Fast Confession – property developer Marcel Soural: I had to work hard for all I own. The state knows all about me

How has the coronavirus affected you and your company? Did you have to put all your projects on hold, or the opposite? Did you or will you have to dismiss employees? The consequences of the coronavirus are yet to be fully seen...

They are yet to come. Our core business is residential development, we're building flats. I have to say that the coronavirus has not affected us at all, quite the contrary. People have discovered over time, that as the states print more and more money, money gradually loses its value because of that. People do not want to lose money through inflation or price increases. So they invest it. Today, unfortunately, people don't trust stocks or bonds very much, and gold is a peculiar commodity as well.

Really?

Really. So they've figured out, and I think they’re correct, that the safest asset is to buy an apartment somewhere it will always be needed in the future. That means in a suitable location in a big city, not in the outskirts. People really went into an investment frenzy right now, and they're buying up flats right and left.

However, these apartments are really expensive. Lots of people can just barely afford to own a condo, many others can't afford it at all. Who's going to be able to buy apartments?

Money is still cheap now.

**byt/top*

So far, it still works. Two years ago, the pre-COVID, fairly logical reasoning of "why pay rent when you can pay a mortgage for the same money" was correct. Money is still cheap, and it got a lot cheaper during the coronavirus pandemic, because the Czech National Bank wanted to help the economy. And its help started a housing boom. People are taking out a lot of mortgages because the repayments and interest rates are really favourable now. The moment this changes, more flats will be bought by small investors who have a supply of their own money, or by institutional investors, i.e. the bigger ones, turning the housing stock into rentals. And that's exactly what's going to happen, unless some large set of apartments comes on the market to balance supply and demand. Which doesn't look like it's going to happen yet, because the new Construction Act shall enter into force in about a year or two, and it’s gonna take maybe three more years to see its impact on construction.

Until then, getting a building permit shall remain as cumbersome as it is now, so supply will still be weak. And what is scarce is expensive. People will gradually stop being able to afford their mortgage repayments. House prices will keep rising. You put some of your equity, your own resources into buying a home. The bank will ask you for about fifteen, twenty percent. However, in absolute terms, it will keep going up, even if you somehow manage to scramble up the money. The monthly payments will keep going up. And it's going to increase proportionately as the apartment gets more and more expensive.

At some point, you'll start to consider whether you should pay a monthly mortgage of thirty thousand or eighteen thousand in rent for the same apartment. That's where the rental market starts to work. You go into renting and you resign yourself to owning your own home. You'll find that renting also has its great advantages. It will be cheaper and you will be independent, free. If you change jobs and move, you'll pay rent somewhere else and, most importantly, you won't have to look after the flat.

So in about three years, renting will become profitable?

That depends. Unless something massive happens on the supply side of apartments for sale, which is unlikely, the price of rents will probably stall or slow down with investors buying most apartments and turning them into rental housing. Their supply will grow and prices thus will not escalate. And mortgages will already be so expensive that most people looking for housing will go into rentals.

Anyway, the apartments that are already available (and overpriced) will be bought up by big corporations or foreigners.

Not foreigners, they don't buy much here. There are no new foreign buyers lately. What’s on the rise is real-estate investment funds that are either established Czech businessmen or have foreign money. They already know that the opportunity will be here. And then there are small investors as well, a significant group of people who own five or ten apartments, having the family fortune stored in them. These properties are enough for them to cover their living costs quite well.

When did you buy your first flat?

That was in our first project, which we called Bytový dům Tachovská (Tachovská Apartment Complex). We started building it in 1995 and completed it in 1996. The company was founded in 1994. We are historically one of the first property developers on the Czech market.

Did you think back then that this was a good move?

You mean buying an apartment? No. And this was a time we were selling flats for 18,000 crowns per square metre.

If I looked in the land registry, how many flats and properties would I find under your name?

That's difficult. I have a certain structure of my own property, designed in such a way that you probably won't find me. It's either in an LLC company, or a family trust fund.

Does this mean that if you went into politics, even though you said you didn't want to, you would end up like former Health Minister Arenberger?

No, I'd disclose it. I had to work hard for the apartments, I file my assets declaration and tax returns, and the state knows all about me. I'm a tax resident here in the Czech Republic, we have no office in the Panama or anything. I tax all my profits here and I am easily traceable.

What problems have you faced during your career? For example, have you ever been asked for a bribe to speed up issuing of a building permit?

