The last four years saw more insolvencies announced than new investments started, and going insolvent most often means bankruptcy and liquidation.
At least 35 large projects, either completed residential complexes, office buildings and malls or land and projects only half finished, have gone insolvent over the last four years. The debts of the companies managing those investments stand at more than EUR1 billion, according to Finance Ministry data and banks are the main creditors, as ZF has found.
Some of these projects have already been reorganized by finding new investors to take over or in some cases liquidated, while the empty plots of land and the frozen projects ended up on the lists of court-appointed liquidators, who have trouble finding buyers for them. The overall feeling in the real estate market is that the streak of insolvencies and bankruptcies has not reached its end.
“We can’t say the worst is behind us. We will definitely see many insolvencies and bankruptcies in real estate. The heaviest pressure from creditors, and I’m not talking banks only here, is put on the retail and residential segments, which will remain the stars of the market,” believes Valentin Ilie, chief executive officer of Coldwell Banker Affiliates of Romania.
The company he runs has been involved in two of the biggest insolvency cases on the market, City Mall in southern Bucharest and residential complex Alia Apartments in northern Bucharest.
While City Mall ended up liquidated and was sold to Greek businessman Ioannis Papalekas who is converting it into an office complex, Alia is being reorganized and Coldwell Banker is in charge of selling the luxury apartments comprising it.
These two examples are among the lucky cases, as their sale generated some money, even though their initial owners lost everything. On the other hand, some real estate assets are now considered impossible to sell, which means banks and other creditors cannot get anything back.
“There have and there will be many bankruptcies on the land segment, none of which high profile cases, but still quite many, plots of land that should have been used in a number of projects left at the announcement stage,” Coldwell Banker’s Ilie said.
Banks used to lend tens of millions of euros even for land buying during the boom days. The market freeze induced by the crisis rendered many developers unable to repay those loans, while getting new ones to finish construction work was out of the question.
Under the circumstances, banks decided to reschedule the loans in some cases, to sweep them under the rug, but in the end found themselves having no other way out but to petition for insolvency and liquidation of the debtors. The portfolio cleanup process is not over yet.
“It is hard to expect a positive trend of the real estate market over the coming period. We see it flat rather than anything else, which will drive even more projects insolvent,” says Andreea Anghelof, managing partner of insolvency specialist Casa de Insolventa Transilvania (CITR). “Properties that fit the ‘First Home’ profile are the most likely to avoid it.”
CITR has or is still managing projects like City Mall, Tiago Oradea, Alia Apartments and Swan Office Park.
CITR sold shopping centers City Mall and Tiago Oradea, and plans to reorganize Alia and Swan. It also has other properties for sale and has been looking for buyers for at least one year.
The company is trying, for instance, to sell the Armonia shopping center in Braila (SE Romania), with negotiations starting from EUR14.8 million excluding VAT. Last year, the asking price for the 29,500 square meter center was EUR25 million.
An office building in central Bucharest (Valeriu Braniste Street) with a lettable area of 4,800 square meters is now on sale for EUR2.75 million instead of EUR5.3 million a year ago. Even so, they are not the kind properties causing most trouble.
“The unfinished projects with no source of funding pose the most difficult problem. The banks, which have rolled over debt in the hopes of finding solutions that have yet to be found, are now going to court petitioning for insolvency of such projects,” Anghelof said.
She believes the solution in this industry is mainly the private equity funds specializing in distressed assets, which have a higher risk appetite hoping for a significant profit.
However, very few investors are willing to buy troubled real estate assets in Romania now.
An exception is Greek businessman Ioannis Papalekas, who bought back bankrupt City Mall, took over insolvent Tower Center (office space) and bought several plots of land from construction company Lufin, also insolvent.
Industry insiders are saying that lately, banks have been buying via special purpose vehicles those distressed properties they financed, hoping to get a better price for them once the market recovers.
UniCredit, Volksbank and Alpha Bank are among the most active banks that funded insolvent projects. Other banks with troubled real estate loans in their portfolios are Bancpost, Bank of Cyprus and BCR.
There are few cases of successful reorganization for the time being and even so, creditors do not get all their money back. However, most players in the real estate industry believe that this process will help reset the market where property prices had become unjustifiably high during the boom years.
