Talking crisis, real estate and stock exchange: Interview with a top-tier leader

Dan Ioan Popp, chief executive officer of Impact, the sole Romanian real estate developer listed at Bucharest Stock Exchange speaks in an interview for Wall-Street how Romanian companies strive to seek a loophole out of crisis, and what’s ahead of Romanian stock market.
Scrambling for a way out of crisis

The crisis has shattered the business landscape and created new economic and financial landmarks. It has been the buzz kill to executives ready to feast on bulls. The result, a new concept in the business arena emerged “crisis managers”.

Dan Ioan Popp speaks from the standpoint of a manager in office for the past ten years. His vision to riding out the tough times: a company-wide review of activity. Although it is hard to give some clues to what the future holds for us, Popp says he’s a bit surprised of the European Union’s failure to take issue and do something as well as of US administration’s shift of focus, adding that the old regulations call for immediate change.

“Financial and accountability rules need to get back on the drawing board. Imbalances between economies in China, India, Mexic and the rest of the world must narrow. If these facts remain the same, there is nothing else to talk about”, said Dan Ioan Popp.

Barack Obama and his assumed position in this context is a good sign, he says. US markets and EU markets must even up, and soon.

“If these two markets don’t try to share common pathways, nothing good will come out. Romania will swing back and forth by the news, because we are too little, we will keep depending upon what other people decide”.

Even if the landing will be painful, we have to stay informed around the clock. We have to understand what is happening and to think the unthinkable, to see all the possible scenarios.

“It is smarter to be a tenant than a landlord”

In the last half of the year, Impact, the company headed by Popp, launched four financing facilities for apartments within the Greenfield compound. The first two facilities, CallBuy (lease-to-own agreement) and Find-L (rates to developer), were launched in November 2008, the newest solutions, Piece-by-Piece and Bridge, being available as of this month.

However, the products have something in common: they have 4-year maturity, deemed by the head of Impact as “affordable” both by clients and company.

“If a client failed to repay the loan in four years, he would be extra charged, and clients can react differently to an increase in final cost. Therefore, the market conditions in terms of financial costs make us believe that a four-year maturity is acceptable for both parts."

“We will start second stage of Greenfield project in first quarter 2010 the latest”

The first stage of Greenfield residential project covers 680 apartments, of which only 100 are to be completed, the rest being already delivered. Of 680, 200 have already been sold, but the head of Impact is confident. The company will start the second construction stage in first quarter 2010 the latest, citing “a fabrication cycle”.

The second stage of Greenfield will start with 165 housing units, and the funds will derive from downpayments, Impact’s funds and its financial partners.

The real house demand will be the driver of the residential market

If a year ago, the residential market was dominated by secondary-market transactions (e.n old apartments market), because 85% of the deals included second-hand apartments, Popp says today, it is difficult to even talk about a market with everything on ice.

“Old apartments account for 95% of the residential market and a mere 5% goes to new apartments. But a house is a vital asset, and the real house demand is still running in Romania, which will eventually drive the market back up; not the speculative investors or German funds but the evolution of mentalities, peoples’ aspirations and their possibility to borrow money to buy a house”, Popp explained.

“To Romanians, playing stock market is like playing squash”

Popp’s theory doesn’t apply to the revival of the stock market as well. There is a huge difference between residential market and stock market as it targets different public and involves capitals with totally different purposes, he continued.

If in 2000 surveys founded that only 1% Romanians would be willing to trade in the stock market, now their willingness is probably at the same low level, especially now when people think twice before investing or saving money in banks.

“It was a time when stock market prices were ballooning, with over 90,000 accounts opened. But few months ago, the same person said something about 3,000, of which a mere half is probably active. The number of investors dropped alongside with the market. To Romanians, playing stock market is like playing squash – sports little known in Romania”.

“I don’t believe in a fast-track maturation of the local stock market”

Impact manager weighs the Romanian stock market against a commercial market where marketers (issuers) bring their commodity (stocks) for shoppers (investors) and regulators oversee their activity. All these “still developing” components need to mature.

“I don’t believe in a deep fast-track maturation of the stock market in Romania. Our real problem lies in how much emotions we put in this game, we don’t know how to stay calm in extreme situations. But the capital market has its interesting side, for those who see its aspects even its downsides”, said Popp.

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