This autumn will be a reliable test for our economy – says Mark Roefler, the CEO at Dantex, a construction company building and selling flats. The company also owns several office buildings and a shopping centre in Warsaw.
Krystyna Naszkowska: How is a construction company faring during a pandemic?
Mark Roefler: It’s all different. The work flow has changed because most things are done remotely. We’re not holding meetings and discussions. We’re not at the office and engineers are not at construction sites. All communication is done via e-mail, phone and video-conference and our engineers supervise construction sites while seated in their cars.
I take turns with other owners at the company headquarters and I meet about three people there instead of several dozen. All documents are circulated digitally. Sales offices are operating quite normally but instead of several, one salesperson is present there. This is more than enough as client turnout has fallen over the last couple of weeks.
But overall, the property market is not much affected when we compare it with other sectors. Construction sites also remain open except there are 5 to 10 percent less workers present.
Have you considered keeping the remote management at the company after the pandemic? It’s cheaper.
I’m old-fashioned and it is difficult for me to get used to it. But it’s not a definite no.
Has anyone been laid off?
Not a single person. We’re employing about a hundred people but none of them are builders. Those who actually build are employed by our contractors and construction hasn’t been halted.
However, I’m far from certain that sales will go as planned. This autumn, our last building will be finished at the settlement near Arkadia Shopping Mall in Warsaw. And that’s going to be a test: how many of our clients who have signed a preliminary contract will finalise the transaction? How many will remain credible for banks? Half of our clients rely on a mortgage. In my opinion, this autumn will be a reliable test for our economy.
And the renting market?
The settlement near Arkadia consists of about a thousand flats. When we were beginning this investment, most people were buying flats from us for themselves. In the last period of that investment, half of all sales were signed with buyers intending to rent the property.
This is because a flat is a good investment that keeps value and at the same time creates revenue from rent.
Effectively, renting became a far better option than keeping money in the bank. It fuelled the renting market, especially in Warsaw, where a low unemployment rate and increasing wages encouraged many people to move and rent a flat in the capital city.
Property agents say that rents have plunged by 30-40 percent and this movement is reversed, because people are leaving Warsaw and flats that they’ve been renting. Is it possible that some of those who have bought flats with the intent to rent them will now try to sell them, so the property prices will fall?
Prices could fall. But on the other hand, what is the alternative for the seller? What will one do with the cash raised? Buy government bonds? Put it all into a bank account? Both have marginal rates and the inflation rate is growing. In my opinion, property falls won’t be deep nor lengthy. The market will freeze for a while, but I don’t see it going into a freefall.
So, your business wasn’t severely hit by the coronavirus?
Not in that area. But we also have a shopping centre near the Wiatraczna roundabout. And we’re knocked out flat there. Nearly all shops have been closed since mid-March. Rents are not being paid but we still have to pay our contractors: 50 thousand zlotys monthly towards security, 30 thousand for cleaning, 120 thousand for electricity. There is a company servicing elevators and escalators, air conditioning, and so on. Overall, it’s several hundred thousand zlotys every month. And on top of that there is an enormous loan we took to build the shopping centre.
The government’s ‘anti-crisis shield’ doesn’t help you?
Not in the least. This so-called ‘shield’ was designed to protect employment, so its support is limited to companies that employ people. And the shopping centre is a business-to-business model. Our contractors are protected and allowed not to pay rent. And we are not protected at all, despite the fact that once we go under our contractors will lose their businesses as well.
The government does not acknowledge this. They act as if they are unable to see that the economy is interconnected so we all pull together, up or down. This shield was written in haste and dictated by those who managed to be at the ruler’s ear.
For example: there is a company that has many stores and employs a workforce of several thousand. It will easily convince the minister that it needs a bailout because once it goes bankrupt it will lay off all of its workforce. But the company’s stores are at shopping centres and if operators of these centres go under, the staff at the stores will be made redundant as well.
I have an impression that the government believes that shopping centres are all owned by large, Western corporations no one cares about nor plans to do anything for. We’re the victims of these convictions.
Are none of your contractors paying rents due?
A handful. Banks, for example, weren’t closed but they attempt to negotiate the rent. The same problem exists with office buildings. Companies renting space from us suspended their monthly rent transfers despite the fact that they don’t want to leave their offices. I do understand it. Everyone believes that once things normalize, everything will be as it was before the coronavirus in terms of revenue and employees’ salaries. They want to get by.
And you don’t have much of a choice, because once they move out it’s going to be difficult to find a different client.
We’re going through it with our condo-hotel, where many units are for rent. The company operating it went into administration in March and it’s like with the shopping centre – we own a building that is empty and generates costs. We’ve even managed to find another company eager to take the building over, but ‘after the market rebuilds’. It means that we’re to take on several months’ worth of costs.
And no one really knows what it’s going to be like post-pandemic and how long it will take for the market to rebuild.
Are governments in other countries supporting the owners of shopping centres?
I have absolutely no idea. We’re fighting for our lives on a daily basis and that’s what occupies us. We’re not comparing support packages in different countries. I look for rescue everywhere I can, for example persuading the cleaning company that one cleaner is sufficient instead of two dozen when nearly no one visits the shopping centre. I didn’t expect the state to help me, so I’m not really surprised not to receive any help. But it would be good to have it.
How do you expect the lockdown to affect the economy?
It’s hard to tell as it’s all happening very quickly. But in my opinion the longer the lockdown measures are in place the worse it’s going to be both for the economy and for society. Does anyone consider how it’s affecting those dependent on alcohol? Addiction is also a sickness and people are dying from it. Now it’s not allowed to go to a support group meeting. How many people who weren’t drinking started to drink again? Some of them will die as a result.
I have a friend who owns a wine store. He told me that his revenue surged by 40 percent.
That’s exactly my point.
What’s ahead of us?
Today every forecast is unreliable because there are no contacts and no real estimates. But our social life was interrupted in a way that’s unsustainable in the long run.
And how long it will take to get back to normality?
I’m cautiously optimistic and in my opinion the lockdown cannot be maintained for longer than three months. The shorter drastic measures are in place, the lower the cost for the economy and society. But no one will survive it for longer than three months.
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