Jan Cienski in Warsaw -

The views from the apartment on the 50th floor of the Zlota 44 tower are stunning, with floor to ceiling windows showing the whole of Warsaw’s skyline as the Vistula river curls off into the distance. The only problem is that the apartment is so far the only completed residence of the 52-storey building, which has been under construction since 2008.

The tallest residential tower in the EU was designed by Daniel Libeskind, the American architect with Polish roots, and its steep point is supposed to evoke the Polish eagle soaring off into the sky. It was the signature project of Orco Property Group, a Franco-Czech developer with properties scattered across the region. During the launch of the project almost eight years ago, eager punters crowded into Warsaw’s national theatre to listen to Libeskind and to take a look at a mock-up of what a future flat would look like. This was at the peak of Warsaw’s pre-crisis property boom, where plunking down €10,000 per square metre of property seemed like a sensible idea.

About 20% of the building’s planned 266 apartments were sold – but the project is still very far from completion, and it won’t be Orco that finally finishes Zlota 44. The developer sold off the unfinished building last year for €63m, after reportedly spending about €166m on the project. After paying a contractor, Orco put €50m towards its bottom line. Despite that, the company still owes €186m on a portfolio worth €322m, and is still having trouble covering its debt payments. Shareholders have taken a bath. Orco shares have lost about 99% of their value over the last five years, and are trading on the Warsaw Stock Exchange at PLN1.54 (€0.37).

Orco the killed whale

Orco was founded in 1991 in Prague by French developer Jean-Francois Ott and rapidly grew as Central Europe shook off communism and the region’s economies started to revive. The problem was that he over-extended himself and took on too much debt – something that just about killed his company after the collapse of Lehman Brothers in late 2008. Ott put Orco under the protection of a French court while negotiating with bondholders. As the region emerged from crisis, he put a lot of hope on the Zlota 44 project as a way of reviving his company’s fortunes.

But the building was jinxed with enormous problems. Construction began in March 2008, but stalled a year later with 17 floors built when Orco ran into financial difficulties. Then Warsaw authorities blocked construction because of issues with the building permit. After that, neighbours in surrounding buildings objected to the design, causing yet more delays. Construction finally restarted in January 2011, and the plan was to have the building completed by mid-2014. The sale of the rest of the apartments was going to provide a massive cash injection that would help right Orco.

Instead, the developer got into a huge fight with its general contractor and construction stopped last year after banks financing the project baulked at giving Orco any more funds. The exterior of the building is completed, so the tower is no longer an eyesore on the Warsaw skyline, although critics complain that it has been finished with cheaper materials than originally proposed, giving it more of a plastic look that does not follow Libeskind’s glass-and-steel design. But the interior is nothing more than floor after floor of grey concrete. Orco’s problems and the construction delays, coupled with a decision to increase prices to €15,000 a metre in order to underline its desirability, made it almost impossible to find buyers.

The final construction is now in the hands of BBI Development, a Warsaw property developer, and Amstar, a US-based property fund, which bought the project from Orco last year. The partners expect to spend about PLN180mn-190mn and to have the building completed by the second quarter of next year.

Just who will buy the flats is a little problematic. Almost all of the initial investors are people from outside of Warsaw. The capital’s luxury property market is still a far cry from the optimistic days of 2008. Zlota 44 also has more competition. The completed Cosmopolitan Tower, just a couple of blocks away, has 250 luxury flats (where prices are reportedly about €6,000 a metre), while Platinum Towers development, also in central Warsaw, is selling for about €4,000 a metre. For now, the new owners of Zlota 44 are sticking with top-end prices for their flats, but it is not clear that there is enough demand at the top end of the market.

Their hope is that the luxury market follows the broader trend in Polish residential property. Reas, a property analysis firm, reports that last year marked a record for transactions in the country’s six largest cities. “Over 43,000 flats were sold on the six analysed markets in the whole of 2014, up by nearly 20% as compared to the record-breaking 2007 and 2013, when around 36,000 units were sold in each year,” the report noted.

The problem is that average property prices in Warsaw are stable, hovering at around €1,800 a metre. Zlota 44’s new owners will have to justify the enormous gap between those prices and those for flats in their building if they want to avoid Ott’s fate.