Our problem is the officials. There’s just too many. And then the way the Construction Act has historically been amended by dozens of amendments. Each amendment has brought another extra bureaucratic process. Today, to start building, we have to get a zoning permit and a building permit. We need to collect about 70 permitting stamps in each procedure. And for each stamp, you have to put up with at least one official. Sometimes the stamp is issued by an administrative section, which has its own departments, and each of these departments issues a statement on your application, so sometimes one stamp means multiple officials to tackle. The government authorities concerned are usually civil servants, meaning they don't want to make any mistakes, they don’t want any worries and problems. They have their cushy job, a nice stamp, they’re never in a rush. There‘s no binding obligation for them to give it to us by a certain date or deadline. So the clerk is our biggest "enemy" – or rather the amount of them. We can't afford to bribe someone or do anything like that. That would be completely unnecessary and inefficient with the number of officials we need to convince. (laughs).

What’s your opinion on illegal constructions? There is a lot of discussion about them in Prague 2.

We're building big apartment buildings, complexes. You can't afford to build such a thing illegally, that’s not possible. We build an apartment building and it needs a declaration from the owner. You have to divide the building into housing units, you divide them in the land registry, and to do that, you need a building permit. Then, in order to sell the housing units, you need to get an occupancy permit, which is necessary to have a registration number for the building assigned, and you have to include that registration number in the purchase contract. Therefore you can't sell a new apartment without an occupancy permit.

However, I can own, for example, an apartment building in Prague 2, as you said. And before I start reconstructing it, I'll make a declaration of ownership, and that will create the apartment units. I can easily sell off these units, whatever reconstruction is going on, because they already exist. The question is, do I have to have a building permit for everything I renovate? I don't. If it‘s repairs or design stuff, I usually don't have to. A building permit is necessary mainly for elements that are, for example, structurally affected or for when I am expanding the house, increasing its mass and so on. But a lot of things can be done without a building permit.

Pronájem luxusního bytu, Praha 2 Vyšehrad, Praha 2

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Of course, all of the investors and owners, are getting into the same rut as we are, those 70 stamps. But since they don't do it every day, it drives them crazy. And so it can happen (it usually doesn't, though) that someone decides to build illegally...

You're planning to build Prague’s new tallest building, Top Tower. Why do you want it to be the tallest?

Because the plot allows for it. When we exchanged it and paid the Municipality an arm and leg as the rest of the price, we found out that the land is not in the conservation area, which creates sort of a circle around the city centre. Nor does it lie in the no high-rise zone, which is also important. That means that those two key restrictive conditions that prevent you from erecting high-rise buildings are not in place here. It's a house, right next to a subway station. So a remarkably good location to build something interesting. When we calculated the yield of the site based on the gross floor area, we found that we could go over a hundred metres.

Isn't that an ego thing as well?

We have about eight options designed for the plot. The seven previous ones weren't over 100 meters at all. We presented the variants to the IPR (Prague Institute of Planning and Development) at their council meeting. And they asked what would make this building significant, that they see it would be tall, but not really that tall. They gave us a bit of a hard time, and then I gave the architects a hard time, and I said: "All right, they want something provoking there, so let's give them that." And thus, Top Tower was born.

It’s designed to have a lot of small apartments and shared spaces. Is it primarily for young people, then?

There won‘ be just one function. The tall tower shall have small apartments up to about 19 square meters, which is really small. But take it the way we managed to get everything in there - kitchen, toilet, shower, bed, storage space. You'll have everything. What do young people need? They don't need to dance the waltz in their apartment, they need a place to live. We're going to give them shared equipment and spaces on three, four floors with these small apartments. There'll be big communal gyms, libraries, kitchens, living rooms and so on. That's the lesson we learned in London. We know that this concept works in Madrid, Berlin, Hamburg or Amsterdam as well, and it is very popular there.

I thought we already have it here.

No, you mean the project in Malvazinky. But that's not the same. The apartments there are for sale, which's different from our concept of co-living. We won't sell the apartments, we'll still own them all. They'll be rental apartments that we'll take care of. But mainly we'll take care of the common areas to make it work. If you chop everything up into ownership shares for a hundred to four hundred people and sell it off, co-living will never work.

How much is the rent going to be?

I think it's about fifteen thousand. But that's including utilities. There'll be 400 apartments, all of them rentals. Then there'll be offices, as well as attractions, such as the ship. See, this ship is not just a statue, it's a static feature that supports the tall building. There are two lifts that will take people to the top of the ship, allowing you to see 85% of the Prague skyline. Below the lookout will be a scenic overlook restaurant, and an outdoor art gallery inside the ship. The roof of the low-rise building shall have other attractions, so that you don't just go to the lookout, take a quick look and go home, but spend half a day there and have fun.

I see you're proud of this project.

I am.

The Fragment project in Karlín also bears your name. What's your relationship to this place?

