What are the Baneasa project’s phases and when are construction works on each of them scheduled to begin?
It is difficult to tell exactly when the phases will start, but what I can say is that the first phase, which was the first half of the retail platform, Carrefour, is due to open on 12 April. So this first phase of the retail platform will be complete by then. The second phase of the retail platform will start at the end of April, and will be completed by the end of 2007. Then we have the office park, with a first phase that will start in two weeks’ time, and that should be completed by late spring, May of this year. The next phase of the office park will start depending on market demand, and we will end up completing phase after phase depending on market evolution. As for the residential part, we are already underway with the first apartment buildings, which started last summer, and we are now about to start the first houses, which will happen probably in late April or May. A scheme of such size is comprised of many different phases. The entire project has been designed to be responsive to market demand. If that slows off, we are not forced to bring products into the market there is no demand for. So we can move as our clients want us to.
How many of the built apartments have you already sold?
Although at this point I can’t give you a specific number, but I would say we have sold some 25 percent of what we have under construction on the residential side. However, we haven’t started a full-scale sales campaign for the apartments yet, this is just a pre-sale situation. We’re hoping the whole residential part will be offered in one go, so we can provide an entire offer to people, not just the apartments, but houses and large villas as well. We want to give them multiple choices.
With what companies are you working on the project?
On the commercial area we are working with Vinci, which also has its subcontractors, and on the residential area we are working with Comnord, which is building the apartments for us right now. We are about to enter the contract for the business part, but the procedure has not yet been finalized. Vinci also developed Feeria, the first phase of the retail area, but we are also working with the company and developing around it. We are the master developer, while Vinci is developing a piece, which is the Carrefour and the shopping galleria, named by Vinci Feeria. At the time we made the deal with Vinci, we weren’t certain exactly how quickly phase two of the shopping mall would start. So we are the master developer of the project and they are sub-developers.
How is the mall incorporated in the Baneasa project going to be different from the other malls on the market?
The mall will be different for two reasons. One is that it will probably be the biggest in Bucharest. Although people are planning all sorts of enormous malls, I expect this one to be the largest one when it opens. But for sure it will bring a lot of new brands to Romania, which I cannot disclose at this time, and we will have a great variety of retail areas. We will also have more leisure content than the other shopping malls have. At the end of April, when the mall is launched, the new brands we will bring will also be disclosed. We are counting on two types of catchment areas for our mall. For the beginning we are looking at a much larger area, with a couple of our retailers that, for a few years, will certainly have a unique location in Baneasa. They will bring people from a wider area, even from outside Bucharest. Over time, as more shopping centers are developed, if the traffic infrastructure is not improved so people can move around the town more freely, I think we will begin to concentrate more and more on the local environment.
Have you decided on a brand for the announced 300-room hotel within the Baneasa project?
We’ve had discussions with a couple of brand names, with several operators, but right now we are analyzing in detail whether we want to have a 300-room hotel or reduce the number of rooms to 125 – 150, and then in a second phase build another 150-room hotel. So we will end up with 300 rooms, but in two different phases. We are taking this decision by looking at the market now. And if the market grows, we can build some more. The entire project, when we launched it, was supposed to be carried out over some 10 to 20 years, but there is no rush to build the whole thing at once, and create a huge elephant: there is no point in building an enormous hotel that you cannot fill, it’s much better to go with a more modular concept. But we will provide conference facilities for the business park, which are very necessary. Bucharest doesn’t necessarily need a big conference center, as it has the biggest in the world sitting in the middle of the town. But it needs conference facilities, which is something different.
What is the value of each of the Baneasa project’s parts?
The first phase of the retail part is worth some EUR 15 million. For the offices, the first phase that we are launching will be about EUR 60 million, and the first phase of the residential, the first apartments, will be worth around EUR 100 million. The project’s total value is somewhere near EUR 1.2 billion. But the value depends on the market. Today the value might be EUR 1.3 billion, and in two years’ time, it could be EUR 2 billion.
How much do you estimate the project will return?
Overall, the project should return some 20 to 30 percent, and this is what we expect. Hopefully, it will return more than that. If things go disastrously wrong, it might return less than that. But is very difficult to predict exactly what is going to happen, when you look at the scale of the project. This is a project that’s going to evolve over many years. Prices have risen enormously in the northern part of the town in the past few years and no one could have predicted that. At the same time, construction prices are going up very fast, and rents are coming down. That’s why it’s impossible to predict the return. We have got one of the best pieces of land in the whole country to develop in Baneasa. It’s not only about making money, there’s a huge responsibility in developing it right. This is the front door to the capital city. If we make a complete mess of it, anyone who drives into Bucharest is going to see that complete mess. And it’s going to change their opinion of what this country is all about. We are building a new town, and we have to make sure all the elements of what we do fit together. People who live there will wish their offices were there, and those whose offices are there will want to live there, and people who go there to shop will want both things. We are creating a whole community. Setting up this project meant setting up a master plan, and then filling in that master plan, in reaction to the market itself. In five years’ time, the absolute must could be a water park or something we haven’t included in the original plan. So we will be able to reconfigure what we are doing.
You once said the company’s profits were going to be re-invested. In what exactly are you planning to re-invest?
We are already re-investing in Baneasa. Any profit that we make in the short term goes back into the project. We have to build schools, hospitals, spas, educational centers, landscaped areas, and all of these things cost money, so we have to re-invest all the money we are making. We are trying to put together all the elements of a community, which is what makes this project unique. We are not just talking about building some houses in the middle of nowhere and then running away. We are talking about building a community. We need to invest in what kind of street furniture we are going to use, what the rubbish bins are going to be like, what the landscape is going to be like, all these kind of things. Large sums of money need to be poured into making the area a desirable area, and not just a collection of houses in a field. We don’t expect to make any profit from this project for the next three to five years.
Tell us about your working experience in Romania. On what projects have you been working on this market?
For many years, I think I’ve been the market! I’ve been working here since 1992, but I wasn’t involved in this kind of project before. I used to run the Jones Lang Wootton office many years ago, and I came across many projects during that time. In the last few years, I have been working on several residential buildings, and on creating the office building in Dorobanti which now hosts the Petrom headquarters. My experience is pretty broad in Romania. I have also been advising people in Romania, the Czech Republic and Poland, when I was working with Jones Lang Wootton.
How often do you go on the construction site?
Usually once a week.
What are the three keywords that would describe Romanian real estate at this moment?
Romanian real estate is excitable, confused and promising.