In the centre of Prague’s old town, the world’s largest collection of Apple product exhibits can be found in a dedicated museum.
Opened last year by a mysterious collector, the museum pays homage to Steve Jobs’ entrepreneurial spirit. And it is a sign of the times in this region.
With technological innovation in eastern Europe replacing the heavy industries of the Soviet era, it is perhaps unsurprising that the head of the region’s largest developer compares his buildings to iPhones.
“I say to our people, every building is an opportunity,” says Pavel Trenka, group chief executive of HB Reavis. “So what can you bring? What new functionality? What new experience?”
Previously a “commodity player” achieving the lowest price point for offices and retail through the use of its in-house contractor, the developer now has a strategy that focuses on innovative office, retail and leisure spaces with value-added services
and design.
The UK needs to take note. Undeterred by Brexit, HB Reavis is expanding its London team and plans to have a third of its €2.1bn (£1.8bn) portfolio in the capital in two years’ time.
After making a spectacular market entry with the redevelopment and sale of 33 King William Street, EC4, to US bank Wells Fargo in a £300m referendum-defying deal this summer, what will HB Reavis do next both on home turf and here in the UK?
Commodity to innovation
In both markets, the future is tech. A growing number of digital success stories are emerging from central and eastern Europe in response to a young talent pool and relatively cheap offices. Google notably launched a tech campus in Warsaw, Poland, at the end of last year. And catering for those new and growing businesses is central to HB Reavis’s strategy.
“Employees are directly impacting the office space needs of the client because the younger generation look beyond themselves to how the environment affects the community as well,” Trenka says. This means flexible leases, room to expand quickly, and added services to attract staff.
At app developer STRV’s global headquarters in HB Reavis’s River Garden II/III office complex in Prague, the mess from a roof terrace party the night before has been cleaned up before my arrival. Employees enjoyed a jacuzzi, beer on tap, sleep pods and indoor skateboarding.
Chief operating officer and co-founder Lubo Smid says his tech staff like to be surrounded by a plethora of devices, including an HTC virtual reality headset. Coders tend to like gardening, he says, and so several desks are decorated with potted flowers and herbs.
The large, modern offices match the company’s culture, offering staff more than “just bland corporate space, and enabling them to feel great at work”, Smid says.
Founded in 2004, STRV grew from 50 to 150 employees last year, and expects to reach 450 in the next two years. Around 180 developers with an average age of 28 work in the 60,000 sq ft offices in Karlin, a former industrial area on the edge of Prague’s old town, which has become a hub for tech firms. In anticipation of its own growth, the space it leases is sufficient for 450 employees.
“We’ve had a lot of crazy requests and HB Reavis has been able to take these requests and really exceed our expectations,” Smid says. “Every single thing in the office is well-crafted, not like they just wanted to get it done. They wanted us to feel nice here.”
The focus on employees and shared spaces has already served HB Reavis well financially. Three of its Warsaw office buildings in the former industrial-orientated Mokotów district, featuring green spaces, independent restaurants and quirky reception areas, were sold earlier this year after it was offered prices “beyond what we could have imagined”, says Trenka. Gdanski A and B, which comprise around 517,000 sq ft, were sold to Savills Investment Management on behalf of a global pension fund client in September for €186m.
Alongside the autumn sale of another Mokotów asset, the 532,800 sq ft Konstruktorska Business Center to Golden Star Estate BV for €120m, the deals represent HB Reavis’s first divestments in the prosperous Polish market (see global strategy box, overleaf).
“I think in Poland, we started with the philosophy,” says Trenka. “Our receptions and ground floor and greenery are distinctive. I think that focus on what our users, our people, are feeling in shared spaces is where we’re different.”
He adds: “That’s part of the shift – from the commodity to innovation, bringing something new that surprises the client beyond expectations.”
City within a city
On the south-eastern edge of Bratislava’s historic city centre, a new district is rising up on a swathe of brownfield land abandoned since the 1980s. Overlooking the Danube, Culenova will host financial group Penta Investments’ highly anticipated office and residential project, designed by Zaha Hadid Architects. Comprising five high-rise buildings, the complex will surround a restored former heating plant and sit in a
tiered park.
In close proximity, HB Reavis’s Twin City, the largest regeneration project in central Europe, will comprise 700,000 sq ft of offices, shops and services across three buildings at Mlynské Nivy.
A further 377,000 sq ft of offices are being constructed at the 22-storey Twin City tower, alongside a central bus station.
Opposite Twin City, HB Reavis is also constructing Stanica Nivy, a mixed-use project with a mall, office space and bus station totalling around 1.4m sq ft.
The project will see HB Reavis deliver its first campus model, where services from workspace to a fresh-food market, laundry service and rooftop running track, will provide workers with all their daily needs in one place.