We lived there for about 12 years, in Karlín, in Kubova Street, near Lyčkova Square. It's actually on the other side of Kaizl Gardens. The Fragment is being built on the other side of the park.

There's expected to be a statue by David Černý, supposedly a woman with her breasts out.

A naked woman with breasts. Every woman has breasts. (smiles)

Okay, but why it’s going to be her propping up your building?

It's David Černý‘s artistic expression, none of my business. He just made it up that way. And she having an ample bosom is just a thing that David prefers, so here we are. (laughs)

But the house is yours.

It doesn't matter, you can't guide the hand of an artist. That's like commissioning a renowned painter for a personal portrait and telling him I don't look like this, here, do this and that. That's baloney.

If you commission a painting, it's yours and you're the only one looking at it. Whereas here, there'll be an awful lot of people looking at the sculpture.

That’s right. If it was my statue, I'd be upset if certain parts didn't match the real thing. But it's not my statue. He composed it from his own ideas and visions, it's his artistic choice, his freedom. I have no say in it.

David Černý is very controversial and you give him a lot of space. You said in your Quick Confession that he charmed you with being straightforward and honest. But that's his personality. Do you really like all of his works personally?

Not all of them, but then again, he probably doesn't like all of our buildings either. That's the way it is.

Are you personally interested in art? Would you give your next project, give space to someone else, who would be interested in collaborating with you?

It’s mainly about communication, the wavelength you’re on. David and I met about six years ago when he made us a 12-metre sculpture of Trifot for Korzo Nové Butovice, which was part of the Smart Flats project. At that time we were struggling with the fact that we wanted to have something nice in the square to enliven the space, to catch the eyes of people coming out of the metro and make them come to the square, see the gallery, restaurants and so on. The selection procedure really gave us a run for our money. And then one day our project manager said: "The only one who can make you anything good for that place is David Černý". We negotiated with him for half a year, it was terrible (laughs). But then we came to an agreement, he even signed a contract. And everything we agreed on worked out perfectly and in time.

We got to know each other, then we started going to the pub together, and we got on the same page. I have a similar philosophy of doing things differently, I don't want to be mainstream, I hate routine and all that. At the time he delivered us the Trifot, we had just acquired the property rights to the Fragment plot. That project was designed by Qarta architecture studio, we didn't even do a tender for it. I told the architects, Řezák and Wittassek, that I would simply throw in David into their team to come up with something. I told them I would like us to start doing buildings a little differently - to make them the way it used to be, back when architecture and art went hand in hand, needing each other. This relationship is completely gone nowadays. They agreed, came up with the shape of the building together, and David added the sculptures. Subsequently, David and I started another architecture studio together called Black n' Arch.

What do you do when you're not working? What do you like to spend money on?

That's such a cliché, what you like to spend money on. I live a normal life, just like you, completely the same.

Well... (laughs)

Well, yes, I have a helicopter for example, but I have it only because we are building a winery in Veselí nad Moravou. And that's very far away, three and a half hours by car. So I told myself I had to get a pilot's license, which took about a year and a half. I bought a four-seater helicopter. I have it parked in a hangar in Řeporyje, it takes me ten minutes to get there, and in another twenty minutes, I'm able to take off and fly. That's great, I quite enjoy that, the world from above is completely different.

Aren't you afraid to follow Petr Kellner’s fate?

I am. But being scared is the best way to have nothing bad happen to you. You mustn't be too confident and arrogant, thinking you can dare everything. I'm not at all saying that's what Kellner was like. No, he didn't fly that helicopter! I'm talking about piloting. It takes a lot of humility and knowledge to say - it's nasty weather, I'm not going to fly in that, I'd rather drive. Then I also like to go on vacations, to explore things that are not usual. On the other hand, I don't like to go to the seaside to just lie on the beach for a week.

Do you prefer the seaside or the mountains?

I don't care, but I need to keep moving. I can't lie in one place. For two days, yes, but not any longer.

When is the right time for a man like you to retire, leave it to others and just do what you want? When do you start resting?

I don't know. A lot of people, those coaches and therapists and such, will tell you that you have to be careful about your work-life balance. I enjoy the projects we have in the pipeline, and I would be downright sad if I wasn't there to influence and improve them, if I couldn't see myself being part of this big project team that builds something nice and is immensely proud of it in the end. It's part of my life. The way people feel about their hobbies, I feel about this. Carrying out our projects. I love it when they're conceived, executed and then made to work. The question, "When are you going to retire?" may not be a question for me.

I meant a lot of people want to be rentiers, make a lot of money fast, and then just enjoy life.

I couldn't do that. Ask people who have built something, sold their business and then started nothing else if they are happy.

Thank you so much for the interview.