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Ministries going on selling sprees

State purges itself of excess properties in Prague city center

By Victor Velek
Staff Writer, The Prague Post
March 19th, 2008 issue

Dittrichova 21, Prague 2, 2,198m2
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Gorazdova 24, Prague 2, 2,659m2
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Štěpánská 15, Prague 2, 9,043m2
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Legerova 49, Prague 2, 1,804m2
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Biskupský dvůr 5, Prague 1, 4,103m2
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Hornoměcholupská 40, Prague 10, 1,385m2
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Washingtonova 21, Prague 1, 4,299m2
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Kozí 4, Prague 1, 4,486m2
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U Půjčovny 10, Prague 1, 7,001m2
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A. Čermáka 2a, Prague 6, 8,234m2
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Šeříková 1, Prague 5, 1,050m2
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Olbrachtova 3, Prague 4, 2,688m2
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Hvožďanská 3, Prague 4, 17,987m2
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Some 1,600 state officials used to commuting to the city center should get ready to kiss Prague’s historic skyline goodbye.
Industry and Trade Minister Martin Říman is planning to sell off a number of buildings inhabited by organizations the ministry controls, moving dozens of civil servants to the capital’s outskirts. The move could be a boon to real estate developers, freeing up precious space in the city center.
The sale follows efforts of several other ministries, including the Health Ministry and Interior Ministry, to sell what they call excess buildings. Such sales have become a particular priority under the current center-right government, which plays up its focus on efficiency.
The Industry and Trade Ministry plans to sell 13 buildings and will use the proceeds of the sales to establish a single administrative office complex on the outskirts of Prague, said Tomáš Bartovský, the ministry’s spokesman.
Říman published a list of houses slated for the sale March 7, about two months after he had announced the relocation project. He confirmed the buildings will be sold in the second half of the year.
The ministry hopes the relocation will make the work of its agencies — CzechInvest, the Czech Retail Inspection, the Assay Office and the Czech Patent and Trademark Office, among others — more effective and cheaper.
The buildings will be sold in one unit and will likely draw multiple bidders, since most of the offices are situated in attractive locations of Prague’s New Town.
The process chosen by the ministry has drawn criticism. Selling the set of lucrative buildings as one package will be disadvantageous for the state and will favor a preordained group of bidders, argue some in the real estate industry.
However, some in the industry can see why the ministry has chosen to sell the buildings together. The ministry is not a real estate expert and a unified sale may save it a lot of time, effort and additional costs, said Petr Illetško, CEO of the real estate company AAAByty.cz.
The state could possibly make more money by selling the buildings one at a time, Illetško added: “As far as yield is concerned, one-package sales are not especially advantageous for the seller.”
By consolidating operations in one building, the ministry will save “tens of millions of crowns” in maintenance costs, improve communication between individual agencies and bring employees to a modern workspace environment, the ministry said.
“We expect that the sum netted by the sale will exceed the costs of constructing the administrative hub in the suburbs,” Bartovský said. “Therefore, the state budget will also benefit.”
Castles and depots
In searching for sale models, the Industry and Trade Ministry can look at several of its peers that have purged themselves of unneeded real estate.
Recently, the Health Ministry tried to sell 17 unused warehouses across the country in a single sale, for 113 million Kč ($7 million). The deal drew an outcry as three castles were included in the transaction, properties originally promised to local municipalities.
“We had been negotiating for three years on a contract transferring the castle for free into the town’s hands and suddenly, without any formal closure to the talks, we found out the castle was put up for sale along with 16 other properties,” said Vlastimil Machů, mayor of Brantice, a north Moravian town where one of the ministry’s castles is located.
Eventually, the ministry cancelled the tender and agreed to sell the castles to the municipalities. During that time, the municipalities delved into archives and unearthed documents allegedly proving that two of the castles were misappropriated from them by the state during the communism era.
“It is highly probable now that we will acquire the castles for free,” Machů said. “It is a lesson for other towns to take pains and check archival documents.”
The ministry’s planned transaction showed its contempt for small towns, he added. The Health Ministry did not return repeated calls for comment.
Some other ministries try to avoid package sales of properties. The Interior Ministry, for example, says it sells its assets — usually barracks, depots and apartment buildings — separately and in consultation with concerned municipalities.
Like some of his counterparts, Interior Minister Ivan Langer has made the disposal of unneeded properties one of his priorities. In 2007, the ministry brought in about 150 million Kč in property sales, after earning more than 820 million Kč the year before.
This year, the ministry is ready to emulate those 2006 earnings.
“We expect to net some 800 million Kč from the disposal of unneeded assets over this year,” said Deputy Interior Minister Blanka Vysloužilová.
The sales are made to cut operational costs and raise money for the ministry’s top-priority projects, notably the modernization of police stations and the purchase of new police cars, she added.
Nevertheless, according to the Office of the Government Representation in Property Affairs (ÚZSVM), an agency in charge of state assets, ministries cannot use the money from sales according to their wishes.
“All income from the sale of state property goes to the state budget,” said agency spokeswoman Jana Lysá.
Thus, the grand ministerial plans relying on cashing in unneeded properties are less straightforward than often presented, as the rerouting of money gained must be first approved by the Cabinet.

Victor Velek can be reached at vvelek@praguepost.com


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