Teodor Pop, RED: We halted talks, and withdrew properties that were for sale

After selling last year the plaza in Arad at a 6.75% yield, RED Management Capital announced that none of its projects are for sale any longer, as in the current market conditions, everybody who sells will surely lose.

Up to now, RED invested in domestic real estate market nearly 700 million euros and intends on investing at the same pace another 300 million euros, as company is in talks for drawing strategic partners. Some of the group’s projects are Armonia plaza (in Arad, sold to Immoeast, Braila – the next one to be delivered, Satu Mare), Armonia Mall Giurgiu, commercial centers Cadran (Slobozia, Husi – to be opened in the spring of 2009, Miercurea Ciuc and Harghita) and mixed projects (World Trade Center Constanta and Radius Shopping Business & Arts Baia Mare.

“We withdrew our projects from the current negotiations, as their running prices would not reflect the real value and whoever sells in times of crisis will definitely loose. As the plaza from Braila is the next one to be delivered, in March 2009, we talked to groups of investors, whereas we have not reached any agreement and we decided to keep all projects we are developing at the moment,” said Teodor Pop (photo) Managing Partner at RED, adding that this is not a permanent decision, but a long-term one.

According to Pop, if in 2006 the exit-yields were 6-6.5%, they have risen up to 8-8.5% lately, meaning that developers’ profits will sharply decline. RED representative said Armonia plaza from Braila rendered 8.5% yield.

Apart from the decision made to keep the real estate projects, RED said it will administrate on its own nine commercial centers and by yearend the company will set up a management team in charged exclusively with the projects’ property management.

“We did not appeal to brokers in the market, not even when we planned on selling properties, but we adopted a direct approach with the investment companies. Own management of the centers and the decision to keep the real estates are part of our strategy for Romanian market, a strategy which will be implemented in the context of global financial crisis,” Pop added.

RED representative says we will witness long delays in real estate projects, both in retail segment and in office space, projects’ abort, or even “loud cracks”, however the market has the ability to overcome the turmoil in the second half of 2010.

“Banks have restricted their lending conditions and cut the refunding degree from 70-80% down to 30-40%. Developers who urge for funds will have to have their projects almost fully leased, and those who have already contracted loans, will have doubts whether to continue their real estate projects or not, because of the market’s mode”, Teodor Pop added.

Translated by Camelia Oancea

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