleasure Doing Business
For further information please contact:
Dariusz Sikora - [email protected]
David Olszewski – [email protected]
Grzegorz Warchoł – [email protected]
ORHOL & OLSEN SP. Z O.O., AL. JANA PAWŁA II 27, 00-867 WARSAW, POLAND