One was filed against Eurosmart Investment on September 27, the company that developed a luxury apartment building on Mihai Eminescu Street in downtown Bucharest.
The building is about 85% completed and should have included some 50 apartments.
Eurosmart Investment, controlled by Marina-Ioana Popovici (62.6%) and event organizer Forum Invest (37.4%) borrowed EUR10 million and 2.2 million lei (EUR0.5 million) from Alpha Bank in 2007 according to the Electronic Archive for Secured Transactions (AEGRM).
The investor chose Total Confort as builder, but work stopped more than a year ago.
“The project is about 85% done, it only needs the yard and the basement completed, as well as painting, wall and floor tiling and door installation on the inside. The project was poorly managed, as far as I’m concerned, the clients had no developer experience,” says Daniel Roman, manager and one of the shareholders of Total Construct. “Because this was their first project, they did not exactly know what they wanted and so we took too long and when the crisis came the bank halted the funding.”
Total Confort, too, went to court requesting that Eurosmart Investment be declared insolvent. The case is on the next week’s docket with the Bucharest Court of Law before Alpha Bank’s.
Roman says his company has about EUR200,000 left to collect for work done and EUR400,000 to EUR500,000 for the deposit made before the project started.
Eurosmart Investment officials could not be reached by the time the story was ready for posting, and Alpha Bank chose not to comment.
The other insolvency request filed by Alpha Bank last week involves Myth Investment & Development, a subsidiary of Africa Israel Hotel, part of the AFI Europe group, which also owns AFI Palace Cotroceni mall in Bucharest.
The group controlled by Israeli billionaire Lev Leviev brought its hotel unit in Romania in 2007, which bought four buildings in the center of Bucharest, three fully operational hotels with 144 rooms and the dilapidated Palas Hotel, which needed extensive work.
The same year it bought the hotels, Myth Investment & Development borrowed EUR30 million from Alpha Bank, about as much as it was said to have paid for the acquisition at the time, pledging the four hotels as collateral according to the Electronic Archive for Secured Transactions.
Five years later, Palas, close to the Cismigiu Hotel, which is undergoing renovation in full gear, is still a rundown building. The other hotels, the Central, across the street from Cismigiu Hotel, Opera, near Palas and Venezia a bit farther down the road in Mihail Kogalniceanu Square, continue to operate under TH Hotels.
The three operational hotels had been valued at EUR27.8 million at the time the loan was granted or EUR193,000 per room, much higher than today’s price for three and four-star hotels in downtown Bucharest. On the other hand, Palas, which should have had 150 rooms upon completion of repairs, was valued at EUR13.3 million, according to the Electronic Archive for Secured Transactions.
Africa Israel Hotels officials had not provided any comment about their plans by the time the story was ready for posting.
The Greek-owned Alpha Bank has taken steps over the past year to address some of the problems caused by the troubled projects they financed – the Asmita Gardens residential towers are now insolvent, and a reorganization plan has been recently approved, the Liberty Mall was foreclosed and bought by Alpha, Bancpost and Bank of Cyprus via a special purpose vehicle, while Tower Center in Piata Victoriei (downtown Bucharest) was sold to a new set of investors who pledged to repay EUR17.5 million of the debt of the developers.
(English version by Loredana Fratila-Cristescu)