Prague 18 October 2016: Guyana Holdings, majority owner of Skoda Palace, are pleased to announce that they have engaged one of Europe’s most highly respected and influential architects Eva Jiricna. She will be tasked with defining a vision of how this art deco Palace could be converted into a vibrant, inspiring and welcoming contemporary retail and office space, while at the same time respecting the historic value of the Palace’s original design. This engagement is not about implementing a reconstruction at this stage; Eva Jiricna’s mandate is to explore the Palace’s potential with the objective of retaining its valuable historical design, tradition and central role in Prague.
“When selecting an architect, we looked for someone who loves and values the rejuvenation of historical buildings, and who holds the urbanistic view that new is not the only option. We also needed someone with a proven track record of creating designs and concepts that meet the needs of modern clients. We are confident that Eva will tackle this project sensitively, sensibly and with great style, taking the Palace from good to great,” said Guyana Holdings board member, Abigail Schaeffer. “Eva’s mandate is to explore the Palace’s potential; ensuring that it is an attractive and modern space for the future,” concludes Ms. Schaeffer.
There has been considerable development in and around the Narodni trida area and the owners wish to consider all alternatives in order to secure the Palace’s future. Projects of this magnitude requires planning well in advance, and while 11 years seems like a lot, it’s actually a rather standard time frame. This engagement will in no way disrupt the City’s operations as it relates purely to planning.
“Skoda Palace is a generous piece of architecture in respect to size, design and location, and it’s no secret that I’m a big believer in exploring how to give older buildings rejuvenated life instead of just constructing newer and bigger buildings all over the city. My efforts will focus on creating ideas and for a modern retail and office design that offer the best standards today and in the future,” said Eva Jiricna.
Eva Jiricna is an award winning architect known for maximizing space by combining engineering, architecture and interior design. Some of her most recognizable work includes the transformation of ‘unmanageable’ London spaces into modern and exciting usable areas while respecting their original historical values. Ms. Jiricna in particular enjoys projects where she can offer timeless and innovative design in well-established, historical communities.
The City of Prague and Copa Retail, the owner of Škoda Palace where Prague’s City Hall resides, have agreed on a reduction of payments for Škoda Palace by 33% until the end of the lease agreement. The proposed arrangement is subject to the approval of the Prague City Council planned for 7 June and to a subsequent discussion at the June session of the Prague Municipal Assembly.
“The settlement of the Škoda Palace lease agreement was one of the priorities that I set for myself when assuming my office, and I am happy that we have completed the task successfully. We never disputed the quality of the building. The only viable option was discussing a potential discount because the City had not achieved anything in litigation and Prague just kept on losing tens of millions of crowns every year,” said Mayor of Prague Adriana Krnáčová.
“I have always said that a reasonable dialogue could lead to major savings, which is what the current top City officials have achieved. While we had a markedly stronger legal position, our chief priority and pursuit was to reach an agreement even though we were not pressed to do so. The arrangement represents an adequate, reasonable and both legally and financially solid compromise for either party,” said Abigail Schaeffer, member of the Board of Directors of Guyana Holding, the company that owns the majority of Škoda Palace through Copa Retail.
The parties were involved in litigation for almost four years. Under the arrangement, all disputes will be discontinued including Prague withdrawing the appeal it filed with the Supreme Court. The deal resulted from the effort of a team of negotiators that included Councillors Jan Wolf and Radek Lacko, Director of the Prague City Hall Martina Děvěrová and the legal team of the Císař, Češka, Smutný law firm on behalf of Prague.
“At first, both parties had prejudices stemming from the unsuccessful discussions of the previous years, and Prague was now in a disadvantageous position. Eventually, a compromise was found, giving the City enough time to look for new city administration headquarters, with staying in the Škoda Palace building being one of the alternatives. After the Council and Assembly approve this, the City Hall could obtain a discount of CZK 860 million. In addition, these savings would grow over the next ten years due to inflation. In effect, the agreement would bring the City savings of almost one billion crowns,” added Councillor Jan Wolf.
“We have been through seven months of long discussions that both parties undertook with their respective ideas of the result. We can be satisfied with the agreed discount of 33%, which approaches one billion crowns. Under the arrangement, the lease term will be extended by one and half years and the agreement will end in the spring of 2028. Despite concessions on either side, this arrangement is very advantageous for the City,” said Councillor Radek Lacko.
The arrangement will normalise the business relationship between both parties and turn a somewhat non-standard agreement into a balanced deal, protecting both parties’ rights better. The saving of almost one billion is the biggest benefit for the City. The arrangement was made under conditions that were difficult primarily on the part of the City, as its position had been made complicated notably by losing the previous trials before courts of both instances, including final rulings on appeals.
Details of the proposed arrangement:
Financial aspects: If the agreement is signed by 30 June 2016, the discount will apply retroactively from 1 April 2016 and will amount to CZK 860 million, which means a 33% reduction of the current amount of payments until the discharge of the agreement.
Purchase option: The City waived the purchase option the necessity of which had been subject to considerable doubt, choosing the saving of almost one billion crowns instead. If Prague chooses to buy the building it can approach the owner at any time. The discharge of the option poses no obstacle to this possibility. Since the former agreement from 2006 was full of non-standard and unclearly worded provisions, the application of the option by the City would most likely result in a dispute over price.
