Real estate market in first half: forced deals and focus on residential properties

The scarce real estate deals completed in the first six months of the year were came in under selling pressure due to financial crisis, that put lending on ice and demand in slow lane. In this context, the majority of the deals involved residential properties, but not exactly under the best terms and conditions for vendors.
The sizes of the majority of the deals announced in first half were not made public. The only exceptions were the takeover of investment fund Fabian for 50 million euros and the acquisition of a portion of Perla Residence for 15.5 million euros.

Tri Investments’ acquisition through its real estate investment arm Salamanca Capital of a portion of the Perla Residence was the largest residential deal in 2009.

The UK-based fund took over 69 apartments in the residential compound developed by Crown Constructions, local subsidiary of Greece’s Morfi. The project located in the vicinity of Pipera lake includes 85 apartments, and three villas. The project was finalized at end-2008.

“The transaction was carried under normal conditions, the terms being negotiated as a result of completion date of construction works. The negotiation was lengthy, but it did meet the time frame agreed by both parties”, said Alin Buftea (photo), senior associate at DLA Piper, the law firm appointed as legal advisor in the deal by Tri Investments.

Another transaction completed in the residential segment was the joint acquisition by TNG’s Real Estate division and Baumeister of Central Apartments project. The value of the deal was not disclosed, but sources close to the deal said the transaction followed the pattern of distressed asset deals.

Central Apartments is located near Tomis Boulevard, Constanta and comprises 89 medium-class to premium apartments, being initially developed by Westhouse Group. The apartments’ surfaces range between 49 and 123 sqm.

Vendors now sell at loss to secure immediate sale

As for the retail segment, that had been grabbing the spotlight in the past years, players lost traction as far as new deals are concerned. The gap between vendors’ expectations and that of sellers increased on a monthly basis.

The sole transaction completed was the sale of S.C Retail Park Magnolia S.R.L, by its parent company Lewis Charles Romania Property Fund Ltd (LCSR) that planned to develop Zenith shopping center in Ploiesti. Magnolia, together with its debt load of 3.63 million euros was acquired by Blackpearl Property, held by a number of Irish investors. A month earlier, Lewis Charles Romania reported losses of 21.28 million euros for 2008.

“The value of the acquired assets dropped enough to make vendors sell at great loss. In the context of this dramatic slowdown, players faced mounting pressure in returning the cash invested by shareholders, and therefore, they were forced to sell”, said Georgiana Anghelus, consultant at investment department of Colliers International.

Another deal announced in 2009 was the acquisition of 50% in real estate developer South Pacific Group in Romania to US-based private equity Warburg Pincus. Currently, South Pacific has six residential projects under management in the north area of Bucharest: Syndey, Adelaide, Melbourne, Brooklands, Darwin and Hobart.

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