Executive Summary

• Belgrade Waterfront is a large construction project that aims to build a series of commercial and residential buildings eastern bank of the Sava river;
• The development of the project is entrusted to Belgrade Waterfront LLC, owned by Eagle Hills company from Abu Dhabi;
• The development of the project involves private actors such as Eagle Hills and Emaar Properties as well as public actors such as the Government of Serbia and Belgrade City Hall (directly) and UAE (indirectly by supporting politically the private UAE companies);
• Serbian Government was the initial owner of the Belgrade Waterfront LLC, commissioning also 95% of the needed lands to the company. The Government yielded 68% shares to Eagle Hills for a EUR 130 Million loan and promise of future investment in major infrastructure projects, which is considered by experts a poor economic deal for the Serbian Government;
• EBRD considered initially a potential engagement with the project but dropped their intentions in the process, allegedly for lack of transparency regarding the funding of the project and possible political connections;
• Beyond the economic issues, the project registered a series of architectural problems, so due to poor quality of design and implementation of some of the buildings constructed are already running the risk of being flooded by the Sava river.

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Project Key Facts

Regional and Local Context

Belgrade Waterfront project is highly controversial, due to its sheer size, involved actors and expected impact on the local and national real estate markets the project attracted a lot of attention and subsequent criticism. Summarizing bellow are the most important aspects connected to the project:

1. Constructed on eastern bank of the Sava river in an area known as Bara Venecija, the project intends to deliver tens of residential and commercial buildings contributing to the development of the real-estate market in Belgrade;
2. Officially, the project was agreed upon during the visit of the Crown Prince of Abu Dhabi, Mohammed bin Zayed Al Nahyan, in 2013. After the visit, the founder of Emaar Properties, Mohamed Alabbar, and the Serbian minister of construction, transport and infrastructure, Zorana Mihajlovic, signed an agreement which entrusted the development of the project to the company called Belgrade Waterfront LLC;
3. Established by the Government of Serbia, Belgrade Waterfront LLC was commissioned 95% of the lands for construction directly from the government. After this phase, the Government yielded 68% shares of the Belgrade Waterfront LLC to Belgrade Waterfront Capital Investment, owned by Eagle Hills. It was done in exchange for a EUR 130 Million loan and a promise of EUR 300 Million initial investment;
4. EBRD considered a potential investment into the development of the project, however decided not to participate as the project advanced. There are no clear suggestions what triggered that decision;
5. The project was initially scheduled to be finalized in just 4 years. Soon after, the deadline was extended to 8 years, then 10 years. The current estimation is 20 or more years.

Actors and strategies

Project insights

Belgrade Waterfront project is present on a political scene for decades, but always described as science fiction by the opposition, it ceased to be science fiction in 2015 with the involvement of Eagle Hills. According to local experts, however, this project is highly controversial from the legal, economical and engineering perspective.

Legal Issues

• • Money laundering - "While the investor is from Arab Emirates, it is rumored that the money financing the project are in fact dirty money from Serbia, which are washed through Arab Emirates and legalized back in Serbia” stated one of our local sources.

• Questionable expropriation procedures - "the whole process of land expropriation and construction permits is dubious and not transparent, it seems that there are some political interests behind this project, interests which steer the project in a specific direction, disregarding legal or economic realities” mentions another source.

Economic issues

• Below the market pricing - Eagle Hills has become the majority owner of Belgrade Waterfront LLC in exchange for a EUR 130 Million loan and a promise of EUR 300 Million initial investment. Considering that the land Serbian government later granted for the project makes 95% of the construction area, this transaction was very unfavorable to the public interest. "Considering the high real-estate prices in Belgrade and the conditions offered to this investor, it seems that authorities are handing out a great opportunity to a private investor below the market prices. Which shows clearly that there might be some local interests in the development of the project” highlights one of the interviewees.

• Unclear/inexisted economic benefits - "It is still unclear to me what are the benefits for Belgrade of this project. While the are can be developed, the prices at which apartments are sold currently in that area as well as the speculated prices for rent of commercial spaces is higher than the market once, so where is the real benefit for our community?" asks one of the local experts.

