“For equity players I think this is a great time to enter the market. Long-term picture in Bucharest is healthy,” Gijs Klomp, managing director of JLL Romania told ZF. The only issues are funding and exit but they, too, will be addressed, he added.
The Dutch executive first came in Romania in 2000, while in college, and in 2006-2009 ran the local operations of ING-REIM division, whose portfolio includes the Felicia retail center in Iasi (NE Romania).
He then worked in Budapest and Prague and now that he returned to Bucharest, he sees a lot of progress has been made, such as the Baneasa and Barbu Vacarescu overpasses, as well as the Basarab Bridge, the highway to Ploiesti and the highway sections between Sibiu and Nadlac.
The main problem of the market, the executive says, is the cost of funding, which makes local property less attractive than Poland’s, despite lower prices.
“The cost of funding in Romania is prohibitive. If you do the numbers you’ll see they aren’t better than in Poland.”
Yields may be lower in Poland, but the spread makes property more profitable. For instance, one can get a building in Poland at an annual interest rate of 3.5% and its yield is 8%, hence a 4.5% spread. In Romania one can buy buildings at 8.5% yield, but if the interest is 6%, the business is no longer profitable, Gijs Klomp explained. The investors who want to build new projects using bank loans run into the same problems, he added.
“High borrowing costs impact new development projects, too. Good projects are now paying for poor projects in the past,” for which banks are to blame, too, for not having sufficiently analyzed the investment, because no one forced them to grant loans, the Dutch executive says.
His company is part of the top five in its line of business and posted EUR2 million revenue last year. Klomp expects somewhat higher revenue this year, but does not expect big transactions to be resumed fast. JLL Romania assisted AIG Lincoln and Dinu Patriciu Global Properties in the sale of the Lakeview building in Bucharest for some EUR63 million, the most important transaction in 2013.
(English version by Loredana Fratila-Cristescu)