The Man Who Transformed Karlín

A man who played a pivotal role in turning what was once an industrial Karlín into a district where everyone would like to live. Investor and developer Milorad “Miško” Mišković is currently drawing attention—together with his company Karlin Port Real Estate—also through the planned reconstruction of the long-neglected legendary building of the Vyšehrad railway station.

Mr Mišković, you were one of the people who helped transform Karlín into one of Prague’s most sought-after neighbourhoods. Which moment in that transformation do you consider the turning point?

For me, the turning point came around the turn of the millennium, when—together with entrepreneur Serge Borenstein and a major global investor of the Karlín Group development group, Marc Rich—I had the opportunity to change a neglected, decaying Karlín into the renowned, modern and prosperous district it is today. Marc Rich was, among other things, one of the founders of the commodities company Glencore, which is globally one of the two largest commodity-dealing companies. For the past twenty-six years, I’ve been enjoying life on a grand scale. And not only with the team I started in development with—Mr Borenstein and Mr Rich—but also with Hans-Jorg Bruno, Albert Maizel, and over time Mr Thomas Samii and other investors, with whom we continue what we call the revitalisation of Karlín. However, today it is no longer only about Karlín. Through Karlín Port Real Estate, of which I am a co-owner, we now operate in twelve locations across the capital.

Your life brought you to Prague from Belgrade at the beginning of the legendary 1990s. When did you first feel that Prague had become your true home?

I would say it was about ten or twelve years ago, after I faced cancer twice. Before that, I didn’t think about it that way at all. I’m originally a southerner with Serbian and Montenegrin roots, and I felt welcome in the Czech Republic from the very beginning. But I am not assimilated—I am adapted. That means I respect and honour the rules of conduct and business in the Czech Republic, but assimilation would mean losing what my parents passed on to me: not only genes, but also identity (a code).

As you mentioned, you fought a serious illness twice and overcame it. How did those experiences change your view of life, work, and personal values?

Significantly, I would say. Since then I’ve been more sensitive, but in the best sense of the word. I’m much more attuned to what is happening both in my immediate surroundings and in relationships between people. I would also say I’m hungrier, if you can call it that. I absorb life in full, in all its areas. It motivated me—and still motivates me—to live even better, but also faster, and at the same time to inspire others, not only in their determination to overcome difficult moments in life. It’s also important to say that I never use the word “illness”, but “obstacle”. It’s a matter of psychology—if you keep telling yourself you’re ill, you will be ill. You will convince yourself. But if you tell yourself you are overcoming an obstacle, then mentally, for me, it is something completely different. This is just a recommendation from me for those who, in one way or another, are facing any health issue.

How are the expectations of clients in the premium real estate segment changing, and how do you respond to them specifically?

When it comes to premium real estate, that’s a longer conversation. One thing needs to be said right at the beginning: today the capital is short of 150,000 apartments. Last year, about 6,000 were completed—and that was still a record for the past ten or twelve years. Because of problems with building permits, because of the amendment to the Building Act, which in the best case will probably take effect sometime in July this year, and also because the Metropolitan Plan may only be approved this May, even though it was supposed to be approved back in 2014, the deficit in housing stock keeps growing. And in another five to ten years it will be much higher, which means prices will rise across all segments of residential development. For example: today we have prices in Karlín—let’s say the so-called prime segment—around CZK 220,000 per square metre. By the middle of this year it will probably be CZK 250,000, and within five years I expect the price could easily reach CZK 400,000 per square metre. Prices will go up, and they may rise rapidly. It’s important to emphasise that the average price per square metre in new developments is already almost at the level of Vienna’s average; we have surpassed Berlin and we are certainly 40% above the average price in Budapest… It does mean we are a stable market—there is a tremendous amount of capital in the Czech Republic right now—but because of poor permitting, we are heading towards a situation where, soon, essentially any housing will become unaffordable. People will not be able to reach home ownership and will spend their whole lives—just like half of Europeans—in rentals.

