Quiet man of real estate comes under spotlight with new project

Despite shunning the media spotlight, Alexander Hergan, the investor whose name is linked to real estate development business Avrig 35, has been a serial investor both in Romania and the US. At the same time as managing Avrig 35, which is now developing another retail project, Pallady Shopping Center, he owns six other businesses in the US and is also a member of the Sibiu stock exchange.

Corina Saceanu

Alexander Hergan has been investing in real estate in Romania for the last 11 years, through his firm, Avrig 35, and is planning on retaining his focus on property and the local market. While in the minds of most people his name is linked to real estate and in particular the landmark project Charles de Gaulle Plaza, the businessman has been involved in other businesses as well, most of which have been in the United States. Hergan, who has an engineering background, says he has six other firms in the US, in areas as diverse as software and medical equipment. He is also the director of Peregrine Financial Group, a futures commission merchant (FCM). The company was among those that helped with the launch of futures transactions on the Sibiu stock exchange (Sibex) in 1998, when it also became a member of Sibex. The businessman was a founding member of the Chicago Board of Options Exchange, according to data from Sibex. He has also been involved in the project implementing derivative contracts linked to the Dow Jones Industrial Average.

Hergan, who has hitherto kept a low profile, has been in the spotlight recently with the launch of Avrig 35’s latest retail project, Pallady Shopping Center. “Real estate investors’ interest in Romania began to increase in November last year. Funds which had disappeared from the market are now active,” says the property magnate, while also announcing discussions for possible forward-purchase sales of the recently-announced retail project. “We didn’t look for these forward-sales, but in the last three months we have seen some renewed interest in Romania, which was not here one and a half years ago,” he says.

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But why start a project now? Both Hergan and his partner in the venture, Alex Van Breemen of Cascade Group, say they have taken into account how the market will be in the future, rather than how it is now. “You have to look over the hill,” advises Hergan.

Both investors have also seen increasing interest from retail players in the last six months. “Retailers have approached us saying they want to be in this location. Everyone is knocking at the door now, and retailers want to be in the east of the city,” says Van Breemen. French retail group Auchan and sports firm Decathlon were the first two to sign leasing agreements for stores in Pallady Shopping Center.

This is not Auchan and Avrig 35’s first project together. The French firm has also leased space in Avrig 35’s retail developments Iris Shopping Center in Bucharest and in Pitesti.

“We don’t just build projects and wait for them to be leased,” says the Avrig 35 head, in answer to why he has chosen to start the project now. Paying attention to the market was his strategy. “The market will tell us what the next phase will be,” adds the businessman, referring to the future phases of the Pallady project, which will also include office and residential components. Avrig 35 group owns over 100 pieces of land throughout the country.

Residential is however not his favorite type of project at this moment. “I don’t believe in residential. […] We have not hit the bottom in residential yet,” he says. He doesn’t think the office segment will suffer anytime soon, because of the lack of office projects and the demand for this type of space. “Nobody who starts offices, even speculatively, will suffer,” adds Hergan.

The Pallady scheme was initially foreseen to include a large housing project, but “the market is saturated now and it will take a long time for it to swallow all this residential,” cautions the Avrig 35 CEO.

corina.saceanu@business-review.ro