S IMMO AG has been present on Romania’s real estate market for 12 years now and so far has proved to be a “success story” in terms of Austrian investments in Romania. How would you assess this lapse of time from the point of view of the experience acquired here, of achievements and of opportunities offered by this market?
Romania faced very challenging times after the opening of the iron curtain with its well-known consequences. The years before the financial crisis were very promising and characterised by a strong economic growth. In 2009 the EU and the IMF offered Romania a major support during the difficult years of the crisis. After that there were very strict austerity measures which got the country back on course. Recently we observe a strong trend of recovery, stability and the beginning of a new and sustainable phase of growth in Romania.
What is S IMMO AG’s key factor of success on a very dynamic real estate market as the Romanian one from the point of view of its potential?
Bucharest is the sixth largest agglomeration of the EU and therefore has a solid basis for a profound development in the years to come. The country currently experiences growth which includes a rising GDP – it increases significantly higher than in Western Europe – a good wage level and a high education level. Romania has therefore a high potential due to a sustainable recovery of the market. Our team of proven experts provides long-term experience in the property business and knows the market very well especially in the capital city of Bucharest.
How much has S IMMO AG invested in Romania so far and what are the investment plans for the future?
To date, S IMMO AG has invested over EUR 200 m in Romanian properties, including Sun Plaza shopping centre, Sun Offices and Novotel Bucharest City Centre hotel. At the moment we are concentrating on the development of the office buliding THE MARK and the refurbishment of Sun Plaza. We are constantely watching the market in Bucharest to see if there are any other opportunities to invest in Bucharest.
The company has recently presented the results for first half-year 2016. How do these figures related to the total turnover look like, reported to the initial estimations? Do they meet the financial expectations for this year?
Absolutely, actually we have outperformed our targets by far. The first six months of the 2016 financial year were extremely successful for S IMMO. This was largely due to the revaluation gains, which amounted to EUR 106.9m in the first half of 2016. The dynamic growth on the German real estate market was the primary driver of this development. Berlin’s residential property market has enjoyed highly dynamic development in recent months. We decided to realise a portion of the value increases achieved in our portfolio by selling around 20% of our premises in Germany. This is in line with our cycle-oriented strategy and creates value for our shareholders.
What are the most significant projects achieved in Romania and what are the main learned lessons from these experiences in your capacity of key player on this real estate market?
The most significant project in Romania is our shopping centre Sun Plaza which was at the time of the opening the biggest shopping centre in the country. It is the leading shopping centre in south Bucharest and provides a well-balanced mix of shops, suited for all customers, garnished with a convenient shopping experience and an innovative event program which is supposed to strengthen loyalty among the customers in our neighborhood, as well as to attract people living further away from our place. At the moment 20.000 m² are partly reconstructed under ongoing operation and will be completed in 2018. It will then provide letting space for up to 40 additional shops.
What’s most important about a property investment is – of course – the location, the long-term view of the investment and the high quality of the property, which is mostly reflected in a greenbuilding certification. Our shopping centre Sun Plaza received a green building certification from BREEAM and was the first certified shopping centre in Romania. The connected office building Sun Offices is also certified. Meanwhile Bucharest is definitely comparable to other capital cities in Europe and upscaling the convergency process to close the gap.
What could you tell us about S IMMO AG’s current portfolio of key projects here?
THE MARK is the first significant class A office project to be built in Bucharest’s CBD after a pause of approximately 10 years. The project has a total built area of 43,000 m² and a combined GLA of approximately 25,500 m², comprised in two class A+ buildings. Located on the new Uranus boulevard, at the junction of Calea Grivitei and Buzesti street, THE MARK will be a new business destination in Bucharest as well as a new visual reference point in the city due to its outstanding location and innovative design approach adapted to the actual urban living.
The upgrading process of Sun Plaza has started in the first quarter of 2016 and is expected to be finished in 2018, as previously mentioned. The remodeling works will bring additional 11,000 m2 of high-quality retail and leisure space for up to 40 new stores. Sun Plaza is now in its third year with 100% occupancy and 85% of the additional space to be opened in 2018 is already pre-let. Moreover, we expect to have the entire project fully occupied by the end of the reconfiguration process.
THE MARK and the reconfiguration of the Sun Plaza Shopping Center are two of the most important projects currently developed by S IMMO AG in Bucharest. What will be the total cost of the investments in these projects and what will bring new these real estate properties from the point of view of high standards in real estate?
The investment volume for Sun Plaza will be approximately EUR 30m. For THE MARK we are investing approximately EUR 45m, starting with construction.
What are S IMMO AG’s future developments plans in Romania?
We are concentrating on THE MARK and on the refurbishment of Sun Plaza which will approximtaley take still two years. We are constantly oberserving the market in Bucharest to see if there are any new opportunities to invest in commercial real estates like offices or retail.
How would you place the development potential of the Romanian real estate market on a scale of potential of other markets in South East Europe?
Currently, Romania is definitely the strongest market in SEE and got in the focus of international investors again. After Poland, Romania is the second largest economy in the region. Romania has already made excellent progress regarding the reduction of corruption and is – compared to other countries like Serbia, Bulgaria or Croatia – currently leading.