Decades of false starts and stagnation ended last week for 250,000 sqm of the 110 ha Bubny brownfield in Prague 7 when Penta Real Estate revealed it will develop the former railyards. This is arguably the biggest piece of news to hit Prague’s real estate sector in the last 20 years, matched only by the original sale of the land to Orco before the financial crisis.
But that’s not the surprising part. Penta’s involvement looked to have been on the cards almost since June when J&T completed its acquisition of the project’s SPV HoldCo Bubny from CPI. The surprise bit is that Penta and J&T brought in another partner for the deal — a new investment vehicle called AKIPIA fronted by the Czech arms magnate Michal Strnad.
Penta took a 50% share of HoldCo Bubny as lead developer, with AKIPIA taking a 35% share. J&T stays on in the project with just a 15% share. “The investor approach prevailed — we will serve as a passive investor,” said J&T Real Estate chairman Dušan Palcr.
The motivation for CPI to sell Bubny will have been to focus on income-producing assets. With ratings agencies breathing down its neck to reduce leverage and interest rates threatening to ratchet even higher, the decision was really an obvious one.
In truth, Bubny was probably always going to need multiple sources of capital — and development know-how. After all, the site’s expected to absorb €3.7 billion of investment between now and 2050. That would include 10,000 new apartments spread across 25 blocks, including rental and student housing, offices, hotels, schools, and a park.
It would be hard to overstate the strategic nature of the location. Not only does it sit between two metro stations (Vltavská and Nádraží Holešovice), it’s now served by two train stations, after the recent opening of the Praha-Bubny commuter rail station. On top of that, the planned Vltavska Philharmonic project is the city’s most spectacular public investment in decades and will contribute vastly to the area’s value.
Ultimately, what’s striking about the news is what it says about the Prague real estate market. The ability of Czech capital to control the local real estate market has been obvious for years, but the range of high-stakes players working together on this vast undertaking is breathtaking.
Especially AKIPIA, which was set up literally the day before this whole transaction went public. Forbes rates its founder Michal Strnad as the richest Czech, and he’s joined by the late Petr Kellner’s former in-house lawyer Tomáš Brzobohatý and Marek Šmrha, who until recently was Penta’s own investment director.
Bubny has defeated every previous owner. But with Prague’s Metropolitan plan now providing planning cover for larger undertakings, the combination of Penta’s development skills plus the financial muscle backing them might just do the trick this time.
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