Change of currency: Both parties agreed to change the contractual currency from CZK to EUR. This makes contract financing easier for Copa Retail. The City will hedge itself against currency risks, which will represent no additional costs. In fact, since the Czech crown is expected to strengthen vis-à-vis the euro, Prague will ultimately save as a result of the switch to the euro.
Extension of lease: The parties agreed an extension of the lease agreement by an additional 18 months, i.e. in principle until Q1 2028. Copa Retail requested the lease extension to secure its return on investment. On the City’s part, it will provide more time to prepare the potential alternatives for the City’s residence after 2028, which include staying in Škoda Palace because of the building’s convenient location in the city centre.
Discontinuing pending litigation: The City of Prague has decided to discontinue all litigation instead of continuing to take its chances in court. While the City lost both in the first and second instances, it eventually achieved its goal – reducing the payments – and prevented further losses thanks to negotiations.
Guyana Holdings, welcomes the news that Prague City Council plan to organize a negotiation team in order to address the ongoing legal issue with Skodova palace. “We have been trying for two years to open the doors and have a meaningful dialogue with City Hall. The City wants to pay less rent, but the longer they wait, the less we can offer in terms of a settlement. Based on my calculations, the City loses 135 000 CZK a day in what they can negotiate through lower rent. The sooner we meet and have a meaningful conversation the better for both parties,” said Abigail Schaeffer, Board Member of Guyana Holdings.
Schaeffer met the Control Committee last Wednesday 29 April, presented her views and answered questions about the conflict. There she stated very clearly that Guyana Holdings is very keen to negotiate a reasonable settlement, and the first step the City must take is hiring reputable, qualified and experienced lawyers in real estate law or conflict resolution. “I am certain that once the City is properly advised on their position, it will be possible for them to take a sensible and rational approach to settlement.”
The Appeals Court today rejected an unjust enrichment appeal brought by the City of Prague in the Skoda Palace case. Today’s decision is the second of two appeal rejections and the fourth of four losses that the City has endured since launching litigation in 2013. Despite the fact that Copa Retail has won in court, it is still willing to conduct settlement talks if the City so wishes, as it believes a solution exists. However should the two parties meet, Copa Retail hopes that the City will reach clarity about their need for the purchase option in the current lease contract.
“The City recently told me they expect a contract where they pay less, but maintain the purchase option; this is unrealistic. The only way the City today will pay lower rent is if they give up the purchase option along with all the other unusual lease clauses. What they in fact told us is that they don’t know if they need the purchase option or not, they in fact have no idea what they need, so shouldn’t they make a decision? Does it make sense to pay higher rent now because the City has no idea if they want to buy the property or not?” said Abigail Schaeffer, Member of the Board of Guyana Holdings, the majority owner of Skoda Palace.
„The City has a purchase option in its lease that allows it to buy the building at an uncertain price within the last five years of its lease. It is this clause plus several others that leads to a higher rent being charged than otherwise. The City has lost at every instance in court, spent millions of crowns in court and legal fees and rejected a rent reduction worth over 500 million CZK. There’s a big difference between paying for something because you know you need it as opposed to wanting it because you can’t make a decision if you really need it or not, ” concludes Ms. Schaeffer.
A court of appeal confirmed today the rejection of the City of Prague’s action against Copa Retail regarding the entitlement in the dispute over the amount of the rent for the Škoda Palace building. In addition, the court of appeal ruled about the costs of both trials in favour of the defendant.
“For two and half years, the City of Prague has been involved in a lawsuit against us over the amount of the rent it pays for Škoda Palace. But the court has already dismissed two actions filed by the City and the City did not succeed again today,” says Abigail Schaeffer, Member of the Board of Directors of Guyana Holdings, the majority owner of Copa Retail, the company that owns Škoda Palace.
Copa Retail’s offer for a discount of half a billion from the total rent for the building has been in existence since last July. The City Hall refused the offer. The discount can be applied only on the future rent, not retroactively. This means that as time passes, the total discount offered is decreasing. Instead of an agreement and the resultant reduction in the rent, the City is losing CZK 135,000 every day.
“Prague set up a special workgroup for negotiations with the owners of Škoda Palace, but it never invited us for a discussion during the 154 days of its existence. We have repeatedly publicly declared our interest in maintaining an open dialogue with a view to resolving the dispute, but the dispute persists,” concludes Schaeffer.
Dear Ms. Krnacova,
I trust this letter finds you well and you’ve had at least a partial break during this hectic summer, regardless of the political events at the City Hall reported in the media.
I noted with interest that Prague City Council has adopted a proposal to continue litigating and in parallel try to negotiate [a settlement] with the owners of Skoduv Palac. I confirm my commitment and willingness to sit down and participate in a transparent dialogue with the aim of resolving the current dispute to the satisfaction of both parties and to the benefit of the Prague citizens and taxpayers.
I am also aware that a special working group has been formed on May 5 with the objective to negotiate changes in the current lease agreement for Skoduv palac. Since that date, however, I have not once been approached to meet, which leads me to make the respectful suggestion that we meet sooner rather than later, also given the upcoming appellate hearing on October 7th. I believe it would be wise to meet befor that date and would appreciate if we could meet by September 30th.
Finally, I would just like to take the opportunity to remind you that since May 5th, the City of Prague has forfeited potential savings in the total amount of almost 17 million CZK, which represents savings offered by us in the amount of CZK 135 000 per day (based on our offer to the City in July of last year). This does not include the City’s ever-increasing cost of legal proceedings.
I am at the working group’s disposal and hope to hear from you soon.