Gerasimos Vergotis started his career in 1989 as a financial analyst at PepsiCo's headquarters, where he continued to work for ten years. His name became linked with Romania after he left PepsiCo and, drawing on his experience, he started Plori Capital and Consulting, an investment vehicle with operations on the local market.
The company was established in Romania in April 2005 with the purpose to advise and manage the real estate and capital markets investments of the close fund's clients. According to company information, the shareholders of the company are Vergotis and Spring Creek Capital Limited, a Cypriot company in which Vergotis controls the majority of the shares.
Looking back at his first investment in Romania, Vergotis remembers his fear. “My first investment here was an apartment. I was petrified, to tell you the truth. The lawyers that were recommended to me by a bank had their office in an apartment building in Unirii. It was not what, traditionally, one would expect. Incomplete documentation and an incomplete title – I saw them with my very first purchase. It was a learning experience because lots of the issues one has to be careful about I saw with my very first purchase,” Vergotis told Business Review.
According to him, Plori's clients are 21 business people who have made investments in Romania. “In this close fund there are no Romanians, they are mainly Greek investors and one investor each from the US, Mexico and Switzerland. Our total investments in Romania in real estate, at acquisition value, reach around EUR 6 million and another EUR 1 million has been invested in equity on the Bucharest Stock Exchange (BSE),” said Vergotis. Company data show that Plori's investments in Romania represent 15 percent of the assets managed by the parent company. Four years ago the minimum limit to enter the fund was EUR 100,000, and since then it has been raised to EUR 200,000.
This year, office buildings
Romania is the only country in which the firm manages real estate assets. Plori Capital and Consulting's real estate portfolio includes 38 apartments in two residential complexes and various parcels of residential land totaling 107,000 sqm. The land is situated on national roads 1, 3 and 7. Plori stopped buying land in 2006 because the prices were becoming too high.
“We advise our clients to invest in the residential sector for some fundamental reasons. First of all, the housing stock in the metropolitan area of Bucharest is very poor. Secondly, the space per capita for the existing households is very low. There will be a need for new construction and one can only build on land,” said Vergotis.
At the moment, the Plori investors expect a 13 percent yield on income properties, a level that might be reached by the end of this year, says Vergotis.
According to him, a reasonable price for a studio apartment is between EUR 30,000 and EUR 35,000, for a two-room apartment between EUR 55,000 and EUR 60,000 and for a three-room one about EUR 85,000. Could prices get even lower? Vergotis thinks that prices on the residential sector might drop by another 20 percent, before they start bottoming out. “Currently, some 60 percent of the buyers in the market expect the prices to drop,” says Vergotis.
The Plori investment director says that the main market impediment is the low level of mortgage lending. “Bank representatives say
that they are willing to do this but there isn't anyone out there asking for the money. We know
that people are asking but banks are not approving anybody,” said Vergotis.
He added that Plori is interested in investing in office buildings, most probably towards the end of this year.
Good returns on the BSE
“We started investing on the BSE in 2004 and we exited those investments at the end of 2006 and the beginning of 2007. After the big correction registered by the market that year, we re-entered on the BSE in October the same year. Those equities we sold at the end of February 2008,” said Vergotis of Plori's beginnings as a player on the BSE.
According to him, Plori stared to buy shares on the stock exchange again towards the end of October last year when the crisis hit and the market was dramatically down. “We bought little by little until the end of February this year. We started selling about two weeks ago and we have significantly reduced our positions on the BSE by 50 percent,” said the businessman.
Plori invested a significant sum of money in the Transelectrica IPO. “We sold in about three months at about 100 percent profit,” said Vergotis. “We would more than welcome more quality IPOs like Transelectrica, but, unfortunately, in the current environment, we will have to wait a year or so.”
What can be seen is that the company's portfolio has changed in the last few years. “We are looking at different things now compared with what we were interested in 2004. Then I was interested in the financial sector, meaning BRD, Banca Transilvania and the SIFs. We bought shares in that sector almost exclusively. We also had some positions with some Rasdaq companies such as Compa Sibiu,
Iproeb Bistrita and Biofarm,” said Vergotis.
Real estate and capital markets will remain the main areas of investment for Plori, as these two domains currently offer attractive prices and a worthwhile risk-reward profile, added the director.
By Dana Ciuraru