How do you perceive the current situation on the Czech real estate market, and what opportunities and risks do you see for the future?

Beyond the residential market, I have to mention that the Czech real estate market is relatively stable today. It may sound paradoxical to a layperson, but the Czech Republic is currently doing better than Austria or Germany. Why that is would be a long discussion, and it’s not only because of the problems with building permits I mentioned. Investors and developers in those two markets have long been able to borrow money as a combination of bank financing and mezzanine, which often meant they needed only 5–10% of their own capital for individual projects. In the Czech Republic it is still a healthy 30%, which means the ratio between bank financing and own capital—equity—remains in a healthy balance. So Germany and Austria are paying today for having been very progressive a few decades ago. And those markets were, of course, extraordinarily stable. That is why we are now seeing the phenomenon of experienced managers and directors from major German development giants beginning to apply for jobs—not only here, but also with other large developers in Prague—in recent years. In recent years you have also been developing projects outside Prague—Serbia, Montenegro…

What are your development experiences from these countries?

You were right to say outside Prague, not outside the Czech Republic, because throughout my time in the real estate business our focus has truly been only on the capital, and we have no interest in expanding into the regions. Rather, we are interested in expanding abroad. In 2008, with several business partners including the above-mentioned Mr Samii, we expanded to Belgrade. We are also conducting a review—due diligence—on two projects: one is below Dubrovnik and the other directly in Split. We want to expand into new countries, though for me they are old-new, because they are parts of the former Yugoslavia, where I navigate very well, and where, in our case, we will develop—together with a local partner—primarily resorts along the Adriatic, or if you prefer, on the Adriatic Riviera. As for other goals, we have a plan connected to the problems Austria has, as I mentioned: of the ten largest Austrian developers, at least five are in very serious trouble. Together with one of our completely new American partners, we would like ideally to buy an entire local group that has an experienced team and excellent results to date—but most importantly, whose projects are ideally only within the capital city, Vienna.

Are building permits for construction in Croatia or Montenegro diametrically different from here?

Certainly, but Serbia—and its capital Belgrade—is even better than Croatia and Montenegro. Over the past seven years, as I have mapped it out, more than sixty Czech entities (real estate investors and developers) have entered Serbia—and surely it wasn’t only because of the excellent historical relationship between Serbia and the Czech Republic, but above all because obtaining building permits in Serbia, specifically in Belgrade, is today probably in many cases up to ten times faster than in Prague. And any developer on the planet today is “IRR driven”, which means we all track the return on equity, and that is influenced primarily by time. Whether I finish something in two or three years or only in ten years naturally means the returns are completely different. That is why Czech capital has been moving abroad over the past five to seven years—besides Serbia, for example to Costa Rica, Poland, Spain and other countries—which, if someone had told me a few years ago, I would have argued with them that nothing like that would ever happen. And it is only because at home they could not build as quickly as they wanted, and therefore could not expect the return on equity or on the overall investment.

What values and principles are essential for you in business, and how do you choose projects and partners?

As for me—and therefore our company, our fund, and my partner within Karlín Port and the Opportunity Real Estate Fund, Mr Miki Goldstein—our main principle is loyalty. In my view, it cannot be bought, and most large developers of our type, even abroad, run into its absence. As for selecting partners, we choose them according to the project, and of course we have a closer circle of surrounding partners, including a few domestic ones, with whom we cooperate on an ad hoc basis. And then I have long-term partners such as Mr Samii and a few others, with whom I work for the long term and very closely, both in Prague and in Belgrade.

When did you first experience a feeling of real success, and what was it like?

I would say my first real success was the decision to break away from my family. I decided to do so even though I had a fantastic family, parents, support, and I still have a fantastic sister who stayed in Belgrade. It was not easy to make such a decision and become independent, but I think I did the best thing I could. I moved out immediately after leaving the army—I served in Split, studied mechanical engineering, and in parallel also the Franco-American University in Belgrade. There was a lot I had to manage, but I think my parents could be proud of me, even though my decision surely surprised them. But without it, I probably wouldn’t be a successful businessman today; I would have remained what is called a “golden kid”. My father was from Montenegro, was the director of significant Yugoslav companies, and during his career lived and worked abroad for 24 years. He was also very dominant. I think I would have ended up like many of my friends in Serbia who did not break free from the grip of their family relationships and remained in the shadow of their parents’ success.

