The owner of the dilapidated monastery of St. Gabriela in Prague’s Smíchov district, the Cimex group, is already clear about its future. The complex will be converted into a five-star hotel. Extensive reconstruction should begin in two to three years. Those are the plans. And how much is all this going to cost? “At the beginning we said with exaggeration that we were going into a billion-dollar project and now we will try not to exceed two billion,” says Miroslav Kosnar, the head of Cimex.
We have a project on the table and we already know which way we will go. I don’t want to be more specific yet.
Or at what stage of preparation is the project?
The project is currently being processed for a planning decision.
The monastery is a cultural monument. What is your experience with this type of construction? Are you armored for discussions with conservationists?
V 90. We have reconstructed, for example, the Postal Court in Karlovy Vary or the T.G. Masaryk building in the centre of Karlovy Vary. We also have experience with the reconstruction of listed buildings in Prague, for example Petrská Street. The Gabriel Monastery is, of course, the largest project in this respect. We have the experience and we are ready for the discussions.
How has the pandemic, which has hit the hotel segment very significantly, changed your thinking about the future of the monastery?
The pandemic has indeed affected hotel operations to some extent in the last two years. But I don’t think it will change people’s habits in the sense that they will stop travelling altogether. We assume that business will go on, maybe the number of tourists will change or their consumer behaviour will change.
However, from our calculations for Gabriel Loci, the hotel still works best for us. As you yourself pointed out, the conversion of the building to residential housing was also on the table. In the end, however, it turned out that the capacity of the space would not be used to one hundred percent. Some of the flats would not be of sufficient quality and would thus be poorly marketable.
When one billion suddenly becomes two
How much do you plan to invest in the transformation of the monastery?
We do not have a final estimate and do not want to comment on any details at this time. At the beginning we said with exaggeration that we were going into a billion-dollar project and now we will try not to exceed two billion.
Don’t these assumptions bother you with the current rise in the price of building materials and works?
Part of this is some kind of market fluctuation and part of it is undoubtedly a permanent price increase. The entire project must be adapted to this, both in terms of costs and especially on the revenue side.
Gabriel Loci has attracted filmmakers from Netflix
The monastery has been the venue for Prague Fashion Week and Designblok. What are you doing to make the house run?
In addition to the two events you mentioned, there are a number of other cultural, musical and artistic venues. Part of the building is also rented as office space and there is a constant interest from filmmakers. A number of foreign productions for Netflix, HBO and so on are continuously filmed here. We had a summer scene in the summer for the first year and we are counting on it for this year.
Does all this make the building worth running?
For traffic, yes. Not for any further investment or project preparation costs, of course.
How much have you invested in the building so far?
Around 353 million for the purchase plus more for project preparation, then millions for the inevitable repairs. In the near future, we are expecting mainly investments in the heating system, roof repairs and we are trying to fix the long-standing dilapidation of the church roof.
Studio DAM will give the monastery a new look
In what condition did you take possession of the house?
You could tell it hadn’t been touched in a long time. Primarily we had to clean the building and the area itself. I mean, to take away the various waste. We also had to sanitize it so that the place would not fall on our heads with exaggeration and would not make a shame of the various mess inside or around the building.
Do you have any idea when you might get planning permission?
We’d like to have it by next spring.
Have you already chosen the architects for the project?
Yes, they are architects from DAM studio. (authors of the AFI building in Vokovice or Main Point in Pankrác – note)
Dare you say when the hotel might open?
In two or three years, we could start rebuilding. Everything is still open, we are not definitively clear on all aspects of the project. We’re working on that now.
Cimex also owns the Orea hotel chain. Are you considering running this hotel as well?
The Orea Hotels & Resorts chain targets a different clientele, with four-star hotels. A five-star hotel should be built here.
So, are you considering that it would be operated or managed by, for example, a foreign hotel chain that has experience with similarly large “five-star” hotels?
Yes, it is a realistic option for this hotel segment. You need to bring a specific clientele to the hotel so that it can generate the performance that we need given the amount of investment we anticipate.
What capacity will the hotel have?
We already have some idea, but I will not be specific, everything is still in the design phase. By nature, however, we target hotels with a capacity of more than 100 rooms, as it is not worth operating smaller ones. It will be somewhere between 100 and 200 rooms, more in the latter half.
How is the Orea hotel chain doing at the moment?
It is individual, depending on location and segment. We have resort hotels in the mountains, city hotels and spa hotels. Each segment has its advantages and disadvantages. Chains that can work with the client, offer them alternatives, additional hotels and other benefits have more power. We have long benefited from the fact that a significant part of our clientele are Czechs, who, unlike tourists, came even during the pandemic. We were very positively surprised by the figures from the Pyramida Hotel in Prague. Even during the total lockdown, we were able to approach operational zero. We had the best numbers in Prague and we appreciate it very much.
A pandemic doesn’t change our plans.
Do you plan to grow in the hotel segment?
We certainly have growth ambitions. Whether in the field of development, i.e. purchase and reconstruction, or in the field of hotel operation.
And which direction will you go first?
In the past, we were just one step away from signing a contract for the purchase of a hotel complex in Montenegro. The public tender was then cancelled by the local government just before the contract was signed. Apparently she judged the sale to be disadvantageous, the price seemed low. So we have ambitions to look in this direction as well. However, the market disruption related to the pandemic has slowed us down a bit and we are looking at investments more in the long term.
Primarily we tried to stabilize the current portfolio. The hotels were forced to close and we had to concentrate on how to protect the business, i.e. take care of hundreds of key employees without whom we can’t do it. The hotels were undergoing extensive renovations, and then came the pandemic and problems with financing the investments. Logically, they were thus slowed down or postponed.
Do you have a specific project in mind?
I think it slowed everyone’s thinking about everything. Either those who wanted to sell or buy, because those who were selling were trying to sell at the pre-covid price, while those who wanted to buy felt that they would be buying at stress prices, i.e. much lower. The idea did not meet the reality at all.
Perhaps there are individual transactions that have tightened up. But I think the prevailing view is that a pandemic is something extraordinary that stops and everyone waits. This is now the period when transactions are already taking place on the market. There is a glut of money and investors are forced to invest it and real estate is still one of the best options. Which is also an example of the transactions we have and are now completing in the US market. We are thus exiting projects at even better prices than they were before the covid.
The market has cleared to some extent. I’m thinking of Prague hotels now. Isn’t this the perfect time to buy them?
Yes, but it is more about smaller hotels, which are not our investment target. However, we now have a number of management projects on the table for owner-operated hotels looking for professionalism, experience and assistance.
And what about the acquisition of another hotel, in your thinking with a capacity of over 100 rooms?
So far, we’re not doing anything like that, and the market isn’t providing anything like that either – at a price that makes sense to us.
You also have offices in your portfolio. This segment has also undergone some changes. What do you plan to do with them?
We plan to convert some of the properties in our portfolio into housing.