The Slovenia Times

Rising Costs of Projects Scare Away Investors, Trigranit CEO Says

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In an interview with the STA, Toth says that despite some problems the first phase of the investment in Ljubljana should be concluded by the end of 2014.

A request for a construction permit was filed at the end of June but it still needs to be supplemented. "What is missing is permits for few land sites. They are all connected to municipal infrastructure and are in the jurisdiction of either the Ljubljana municipality or the railway operator."

"Emonika demanded more than six months ago that these issues be solved and pointed to some of them years ago. If the Ljubljana municipality and Slovenske ┼żeleznice do not improve their efficiency and cooperation, these issues can cause quite a delay in obtaining the construction permit."

The 45-day term in which Emonika must supplement its request for the permit expires at the end of August. "We have already sent some contracts to the Infrastructure and Spatial Planning Ministry, and we will ask for an extension of the term, if necessary."

Toth is hoping that construction works will start at the end of 2013 and that the first phase of the project, which includes the construction of a bus and rail hub, 1,900 parking spaces and a shopping and entertainment centre, will be concluded by the end of 2014.

The value of this is estimated at some EUR 220m.

Apart from the problems with the construction permit, the project also stumbled on high communal costs. "We must pay about EUR 32m in communal contributions to the Ljubljana municipality and this figure is unheard of. We have never come across such high communal costs in any of the countries where we have built in so far."

If Slovenia wants to attract foreign investments, it must seriously consider this, Toth believes. "If you want to attract investments, you must be forthcoming to investors."

When the contract on the project was signed with Slovenske ┼żeleznice in 2007, the communal costs amounted to EUR 21m, but now they are suddenly EUR 10m higher, Toth warns.

The value of the whole project went up from EUR 220m in 2007 to EUR 350m due to changes in the conditions, legislation etc., according to Toth. "We have reached our limit, which is why we are warning that the responsibility for the hikes should not rest only on the investor's shoulders."

Touching on plans concerning the entertainment and shopping centres, which should also be a part of Emonika, Toth says he does not expect many new brand names to enter the Slovenian market through Emonika. "The owners of the brand names that are already present in Slovenia are happy here and would like to expand."

Therefore, Toth believes that the location will attract foremost the existing brand names and only up to 10% of new brands, because the procedures for introducing new brands are complex and because franchise sellers momentarily do not have money for such investments.

Trigranit is in charge of the entire Emonika complex, including the retail section. A special company TGM has been set up for this purpose, according to Toth.

As regards the commercial part of Emonika, which is to include offices, a business hotel and about 50 luxury apartments, Toth says this will wait for the situation on the real estate market to calm down. "The project is too big to be implemented at once."

The company has a commitment regarding the first phase of the project, while the second phase, which will also include an office tower that will become the tallest building in Ljubljana, will follow subsequently, "when the market will be ready for it".

The project will be financed from three sources - Trigranit's own funds, loans and state or EU funds.

"Trigranit is cooperating with several international banks on its projects and we have managed to set up a good relationship, based on trust, with them. Of course we also turned to banks with offices in Slovenia but these are careful because they got burnt in the past and are currently having a lot of problems."

The Emonika project will be divided into small parts to enable also medium-sized and small construction companies to apply for public calls. "We typically cooperate with several companies to reduce the risks in case of a bankruptcy of any of them."

Apart from the investment in Ljubljana, Trigranit currently has two other ongoing projects in Polish Poznan and Krakow, and in Budapest. Its passenger terminal in Poznan was opened at the end of May.

According to Toth, the entire procedure in Poznan was "much faster" than in Ljubljana. "The passenger terminal was opened in 13, 14 months after the signing of contract with the Polish railway operator."

The costs were also lower. In Slovenia, the construction costs for the railway hub alone exceed EUR 21m, while in Poznan they stood at some EUR 8m, whereas the Poznan railway station has 17 million passengers a year and Ljubljana's only 3.6 million, he notes.
 

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