And how is it in your family? Will your children follow in your footsteps?

Our children, Anja and Luka, completed their education—Luka in Rotterdam and Anja in Prague, respectively in New York—and they entered real estate in Prague. I should add: without me pushing them anywhere or into anything, or interfering with their decisions. It was a pleasant surprise for me, all the more because during the time they were studying we never talked about them one day becoming part of my “ecosystem” in the real estate business. Today, Luka has been working for a year and a half for Cushman & Wakefield in Prague, and I’m very glad he has that privilege. In his short career he participated in the purchase of a shopping centre and the office part of the grand project we all know as Palladium (C&W represented the buyer). Anja has been working since last autumn for Lexxus Norton. The reason both of them work in real estate advisory and brokerage firms is that I don’t want them to work for me earlier than in five or six years. I need them to go through what I went through—gradual, continuous development and growth within our real estate development ecosystem. Everything has its time.

Is there a decision within your projects that you regret in hindsight?

I don’t regret anything. When I look back at my life—which is definitely, in every respect, fast and furious—I regret no step, no decision. I would do everything the same; perhaps I could have done some things with even greater passion if I weren’t part of a rather conservative Central European ecosystem, where you need to act with gloves on and, of course, slightly minimise passion, because it may not always be understood. Every country, every nation has its own, and I think that if I worked in New York, I could allow myself to unleash my natural passions much more.

Passion and energy are frequent themes for you. What brings you the greatest joy and fulfilment in your personal life outside of work?

The most important thing for me is family. However, it needs to be explained that family is not only my wife and my children, Anja and Luka. I’m from Belgrade, I have Montenegrin origins, and there family is understood in a much broader sense. If I look only at my father’s branch, I have thirty-five or thirty-seven brothers and sisters from it. In our culture, what you call a cousin doesn’t exist. For me, the relationship between my sister and my cousin is exactly the same. For example, this morning I communicated with at least ten of my sisters and brothers. Some live in Chicago, Copenhagen, some are in Montenegro, others in Belgrade, in London… And from all of that you receive so much love, which I also often send back to my family. And I like to say that I am the engine of family cohesion. After my father passed away, without any plans I automatically became something like the leader of our tribe. But I also consider as family not only relatives, but also godparents and business partners. And similarly, I try to maintain very close relationships with friends from the mechanical engineering university, the Franco-American university, the army, sports, and from the current ecosystem, which is very broad. And that takes an enormous amount of time and energy to do it all with joy and enthusiasm. But at the same time it fulfils me greatly.

Travel is an integral part of your life. If you had to choose one trip that changed your view of the world, which would it be and why?

Travel is one of the privileges of today’s world because it enriches you. Those who travel can learn a lot—if they want to, of course. There are travellers who fly halfway around the world to a pool and see and perceive nothing else. That’s not me. I’m interested in culture, customs, food, the passion of the people of a given country, their energy, and the history of every destination I visit. All of that is a school. I keep telling my employees, business partners and my loved ones that every day is a kind of priceless school—if you want to educate yourself. And I would like to mention one more thing. I often and very gladly leave Prague, which has been my home for the past thirty-two years, because then I also very gladly return filled with new energy. I think it’s necessary to leave our beautiful city—which is one of the most beautiful in Europe—as often as possible. Ideally, in my view, every six weeks, so that after a few days abroad I return gladly. Without a longer opportunity to travel, our beautiful lady would probably start to suffocate me.

What would you like people to know about you, but most don’t? Do you have a secret you can comfortably share with the world?

Not that nobody knows it, but it has never been addressed explicitly like this anywhere: inside me there is still that boy from Belgrade who likes to conquer the world.