Panculescu thinks the local real estate market will face a credit crunch replica starting 2008 until 2009, because of the investment banks' cash shortage and the increasing caution shown by international investors. These causes, generated by the international financial climate, add to the local conditions on the Romanian property market: the exaggerated and economically groundless price of land, especially in Bucharest, the Central Bank's decision on its money policy regarding the residential market and the long time it takes to get construction authorizations and licenses, said the Westhill director.
Westhill chose Ploiesti as the first destination for the company's projects because the city is “the most important railway and road bow in Romania” which makes the location a suitable target for all kind of developments. “Westhill took the decision to invest in Ploiesti after six months of local market research,” says Panculescu.
The manager shows no concern over the multitude of announced developments targeting commercial centers in the city, because, he explains, every project has a distinctive aspect and delivery time, from 2009 to 2012. The oversupply risk in Ploiesti is also not a danger, because, after opening three commercial centres in the town, the other developers will reorganize their projects for mixed use, with a focus on residential, thinks Panculescu. Commercial developments are a must for investment in the city, since the only options for Ploiesti residents are Winmarkt or Bucharest.
Following the announced projects to be completed in the coming years in the city, Ploiesti will benefit from EUR 830 million split between retail and residential: Adama's EUR 120 million Evocasa housing project, Pic's EUR 60 million retail park, Plusvag's EUR 250 million mixed project close to Ploiesti, to include Sonae Sierra's EUR 153 million mall, BSG's EUR 20 million Central Gardens residential project, AFI Palace Ploiesti worth EUR 100 million, W-Go's Perla mall worth EUR 100 million or Mivan Development and Moritz Group's Tiago mall development. There are also announced projects such as Media Galaxy and Mobexpert joining a shopping center, and Baumax, adding to the already existing units of Metro, Praktiker, Carrefour and Bricostore.
Some 85 km away from the capital, Targoviste lacks enough commercial facilities, the need for which is at this time met by the town's commercial center Muntenia. Westhill will build a commercial center in the city, and is planning to invest EUR 60 million. The project, Crizantema Mall, will comprise a hypermarket, shopping space, restaurants and entertainment area, and will deliver a total of 36,000 sqm of rentable space. It will be completed in 2009.
British company King Sturge has been assigned to design and rent the spaces. Targoviste has also been selected by Matrix Investments for a EUR 25 million mall development called Targoviste Mall, also set for completion in 2009. Panculescu says that Westhill's project will deliver through the retail mix in Crizantema Mall shopping elements such as a fashion shopping gallery and entertainment area in a city lacking such things.
Depending on economic conditions in each county, such as average income or number of inhabitants, every city is a target for one to four commercial centers. “I believe Bucharest can sustain eight to ten large shopping centers,” says Panculescu. As for future projects, he says that Westhill has ongoing projects to acquire two more plots for a residential development and an office project, as well as for another commercial center, targeting cities exceeding 150,000 inhabitants.
The projects developed by Westhill company in Bulgaria and Romania are visibly different in terms of type. While in Romania, as it previously announced in 2007, Westhill will focus on commercial centers and is just starting to look into residential too, in Bulgaria, its developments are in tourism and focus on retail and logistics.
“Bulgaria has succeeded in building a country brand and has invested far more in the infrastructure to support this brand. Given these conditions, Westhill decided to invest in the segments to trigger bigger profits. Still, we hold land in Bulgaria which will become retail and logistic developments,” says Panculescu. “The difference comes from the necessary investments to be made in each country and from what can be sold faster and better. In Bulgaria, holiday homes have been sold almost 100 percent to British citizens who used them as a second home or an investment,” says Panculescu. But he underlines that the two Romanian projects, the Ploiesti and Targoviste shopping centers, exceed the Bulgarian ones both for investment value, estimated at EUR 250 million, as well as investment return.
By Magda Purice