The Prague Post Online: Real Estate: Renovating Žižkov

November 22nd, 2008

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Renovating Žižkov

Discovery Group unveils big plans for the neighborhood

By Curtis M. Wong
Staff Writer, The Prague Post
August 15th, 2007 issue

COURTESY PHOTO

Discovery Group has a lot of projects in the works in Prague 3, including Palmovka, a residential complex.

COURTESY PHOTO

Discovery Group has a lot of projects in the works in Prague 3, including Palmovka, a residential complex.

Jan Přerovský/THE PRAGUE POST

David Lawn, Discovery Group's new development manager, says the latest project will combine living, working and entertainment. enlarge

Discovery Group

Vězeňská 5, Prague 1
Tel.: 224 817 692
E-mail: info@discovery-group.cz
Web: www.discovery-group.cz

Already considered one of Prague’s trendiest areas, Žižkov is a neighborhood on the move. Over the next two years, the district will undergo a complete facelift. Not only will the Central Park development be well under way, but Prague-based Discovery Group has also announced plans for a new residential, retail and office park, to be built on a 112,905 square-meter (1.2 million-square-foot) plot formerly used as a freight railway station.

The 400 million euro ($552 million/11.3 billion Kč) project is scheduled to go up in two phases. The first phase, budgeted at 120 million euros, is expected to be completed in 2009 and will include a 60,000-square-meter retail and leisure center as well as a residential segment featuring 2,000 apartments. All of this, company representatives say, will provide a unique living-working-shopping combination and “serve as a gate to the new city district.”

At the helm of this multi-use urban project is David Lawn, development manager for Discovery Group. Having joined Discovery Group in mid-May, Lawn may be a company newcomer, but his experience is considerable. Starting out as a civil engineer in London, Lawn arrived in Prague in 1992. For 10 years, he served as manager of Czech and Slovak business at Gleeds, a British construction firm, before shifting his focus to industry consultancy work.

Lawn recently spoke to The Prague Post about what it’s like working within the Czech and East European real estate field, and why it pays to be practical and environmentally friendly on this market.

The Prague Post: Tell me a bit about why your company’s new multiphase project in Žižkov is special.

David Lawn: Our goal is to create an urban environment with permeability. We want to combine living, working, shopping and entertainment in a place that’s urban in context. We want the different uses of the area to add value rather than detract from each other. Environmental sustainability is going to be a huge priority, too. Developers are under a lot of pressure from both tenants and buyers to be environmentally friendly. We want to make sure that we’re creating quality buildings that are on the edge of that trend.

TPP: How would you describe Discovery Group’s key objective in the Czech real estate field?

DL: I think our aim is to create environments that function well and add value to the community in which they’re located. They’ve got to be developments that people, including investors and other developers, welcome. We’re often asked as developers to generally improve the environment in which people live and work. Personally, what I like is that no project is ever the same. There are many differences dictated by location, geography and other factors. You never get bored.

TPP: What sets your firm apart from your competitors and rivals in the domestic real estate industry?

DL: I think we’re set apart by the range of experience we have. If you combine our experience in Prague and internationally, it’s quite a unique mix. At the moment our team includes two British members and one Spanish, one South African, one Ukrainian and one Czech member, respectively. The expats are able to bring their varied experiences to the local market.

TPP: Why do you think Discovery Group has been able to establish such a strong reputation on the Czech real estate market?

DL: We’ve been able to cooperate with a number of different investing partners. Because of this, we’re not tied into the tastes of one specific investor. We’ve got flexibility … and we haven’t been beholden to one investor and that investor’s appetite for certain types of investments. Discovery’s been able to keep up a momentum and create a portfolio of projects in quite a short span of time.

TPP: How would you describe the differences between the real estate markets here in Prague compared to the rest of Central Europe?

DL: That’s hard to say because I think I’m a bit “Prague-centric.” For me, Prague is an international city, and it’s got a very international business environment. As soon as you step outside of Prague, you’re dealing with something completely different. The difference is huge. Of course, there are real opportunities outside of Prague, but I don’t think those markets are as dynamic yet.

TPP: How do you think the domestic real estate market has changed in recent years?

DL: I think there’s a lot less of the “Wild East” feel to it, and it’s become more institutional. There’s a huge difference in the quality of our Czech-based colleagues especially. Nowadays there are fewer amateur developers. In the early days, I felt I was responsible for bridging the mentality of locals with that of foreigners who wanted to invest. These days, that gap is a lot smaller.

TPP: What sorts of changes would your firm like to bring about on the real estate market within the country?

DL: First off, we’d like the permitting process to be cleaner and more transparent. The Czech real estate market has gradually moved toward a system where developers have to take on more responsibility for things to be designed and built correctly. We also think that the European Union is having an influence on every aspect of life here. There’s a trend toward conventionalization of building standards, which is a good thing. We want to be ahead of that trend with the Žižkov project by bringing in people with experience in West European markets. We’re very keen to tap into their expertise and know-how. British consultants are extremely experienced in exporting know-how. I think it’s partly from our colonial background.

TPP: Based on what you’ve experienced so far, how do you think the Czech real estate market will continue to evolve in the next decade or so?

DL: What we do as developers isn’t going to change much. But the big change will be whom we sell to and what their requirements are. Now the Czech real estate market has been overheated for several years, so of course the money is going to go somewhere else eventually. Investors who remain here in Prague will become choosier with what they’re buying. This is one of the reasons why we’ve considering environmental factors more seriously, because environmental factors in buildings will be considered more seriously in the future. The environmental sustainability of building materials is starting to play a huge role in the categorization of new buildings.

TPP: Having had experiences in both West and East European real estate, what advice would you give to an Eastern newcomer?

DL: I’d say the best investment of their time would be to understand the way the building permit process works here; to understand what design means and to know what steps you have to go through in order to receive permission to build something. Managing that process is the key to success in this country, because it’s so different than West European processes. You’ve got to devote a lot more time and energy to this process. It’s the one case where micromanagement is required. If you don’t understand the details of the process, it might not be performing properly.

TPP: What’s the most enjoyable element of your job?

DL: I’d say it’s the phase of looking at conceptual designs and determining how to get the best value. It’s the most creative part of the process because you get to play with lots of different options. It’s not very often in my career that I find a site like the one in Žižkov. Certainly, in Prague, there aren’t that many flat and clear sites so close to the city center. The opportunity to develop something like this is going to be great fun.

TPP: What’s the least enjoyable element?

DL: The worst part is negotiating with tenants who don’t have much real estate experience. Part of the problem is that institutional real estate investing comes from a background of feudal law in Britain, where land was offered in exchange for labor. Landlord-tenant relationships are rooted in this feudal tradition. Most leases are by nature landlord-friendly, but tenants also regard themselves as clients and think they’re buying a service. Often I’ve got to get them to sign agreements that aren’t in their favor. The process of negotiating with tenants who don’t have real estate experience can be painful, because there isn’t always an alignment of interests.

TPP: What are your personal and professional plans for the future of Discovery Group?

DL: I’d like to develop a leaner development process in terms of how we do things. We’re planning to significantly increase our line of projects. There’s a huge demand for fresh talent and not enough supply to meet the demands. We need to use the talent we’ve got and leverage it across many projects. Personally, my goals are quite simple: Enjoy what I do, work with people that I like and get paid for it. I’d say that things are looking good in this respect.

Curtis M. Wong can be reached at cwong@praguepost.com

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