This particular land could host TriGranit's Esplanada, a huge city renewal project, mixing offices with residences, retail, cultural buildings and green areas. Its history starts three years ago, when Hungarian developer TriGranit was selected as investor in the public-private partnership, meant to bring beauty and structure to a deserted area in the downtown of the capital city, and, of course, profits to both the developer and the Bucharest City Hall.
Romania doesn't have a great track record in kicking off large public-private partnerships. Changing governments and hectic legislation were reasons for delaying projects which in other countries took much less time to realize. The Radio House project is one such unfortunate example. Construction works started this year, after several years in which contracts with irregularities popped up along with interchanging investors.
The construction date for Esplanada depends on the signing of the contract between the Bucharest municipality and developer TriGranit, which has been delayed year after year. But this time negotiations between the two parties seem to be close to an end, and the developing company expects to start works in 2009.
TriGranit: Long negotiations are normal
What is delaying the project? After negotiations with the state, TriGranit signed the PPP memorandum in May last year, and this has opened the way for the final round of negotiations. Pending restitution claims on more than half of the plot also put a brake on the process. The Bucharest Municipality was expecting to finalize mid-last year the restitution claims and compensate anyone who had lost out. However, no good news in this respect came from the Bucharest city hall.
On the other hand, TriGranit representatives said it was normal for the negotiations between the two parties to take so long, as the value of the project makes it the biggest PPP so far: over EUR 1 billion.
“The negotiations process for Esplanada was naturally a long one, as it was the first project at such a value, over EUR 1 billion. There are no major impediments for the negotiations, things went the normal way,” Dan Ghibernea, country manager for TriGranit Development Romania, exclusively told Business Review.
After the signing of the memorandum last year, when all the TriGranit bosses came to Romania, the negotiations involved weekly meetings, analyzing all the details in the contract up to each comma, numerous studies, analyses and estimations, “so that the contract respects both the investor's and the state's interest,” says Ghibernea.
The long yard seems to have shortened for Esplanada, as the contract signing moment is just around the corner. “We are close to finalization, but, I must say, we prefer to sign the agreement later, but knowing the Esplanada development will have a solid and correct ground, which could make it a positive example for other partnerships of this type,” Ghibernea said.
The need for longer negotiations may be a direct consequence of the irregularities in the Radio House PPP contract, which had to be renegotiated and which will be built with other private investors who did not feature in the initial set.
As for Esplanada, TriGranit, the lucky winner of this PPP, which had to outrun 33 other competitors in the race in 2004, will need to use all its forces to build the more than 650,000 sqm the project will feature.
The developers seem very patient, but since they won the Esplanada contract, the company has already kicked off two other projects in Romania – two Polus Center malls in Cluj – Napoca and Constanta. The project in Cluj-Napoca is actually very close to opening.
“We have waited in some cases as long as seven years to identify opportunities, but I hope we won't have to wait that long in Romania, because we prefer to work and make money. TriGranit has powerful shareholders, and this allows us to focus on projects which don't necessarily have an immediate end in sight. Our main project now is Esplanada,” Lorant Varga, CEO of Trigranit International, said last year. Five years will have passed by 2009, the latest announced date for start of project.
Pedal to the metal for similar size private projects
While Esplanada is awaiting signature on legal papers, two other projects of similar investment sizes are already underway. Baneasa project, a EUR 1.2 billion project built in north Bucharest on some 224 hectares, started in 2005, four years after its founders came up with the idea. Baneasa is not a public-private partnership but it has a somewhat similar structure. The 224-hectare land on which the project is being built doesn't belong to the investor, but to the University of Agricultural Studies, which gets a share for its contribution.
Another project close in investment size to EUR 1 billion is Sema Parc, a mixed development built by local River Invest. The project, started last year, is currently underway, but its situation is different, as this is an entirely private project. The land belongs to the developer, and so do the funds.
Esplanada may become crown jewelry for TriGranit
Esplanada is in fact one of the biggest, if not the biggest such project in TriGranit's portfolio. The company has built similar projects in the neighboring countries, but none this size of built area or investment. The Palace of Arts in Budapest, Hungary, was also a PPP, the first PPP of its kind in Central Europe. Its development cost reached EUR 130 million and it was opened in 2005.
Emonika City Center in Ljubljana, Slovenia, is closer in concept to the future Esplanada. The project, supposed to kick off in 2007 and open in 2010, requires EUR 250 million in investment for a 120,000-sqm total built area, featuring retail and entertainment, residential, offices and a hotel.