Designed by Benoy, the architect behind London’s Westfield, the scheme will be within reach of 45,000 office workers and the bus station’s 20,000 daily travellers. It is due to open in 2019 and tenants are being sought for the shops. Vapiano has signed to open its first Slovakian restaurant there, and HB Reavis hopes to attract newcomers such as Hamleys toy store. Retail leasing manager Peter Sluka says he hopes retailers like Forever 21 and H&M will choose the mall for their national flagships.
The new design reflects how far the retail scene has come in Bratislava since HB Reavis built its first city centre mall, Aupark, in 2001-2007. The 624,300 sq ft shopping centre was a milestone for the city centre’s retail, just 18 years after the fall of communism.
“It took a few years after 1989 for people to be more comfortable and have the means to be outgoing, go shopping and enjoy spending their time in a different way,” says communications manager Martina Jamrichova. “People usually only went to shopping malls on Saturday because of the huge supermarkets, but that changed around 2000.”
She says her parents’ generation adapted quickly to the rise of capitalism. “My father is 70 and has a smartphone, a tablet, and shops online. So the society is quite modern. In some things, we are way ahead and in some ways, we are behind.”
Since HB Reavis completed its first Aupark, a further six huge shopping malls have entered the market, which now has double the saturation of Prague, Budapest and Vienna.
“It’s good news for us,” says Sluka. “It sets the standards. If you want to be the best, you have to beat the others – you have to bring more value to the marketplace than the others.”
Innovation districts
From commodity to campus, the next stop for HB Reavis is innovation districts. The company wants to help provide the infrastructure
for the next CEE tech start-up to go global, Trenka says.
“We create the ecosystem where we bring freelancers, start-ups, small companies, technology players, services, universities and R&D platforms. So there will be bigger companies together with small companies, and we will create the environment which brings them together.”
The start-up scene in Berlin is one of the reasons HB Reavis has chosen it as the next city to enter. It plans to open an office of four to five people there by the end of the year.
In London, HB Reavis is looking for sites where it can create a scheme of at least 1m sq ft to give it enough scale to allow for creativity.
“A million sq ft, that’s a good ground for creating something unique,” Trenka says. But while the team is proud of its London debut, he says, apart from the terrace, it could be more innovative and creative.
“When you look at 100,000 sq ft, what you can do is limited. So I think as we expand our abilities, we will expand our risk appetite to contemplate bigger schemes, and with that we will come to: how do we make something distinctive?” he says.
He is not too concerned about the move to leave the EU for now.
“It feels like London has a huge technology sector so I think London, irrespective of Brexit, will see no change for the technology sector. That’s my perspective.”
One thing Trenka is concerned about is unleashing the creativity of the capital’s real estate professionals.
“London is similar to the US, and I think when you work with the seasoned professionals, everybody’s smart, everybody’s experienced.
“The bigger difference in London is that we lack a little bit of entrepreneurship. Some people were not able to operate in the more entrepreneurial environment where we have more freedom, but you have to embrace it.
“You have to use that freedom to create value, not just to follow what you know.”
Whatever the outcome of Brexit negotiations, it is clear that HB Reavis will relish the challenge of competing with the real estate establishment in London, which raised its eyebrows when the company first entered the City market.
“It’s the most challenging market in Europe,” Trenka says. “One of the most challenging in the world.”
He smiles. “If you can make it in London, you can make it anywhere.”
Interview: HB Reavis group chief executive Pavel Trenka
HB Reavis’s global strategy
HB Reavis plans to significantly restructure its €2.1bn portfolio, which is located predominantly in the CEE region.
In two years’ time, it expects to have a third of its developments in London, and 50% in the CEE markets of Prague, Warsaw, Bratislava and Budapest. A further 15% or so will be in new markets such as Berlin.
The company’s target is to have 50% of its balance sheet in development and 50% in income-producing assets.
At the end of the year, it will probably be at 60:40, after it took advantage of the heated Warsaw market to sell some of its assets there.
However, chief executive Pavel Trenka says: “This is not a long-term ambition. This is just a temporary market situation.”
Trenka says there are no current plans to seek a listing, although he thinks it would be the right option if Chrenko decided to exit the company.
HB Reavis’s history
1989 Fall of communism in eastern Europe
1990s Ivan Chrenko (chairman and majority owner) starts a high-end speaker business
1993 Co-founds a real estate agency after sale of speaker production building creates more profit than the business
1995 Development arm of HB Reavis formed
2007 Pavel Trenka joins as chief operating officer
2010-11 Logistics arm of the business is discontinued
2011 HB Reavis enters London
2013 Buys first London development site at 33 King William Street, EC4
2013 Launches debut bond in Poland, raising £22m
2016 Enters Czech Republic capital market with a bond issue of €46.2m (£40m)
2016 Sells first London scheme to Wells Fargo for £300m
HB Reavis’s 2015 results highlights:
Total assets: €2.1bn
Net asset value: €1.2bn
Net operating profit: €302.5m
Gearing: 29.7%
External financing that is project financing from local banks: 80%
External financing through the bonds it began issuing in 2013: 20%
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