(English version by Loredana Fratila-Cristescu)
|
Project |
Went insolvent in |
Stage |
Assets upon insolvency |
Total debt at the end of 2011 (mln. euros) |
Bank lender |
|
|
1 |
Asmita Gardens |
November 2011 |
Under observation/ reorganizing |
758 apartments |
119.1 |
Alpha Bank |
|
2 |
Swan Property |
January 2013 |
Under observation/ reorganizing |
29,000 sqm of office space |
82.7 |
UniCredit, Volksbank |
|
3 |
City Mall (Victoria Holding) |
November 2010 |
Liquidated – sold |
Mall with 19,000 sqm lettable area |
76.7 |
UniCredit Tiriac Bank, Bancpost |
|
4 |
Pipera City (Creativ Proprietati Imobiliare) |
September 2012 |
Under observation/ reorganizing |
12 ha land in Voluntari |
74.4 |
Bancpost |
|
5 |
Tiago Mall (MLS Proiect Oradea) |
November 2009* |
Liquidated – sold |
30,000 sqm unfinished mall |
72.6* |
UniCredit Tiriac Bank |
|
6 |
Ibiza Sol Pipera |
December 2011 |
Under observation/ reorganizing |
304 apartments in Pipera |
56.3 |
Alpha Bank |
|
7 |
Planorama Colentina (Euro Habitat) |
June 2010 |
Under observation/ reorganizing |
1,100 unfinished apartments |
52.8 |
Piraeus Bank |
|
8 |
Laguna Residence (GEA International Development) |
March 2012 |
Bankrupt |
500 unfinished apartments by Lacul Tei |
41.0 |
La Caixa |
|
9 |
Cortina Residence (Cefin Real Estate Alpha) |
January 2010 |
Under liquidation |
270 unfinished apartments |
38.7 |
Volksbank, Investkredit |
|
10 |
Tower Center International |
August 2011 |
Proceedings closed in December 2012 |
Office tower – 22,000 sqm lettable area |
38.7 |
Alpha Bank |
|
11 |
Armonia Braila (RED Project Three) |
October 2010 |
Under liquidation |
Shopping center – 29,500 sqm lettable area |
36.0 |
Volksbank |
|
12 |
Terra Residence Voluntari (Terra Vision) |
June 2009 |
Under observation/ reorganizing |
700 apartments – 400 of which unfinished |
34.1 |
BCR |
|
13 |
Alia Apartments (Alia Inmobiliaria) |
February 2012 |
Under observation/ reorganizing |
124 apartments near Arcul de Triumf |
32.8 |
UniCredit Tiriac Bank |
|
14 |
Platinum Vitan Towers |
January 2011 |
Bankrupt |
300 apartments partly finished |
30.1* |
Banca Romaneasca |
|
15 |
Belleview Sinaia (Ozer Construction) |
October 2009 |
Under observation/ reorganizing |
344 unfinished apartments |
25.6 |
Piraeus Bank |
|
16 |
Avrig Asset Management |
September 2012 |
Under observation/ reorganizing |
30,000 sqm office project (foundation only) |
21.5 |
UniCredit Tiriac Bank |
|
17 |
EFG Crevedia Development (project in Buftea) |
May 2009 |
Liquidated – sold |
124 ha plot in Buftea |
21.2* |
Raiffeisen |
|
18 |
Greenlake Development |
June 2011 |
Proceedings closed in November 2012 |
700 houses and apartments partly completed |
20.2 |
Bancpost |
|
19 |
Sigma Residence (Sigma Proiect Development) |
October 2009 |
Bankrupt |
3.3 ha plot in Colentina |
20.0 |
Bank of Cyprus |
|
20 |
Citadella Titan (BRC Business Group) |
January 2012 |
Under observation/ reorganizing |
224 apartments in Titan |
17.2 |
BCR |
|
21 |
Tatarasi Arena Iasi |
September 2012 |
Under observation/ reorganizing |
Seven apartment buildings yet unfinished |
15.7 |
Volksbank |
|
22 |
Blue Tower Colentina (Copper Beech Capital) |
October 2009 |
Under liquidation |
156 unfinished apartments in Colentina |
17.7** |
Alpha Bank |
|
23 |
Focsani Plaza (Omnium Invest) |
March 2011 |
Under liquidation |
Mall project on 6 ha plot |
13.2 |
Banca Romaneasca |
|
24 |
Bellevue Residence (Gabi’s Development) |
April 2012 |
Under observation/ reorganizing |
150 apartments in Brasov |
12.3 |
Alpha Bank |
|
25 |
Akademia Center Cluj (Nisco Invest) |
March 2011 |
Bankrupt |
Mall project – 18,000 sqm lettable area |
12.1 |
BRD |
|
26 |
Eurosmart Invesment (Eminescu rezidential) |
October 2012 |
Under observation/ reorganizing |
50 luxury apartments on Mihai Eminescu Street in central Bucharest |
11.8 |
Alpha Bank |
|
27 |
Nanette City Gate Timisoara |
December 2012 |
Under observation/ reorganizing |
Residential project on 18,000 sqm plot of land |
11.6 |
Piraeus Bank |
|
28 |
Locic Residential |
May 2011 |
Under observation/ reorganizing |
3,500 sqm plot by Lacul Tei |
11.6 |
Volksbank |
|
29 |
Proconces |
December 2010 |
Liquidated – sold |
Landmark building on 1,000 sqm plot in Piata Romana, central Bucharest |
10.2 |
UniCredit Tiriac |
|
30 |
Deva Mall (Dor Pluricomprest) |
November 2011 |
Under observation/ reorganizing |
Mall – 9,000 sqm lettable area |
9.5 |
Banca Italo Romena, BCR |
|
31 |
My Dream Pipera (Plus Development) |
June 2009 |
Liquidated – sold |
180 apartments in Pipera |
8.3 |
Bank of Cyprus |
|
32 |
Odyssea Residential (Confidential Business) |
December 2011*2010 |
Under observation/ reorganizing |
Project with 156 unfinished homes |
7.2*** |
Alpha Bank |
|
33 |
Y.A.M. Consultanta Imobiliara (Braniste office project) |
July 2010 |
Under liquidation |
Office building – 4,800 sqm lettable area |
6.1 |
Volksbank |
|
34 |
Verdi Park (Meridian Land) |
February 2010 |
Bankrupt |
11 luxury apartments |
4.5 |
Alpha Bank |
|
35 |
Gigant Construct (residential project in Titan (eastern Bucharest) |
March 2009 |
Under liquidation |
10,200 sqm plot |
4.0 |
Marfin Bank |
*Debt according 2009 financial statement
**Debt according to 2008 financial statement
***Debt according to 2010 balance sheet
Source: Data centralized by ZF from court of law portal, the Electronic Archive for Secured Transactions (AEGRM) and the Finance Ministry