Codrin Matei, Managing Director of Crosspoint Real Estate, invited by Cristian Hostiuc at ZF Live: “The real estate market in Romania is now much more mature. The portfolio is diversified from the perspective of the buyers, there is no longer the feeling of loneliness from last years, with the same investors you met in each transaction. We are still facing the same perception regarding liquidity at country level, but it is encouraging that we are currently on a watch list. It is an improved market, meaning that there are more buyers, more products and more diversified, Romania is more present internationally. We see more investors interested in portfolios of office buildings, industrial, hotels, investments in general. At present, they are looking for everything, from land, to portfolios of apartments, in order to develop the area of serviced apartments, in office buildings with a certain yield, logistic parks. Everything can be traded, if you receive the correct offer.”
Presently there are 2-3 hotels in the market for sale. These are assets that belong to a certain class, and investors target a diversification of their portfolio. The wanted yield in hotels, depending on the location, is 7-8%. For office buildings, the yield is 7%, but we will certainly witness some transactions under 7%. The price of land has increased, the price of construction has risen, the only drawback by which all these elements are interesting for a developer is the compression of the yield, otherwise the investment may not be attractive anymore.
The last transaction signed by Crosspoint – the acquisition by the London Partners of the land in Expozitiei will bring a mixed project, where the investment besides the cost of the land of over 15 million euros will be over 100 million euros. Expozitiei area has all the premises for a healthy development. There are many investments in the area, which depend on the infrastructure improvements, the new subway line in particular. Iulian Dascalu is going to develop a big project at Romexpo, the whole area has about 6 hectares, George Copos develops Ana Tower, Atenor are going to develop an office building near the Unicredit headquarters, GTC owns a land plot near this one, so the vast majority of developers are present in the area. There are projects already under development – Cordia and Impact are developing residential projects, Portland Trust have already completed most of Expo Business Park.
As for the demand, on the office market, the most active is the IT&C industry, which represents 42% of the total leasing activity in the first half of the year and I think that there are enough extensions, new players entering the market to cover all these deliveries of new spaces. Currently we have mandates from companies in the coworking industry, and Romania is still perceived as a country with a highly skilled workforce, the wages for the IT&C industry are still permissive for these companies, as proof all the big companies are present in Romania: Amazon, Oracle etc. There is a “stamp” put on Romania that we are a more than interesting hub in this domain.
In the 4th quarter I think that a lot more transactions will be completed, initiated at the beginning of the year, and I am referring here to investment transactions in office buildings, land, hotels, portfolios, for example the NEPI portfolio, a transaction that is likely to happen by the end of the year. There are other portfolios for sale on the market, such as the Logicor portfolio. From the perspective of the buyers are both existing and new players, which is an element more than favorable on the market, attracted by the yields that are still interesting compared to western Europe, 3 or 4 times higher.
As for the land market, the vast majority of the transactions we are working on are for land, industrial and residential parks. Prices for developing office parks increased by 30%, for residential increased by at least 20%. Although the data shows that the residential sales decreased in the first half of the year, they only take into account the reported sales-purchase contracts, they do not take into account the pre-contracts as well. Much of the residential activity comes from new projects, where these pre-contracts are signed. Among the buyers there are investors who want to benefit from a discount when they buy a package in an early stage of the project, then rent them for a short period and resell them for a certain profit. Also, there are the ones who buy for rent and those who buy for housing. Regarding investments, depending on your risk appetite, you can benefit from discounts of 15-20% per year.
Regarding liquidity, transactions on the office market can take up to 2 years. The last land transaction we completed lasted a year and a half. The price is not the most sensitive factor, usually the commercial terms are agreed from the beginning, in a rather short period. However, the structure of the transaction and the alignment of the requirements of both parties require more time, when the period of the technical and legal checks starts. There are many buyers who want to pay an advance and condition the completion of the transaction on obtaining a PUZ, a construction permit, which depending on the area can take a year, a year and a half or more.
Last year Crosspoint traded over 100 million euros, the vast majority being land deals, this year we expect to trade a larger volume, about 130-140 million euros, which will have a direct impact on the company turnover. The turnover last year was 1.3 million euros totally for the companies in the group, this year we estimate that it will be over 2 million.
In 2018, Crosspoint Real Estate associated with the international company Savills, well- known on the UK market. At first it was harder, because you have to make your presence known on the local markets, but now the collaboration is working very well and their support is being more and more obvious. An example of a new client obtained through Savills is New Work Offices, a flexible space operator, that leased 2,800sqm in AFI Tech Park and foe which we have under negotiations 3 more locations, about 2,000-3,000sqm per location.
See the full interview in ZF Live on 8.08.2019 here: https://www.youtube.com/watch?v=moKByT61yGg
For further information, please contact:
Codrin Matei, Managing Partner, Head of Capital Markets Tel: +40(0)21 232 45 40