Construction/Engineering issues

• Unfit engineering solutions - “Due to poor engineering and planning, the basements of buildings which are already constructed are constantly flooded by water from Sava river, also, because they did not take into account the specificities of the local soils and did not account for it in the building process we can expect that those buildings will be constantly under threat of sinking and subsequent structural damage”.

Beyond the highlighted problems, Belgrade Waterfront project also has an impact on local and regional transport infrastructure, both in a positive and negative ways:

On the positive side:

• The Belgrade Waterfront is located in the center of Belgrade next to the section of Corridor X stretching right through the city and the southern part of the site, which gives the project a very good access to the freeway network of Serbia.
• The Old Sava Bridge, which is located on the northern side of the Belgrade Waterfront, is planned to be replaced with a new bridge and moved either to the Ada Ciganlija to serve as a pedestrian bridge or to the Usce Park to conservated a monument. This question is an important part of an ongoing discussion between the Government and the Opposition.
• The construction of the Belgrade Waterfront has also accelerated the completion of the Belgrade Bypass, including a connection with Pancevo over the new Vinca bridge over the Danube river, which will unburden the city center of traffic jams.
• Alongside the Belgrade Waterfront, the second largest construction project currently developed in Belgrade is the Belgrade Metro, with two of its lines to intersect beneath the building of the old Belgrade Main Railway Station (located on the territory of Belgrade Waterfront).

On the negative side:

• The Belgrade Waterfront is going to put additional pressure on the already congested transport system of Belgrade, because it has required from the authorities to move the main rail and bus stations from the land dedicated to the project.
• In 2018, as the decades-long plan for the development of the site predicted, the old Belgrade Main Rail Station was closed, and the new Belgrade Center Railway Station, also known as Prokop, construction of which started back in 1974, was finally inaugurated.
• Besides that, a shutdown of the Belgrade Bus Station is expected, because of an existing contract to build a new one on New Belgrade, next to the New Belgrade Rail Station.
• The main problem is that the sites of both new stations are further away from the city center and will require passengers to use the already overstretched Belgrade Public Transport.

Forecast

We can expect the project to move further given its commercial value and political support. Some of the buildings are already constructed and operational, while others are on the way.

In 2018, the first two towers called “BW Residences” welcomed its first tenants. Since then two more towers, “BW Vista” and “BW Parkview”, have been finished. By November 2019, the construction of “BW Galerija Shopping Mall” is almost concluded, while the works on “BW Arcadia”, “BW Aurora” and “Kula Belgrade”, as well as “BW Magnolia” and “BW Metropolitan” have been commenced. Start of the construction of “BW Terraces”, “BW Aria”, “BW Terra”, “BW Simfonija”, “BW Verde” and “BW Aqua” is planned for the upcoming months, while the “W Residences” Hotel has been announced.

While not directly related to the construction, we can also foresee large infrastructure works to improve Belgrade Waterfront connectivity with the existing infrastructure, as well as with the one in development.

Strategy and Operational options for EU actors

There are three distinct ways in which EU companies could engage with the project:

1. 1. Financing - whilst the general financing for the project seems to come from Eagle Hills, when it comes to investment in particular subprojects within Belgrade Waterfront, the financial opportunities are still open for European banks, for which a good example is a financial agreement between Belgrade Waterfront and Erste Bank from 2017;

• Construction - there is a clear opportunity for European construction companies to participate in the project. Strabag and Impresa Pizzarotti already set an example in this respect becoming the main contractors for the some of the subprojects. Given the large number of subprojects and the long timeline of the project itself we can expect multiple construction sites in place with ongoing opportunities for European companies;

• Logistics and support - given the desire to interconnect the area with main infrastructure nodes, a further opportunity for EU actors would be to offer consultancy and logistic assistance for the construction of all necessary road and railway connections, in which Chinese and Azerbaijani actors have been already involved. This can be achieved by approaching both - local and national planning authorities. 

For all of the above, it is important for EU companies to account for the specific local context. Specifically to consider the political implications of the project, offer beyond the immediate product a potential line of credit, or suggest potential crediting partners and ensure the required technical support to contact foreign actors. So beyond simply providing a service or a product, EU companies must engage with local actors and support their efforts locally.

Sources

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