PSN has been operating in the Czech real estate market since 1991 – originally as Prague Real Estate Administration.
The rebranding took place in 2019. The PSN portfolio includes Prague’s architectural gems such as the Dancing House, the Fashion House, the Dlážděná Palace, Kotva and the exceptional Vanguard Prague project. Štěpán Smrčka, PSN Development Director, introduced us to the company’s activities.
Can you introduce PSN to us in more detail?
We have been through an incredible 30 years, similarly to other Czech family businesses that were established in the early 1990’s. This year, we celebrate a round-figure jubilee and thanks to iconic real estate, which, since last year, also includes City Empiria, we have reached a stage where we are still a medium-size family business, but the size of projects has shifted significantly. We find that what we grew up on, i.e. the typical block of flats for reconstruction in Prague 2, 3 or 5, can no longer be our only key business. Nevertheless, we can do it, we enjoy doing it, so we will continue to do so, but we have to include ever larger projects in our portfolio. It is a nice tax for success, for all those 30 years of work. The company is undergoing a certain evolution within the team and project management. We are moving from the reconstruction of housing blocks to new buildings and large multifunctional complexes that combine offices, apartments, etc.
What should I imagine under the term ‘medium-size family business’? How many people do you employ?
There are about a hundred of us, we have our headquarters in Prague and a branch in Pardubice. The entire team focuses on all segments of the real estate market – from acquisitions and development through leasing and sales, including administration and everything related to support activities. We are basically constantly looking for quality colleagues. So, within the mentioned evolution, we are still recruiting people, a priori into project management and implementation, within the development of new buildings and growth of the company.
How do you respond to the current situation in the housing market?
I do not want to repeat the same thing that most developers say to the media – approval processes, prices of building materials, work, housing prices, etc. As developers, we are not a priori happy that apartments are expensive, nor do our margins change dramatically over time. The answer lies in the length and complexity of the whole preparation process. As the investment in projects increases significantly due to the length of processes, it means that margins remain at a similar level. Of course, we are glad that there is interest in real estate and housing. It is a safe haven in these turbulent times, when a lot of money is being printed and high inflation is expected. But we are really not happy that fewer apartments are permitted every year and fewer of them are put up for sale.
Is rental housing the solution?
It is the market’s response to what is happening. Of course, if the amount of money you have to invest in your first property already exceeds a certain level – as well as the interest rate – it will force you to rent. I think going to rent is no shame at all. But in our region, renting has always been seen as a bit inferior and everyone had to have their own apartment. Compared to Western Europe, much fewer people in our country live in rental accommodation, so there is room to make up for it a bit. From a user’s point of view, rental housing represents a solution to the situation in the real estate market; on the other hand, it must be said that due to Covid and the restriction of a certain volume of airbnb services in Prague, rents are not growing as fast as the value of real estate. But when the situation calms down, it may change again. We – as a family development company – keep an interesting part of the real estate under our own management and create a portfolio of hundreds of apartments for rent. We would like to keep and manage them in the long term.
Does this mean that you will not outsource the administration, but will manage it with your own employees?
Due to our long experience with property management and the fact that we already have several dozen buildings and hundreds of apartments in our portfolio, we have our knowledge and an experienced team of people. They are part of the ‘family’, everything works and fits together. So, renting and administration will mostly remain under our control.
How do you perceive the establishment of the Prague Development Company?
I think that only time will tell what it will bring. It is very important that it is run by an experienced person, which I believe is happening, and that it is backed by an experienced team. There is no need to explain at length that development is becoming more and more complex, longer and more demanding on quality staff. What they are trying to build here is quite common in the West, it has its history and culture. My only fear is that similar attempts ‘outside the market’ never turn out very well in our country. On the one hand, I keep my fingers crossed, but it is clear to me that it will be a very difficult process and only time will tell whether they can do it, but mainly whether they will receive political support. It is a job for 5–10 years before it ‘catches on’, which is very difficult with a four-year political cycle. It will be a demanding discipline and I am sincerely curious about it.
What is your opinion on the new building law?
I will not go into details, the effort is appreciated. It didn’t surprise me that it was eventually politically adjusted to a certain hybrid. But the approved principles are at least a step in the right direction. As far as legislation is concerned, there is a lot of discussion held about the deadlines, reactions and responsibilities of individual officials. I think that we will fight here indefinitely for simplification and greater transparency and, above all, predictability of legislation. It is okay to define a long-term vision for the territory in which you live or manage together with people and self-government but the process of land or construction management itself should be a brisk formal verification of the intention within the standards. It is not a problem for the developer to have a limit somewhere. What represents a problem for him is that a possible construction limit does not change over time nor is not politically valid. Then he discovers during the process that there are other limits besides what is written. I think this is the most difficult thing in business – investing money with a vision of 5–10 years and only then finding out what can actually be done… This is the worst thing for any investor and is naturally reflected in the length of processes, rising of project prices and in the end even in the price of the product itself.
Can you highlight some of your projects?
There were two most visible projects we have implemented in recent years. The first one was the Dlážděná Palace, which is luxury residential housing in the centre of Prague, in a really complex area, with an investment of over CZK 200 million in a very luxurious segment. Despite minor pains along the way, I think, that in cooperation with conservationists and architects, we have completed a product that clients rate as excellent. The second such flagship product is Vanguard – a conversion of a former industrial factory hall built vertically in Modřany, Prague. Here we are preparing a really exceptional loft housing project. You will be able to take your darling to your apartment by elevator – by the darling meaning a car or motorcycle. It is a very demanding project in the order of hundreds of millions of crowns. In addition to a total of twenty-five projects, we have two other absolutely exceptional projects in the preparation phase. It is Vinohradská 8, which is the former Transgas that we have recently bought from HB Reavis. It is a turning point for us – 20,000 sq m of apartments, offices and shops in a unique place. HB Reavis originally planned only offices. As a residential developer, we would like the majority to include apartments, and offices to remain on a smaller scale. The second project is in Vršovická Street – an industrial complex of Koh-i-noor, where we plan to build 500–550 apartments. These complex projects go hand in hand with the evolution of the company that I have previously mentioned.
Arnošt Wagner / Photo: PSN Archive