Standing on the top floor of Bratislava’s tallest residential development, Panorama Towers offers a bird’s-eye view of the Slovakian capital with its cranes signposting major developments under construction.
To the east of the old town, work is under way at the Klingerka development to build a 35-storey residential tower and a 11-storey office building. West of the city centre lies the 82-flat Nová Vlárska Kramáre development.
Both projects belong to developer JTRE, and managing director Pavel Pelikán is excitedly outlining land where a further six schemes are in the pipeline.
Pointing to land south of the River Danube, Pelikán explains JTRE is planning to create a 1m sq ft city centre, with a pedestrian bridge spanning the river to connect the development with the north of the city.
North of the river and to the east, plans for a 1.2m sq ft commercial, residential and retail development, Eurovea II, are being drawn up.
JTRE is certainly not short of projects to get its teeth into. But the team has plans to focus on growing its presence in a relatively new and unfamiliar market: London.
When we studied the financial models that we’ve been receiving from London, all of them are always around 15% IRR, which is the target for what we aim to do with all our projects abroad
It has already dipped its toe into the UK property arena, having acquired 185 Park Street, SE1, the site for its £400m development, alongside London-based developer Sons & Co in July last year.
The developer has a 10-year plan to establish itself as the next big property player in London, and is looking to invest £350m over the next three years.
With an ambitious aim to make its projects in London account for 50% of its revenue within the next decade, how exactly will the Slovakian developer ensure it hits its target?
The company has already exited the Russian market and plans to sell its only project in Budapest “as quickly as possible” in order to focus its attentions on London, where JTRE international operations director Juraj Ilavský says the company sees a “bright future”.
The firm’s reasons for expanding its presence in London, explains Ilavský, are twofold – the first being that JTRE “wants to be part of this world. The market is one of the major markets in the world, and probably one of the oldest ones, and if you look at prices from 2008, we’ve seen that they have been stable. Only the pace of selling has slowed a little”.
Secondly, because of the high returns that can be made on successful schemes.
“We are buyer-driven,” says Ilavský. “We are searching for the highest revenues in our business. When we studied the financial models that we’ve been receiving from London, all of them are always around 15% IRR, which is the target for what we aim to do with all our projects abroad.”
The £350m that JTRE has earmarked for investment will be directed towards central London sites, with a focus on office and residential development opportunities.
However, the group anticipates that, as a relatively new international player, tapping into the exclusive London market could be challenging, which is where its Park Street development partner, Sons & Co, comes in.
JTRE is in talks to buy the local developer and incorporate it into the JTRE UK business arm. Pelikán says a deal is close to being agreed.
“We are very close in our discussions with Sons to buy them out,” he says. “This would be a good step for us to finalise the agreement, as they [Sons] have been involved in the market for years, therefore wouldn’t need to start from scratch. This is how we would like to settle in London.”
On financing its projects, 30-40% of total costs will be funded through a combination of equity and junior loans, with the remainder through senior debt sourced in the UK.
The developer is focused on buying off-market sites valued between £50m-£100m, following unsuccessful bidding for two sites: the former ITV studios at 52-78 Upper Ground, SE1, and the over-site development at the new Tottenham Court Road Crossrail station, WC1. JTRE and Sons & Co lost out to Allied London for the former ITV Studios, and to Galliard at Tottenham Court Road.
But Sons & Co co-founder and chief executive Alex Stocker is quick to get over the loss, saying it is investigating five other off-market opportunities.
“You spend a lot of time building up a tender and putting a lot of effort in, but the chances of actually winning are fairly slim,” he says.
“We decided we would fall back to where we always used to be: we would try buy things off market[…] and directly target owners.”
JTRE is determined to develop its business in London come what may (Pelikán says the team would carry out its expansion plans “whether or not we have Sons on board”).
But the developer is entering the UK at a time of major political instability, with cumbersome, lengthy and, so far, unsuccessful Brexit negotiations.
Despite the setbacks, the JTRE team seems optimistic about the capital’s property prospects, more so at least than they were in 2016.
“We had concerns,” says JTRE’s head of financing Lukáš Sásik. “After the vote happened, we decided to wait a year to see how the situation evolved.”
But with JTRE founder and chairman Peter Korbacka giving the green light for the company to go full steam ahead with its London investment plans, the company has flipped its concerns about Brexit into an opportunity.
“The pound is cheaper and foreign investors from Asia don’t care whether there is Brexit or not,” Sásik says.
“If you have a good product in a good location, it doesn’t matter whether Brexit will happen or not. The market is so large that a good scheme and a good product will have its mark on the market.”
As Pelikán winds up our tour of Bratislava, with views across the city showing the clusters of JTRE projects, it is clear to see why he wants to do the same thing in one of the most popular capital cities in the world.
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