The Grand expands offices and retail, looks at new hotel options

The company that owns the JW Marriott hotel in Bucharest and the entire complex built around it, Societatea Companiilor Hoteliere Grand (SCHG), will expand the current retail area and the offices as well in the coming future. While the retail area will expand by an existing 1,800 sqm currently used as office space, the offices will grow with the addition of a new building in the hotel's parking lot, Panagiotis Vogiatzis, general manager of SCHG, told Business Review.
Both expansion projects are expected to happen in the medium term. The retail extension should be ready to host restaurants and stores in one and a half or two years, while the new office building should be completed in about three years from now, says Vogiatzis.
The new office block should feature a similar area as the current office space inside the Grand complex, around 12,000 sqm. At EUR 600 per sqm, the entire investment in the new offices should soak up around EUR 7 million of investment. “The idea is not in a very advanced stage, as we are only now proposing architects for the project. […] We need to decide the exact area and how the project will look. If a decision is taken by our board, I estimate it will be ready in maximum two-three years,” says Vogiatzis.
With the retail area and the existing restaurants in the complex being a major attraction, which brings 60 percent of the customers from outside the hotel, with only 40 percent being guests of the hotel as well, the Grand's strategy is to bring new retailers and it is aiming for luxury names. The most recent addition is retailer Gucci, which is soon to sign lease agreements for a store in the JW Marriott's shopping galleria. “We hope they will be able to start furbishing works on the store by the end of this year. […] Usually, such brands require around three to four months to arrange their stores,” says Vogiatzis. The Gucci store should be ready to open by mid-next year, based on current information. The shopping galleria will welcome a new luxury brand on June 4, when the first Louis Vuitton store in Romania will open.
Despite hosting the most profitable hotel in Bucharest, according to Vogiatzis, the entire complex, which he evaluates at more than EUR 200 million at present, has not received any serious offer for a possible sale.
However, the transfer of shares between minority and majority shareholders of SCHG has been subject of media reports, with the latest being one of the minority shareholders, Fatih Taher's intention to negotiate with majority shareholders Strabag and ONT Carpati for a possible sale of their stakes, for him to control the company. Local law firm Bostina & Asociatii has recently been appointed by Taher to negotiate a possible deal. Taher was interested in buying more shares in the company, in which he already owns 19 percent, and said he had proposed Strabag a sale last year, without receiving an answer. The general manager of SCHG says that this kind of report pops up every year, and that from his knowledge, no official sale proposal had been made so far. Moreover, Vogiatzis thinks the majority shareholders would not be very keen on selling, as the complex provides too good results to be handed over at any price.
The hotel runs at a profitability rate of 42 percent, says Vogiatzis, and the company overall posts a similar profit rate. JW Marriott hotel posted last year EUR 40 million in turnover, while its profit stood at some EUR 16.8 million, according to latest data.
In 2000, when the JW Marriott hotel was opened, SCHG signed a management contract with the international hotel chain, which will last for the next 25 years, with the option to extend it by 25 more years. The international chain has recently announced its interest in expanding its presence on the Romanian market, with its eyes on the seaside for a Courtyard unit.
Its first partner in Romania, SCHG is currently discussing with Marriott group the possibility of expanding its business on the hotel segment. SCHG has priority in discussing a possible future partnership with Marriott.
The company has recently refinanced the Grand project with a EUR 110 million loan from the Bank of Cyprus. It also owes ONT Carpati, one of its shareholders, the value of the shell building on which the complex was built – some EUR 28 million, plus interest.
While new hotel developments may be an option, involvement in other types of real estate projects is at the moment ruled out.Vogiatzis, who has been living in Romania since 1996 and graduated from the Romanian faculty of medicine, has been working with ONT Carpati since 2000. In 2005, following changes on the board, he came to work for SCHG. The Grand complex is made of the five-star hotel JW Marriott, with about 400 rooms, 12,000 sqm of offices, a commercial area leased to various tenants and a World Class unit, which is owned by SCHG and run under a management contract, like the hotel.

By Corina Saceanu