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Anda Todor, AmCham Romania
More attention needs to be paid to the qualitative approach, rather than quantitative»
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Real estate ready to reload

With the property boom a distant memory, partner at Romanian law firm Peli Filip, Francisc Peli, believes the real estate market in Romania is hotting up. Profile by Corina Ilie

March 2010 - From the Print Edition

You may have heard this before – but after two years of uncertainty, decline, insolvencies and bankruptcies, the real estate market is finally starting to pick up.
While new investors are still likely to stay away from Romania in the next few years, until the market proves real signs of recovery, developers who know the territory well will re-boot transactions.
But the recovery will be gradual and the real estate market will not witness many large transactions this year, worth hundreds of millions of Euro, but more small and medium-sized deals.
A new trend in small investment funds, set up by a few investors interested to acquire small single-digit million Euro projects, will also wait for the recovery of the market, to protect their money, before taking the risk of investing in the country.
This is the view of Francisc Peli, partner at Romanian law firm Peli Filip and a top business brain on local real estate.
“The property market is getting close to a new cycle and the main real estate actors will be those who have dominated the market in the past ten years,” he says. “The transactions will be smaller at the beginning, concluded by players with a higher risk appetite. Then larger players and transactions will gradually take back the place left free in 2008. I do not think new players will enter the real estate market in the next five years.”
The logistic and office segments will remain the most attractive for investors this year, while the residential segment - which was dealt a body blow by the financial crisis - will still be tagged as unprofitable.
In 2009 the only important transaction on the industrial market was completed by Austrian equity fund Immoeast, which bought 50 per cent of the participation of its compatriot Eyemaxx in three industrial projects in Timisoara, Ploiesti and Brasov. Immoeast also completed the only large transaction on the office market last year. The fund bought from Lithuanian developer Europa Group, ten per cent of the Meteo Business City, near Otopeni Airport, in northern Bucharest, the construction of which has stopped.
On the residential segment British equity fund TRI Investments last year bought 69 flats in Eminescu View project, developed by Israeli firm Future Group on Strada Eminescu, and another 69 projects in the residential complex Perla Residence on Soseaua Pipera, both in Bucharest.
The developers of retail projects will still feel the pressure of their anchor tenants, especially hypermarkets, who can dictate the trends and price of rents on the market, with the success of projects depending on their presence.
“The main reason why the office segment suffered the least during the crisis is because developers could conclude transactions faster and easier, as they did not have to make an extra effort to choose carefully the tenants, as with retail, where tenant mix is important and the anchor tenant can leave and go to the competition if it does not agree with the terms of the developer,” says the lawyer.

Purchase rise

Outside of real estate, acquisitions are targeting sectors such as energy and medical in 2010. At the beginning of the year, one major transaction in the medical sector was the purchase of private healthcare player Central Medical Unirea (CMU) by US investment fund Advent International. At the end of last year, France’s Societe Generale Asset Management also acquired 36 per cent of local medical operator MedLife for 20 million Euro. “These two transactions became visible because no other important transaction happened in the past year,” says Peli. “In 2007 and 2008 when the M&A market was very dynamic, a 20 million Euro deal would have been almost invisible. But the M&A market is in full development this year. We will witness this year enough medium and large size transactions.”
2010 began with Romanian businessman Bobby Paunescu, the owner of television station B1TV, buying independent daily newspaper Evenimentul Zilei and weekly Capital from Swiss media group Ringier. Is this indicating the possibility of assets returning home? The idea of Romanians buying back businesses from foreign owners will remain isolated cases, argues Peli, and foreign investors will continue to dominate the market and conclude most of the transactions.
“The transaction market was blocked for a while because investors did not adjust their expectations to the offer on the market,” he adds. “Investors that understood the market very well were those who made important acquisitions.”
However the merger market will not be too dynamic this year, because it is hard for companies in tough conditions to clearly assess merger strategies.

Fresh faces

Since its set up in 2008, Peli Filip has been involved in some of the most important transactions of the past two years. The law firm assisted last year US private equity fund CVC Capital Partners in its acquisition of the operations in Romania of Bergenbier and Stella Artois producer Anheuser-Busch InBev (ABI) group, as part of a 1.64 billion Euro central Europe-wide deal. The law firm also assisted the European consortium Aktor-Vinci, the winner of the tender for the construction and operation of Comarnic-Brasov motorway, on signing a 1.7 billion Euro concession contract for a mountain highway. “We are planning to continue assisting concession and infrastructure projects in the future, especially since the private-public partnership (PPP) projects finally started to move,” says Peli. “The Aktor-Vinci deal was very complex, as it included many new aspects for all the parties involved. All the law firms on the local market know the privatisation rules well after witnessing so many, but PPP is a completely different area and quite complicated.”
Peli, his wife Carmen and their partner Cristina Filip left the largest law firm in Romania, NNDKP, to start-up their practice in 2008, just as the financial crisis crashed onto Romania. Peli says that having connections to the international environment allowed him to start preparing for the difficulties of the financial crisis from the end of 2007, when the first signs were visible abroad. “We knew it was going to be difficult to start a business in full crisis, but we also thought that we have all the necessary elements to succeed,” says Peli. “Moreover, after years of working and coordinating teams of lawyers in large law firms, we thought it was time to see if we could make our own business successful.”
The law firm has doubled in two years its number of employees to 32 and will recruit more lawyers this summer.


Francisc Peli is a specialist in real estate, infrastructure and concessions and started his career in litigation. He worked as a litigation lawyer in Brasov for a short time and then moved to Bucharest to practice in consultancy. “When I graduated from law school, litigation and civil rights were the only branches of the law sector,” says Peli. “I never thought I would end up as a real estate specialist, working for corporate customers, which is a more interesting area.”
He was later hired by the Bucharest branch of UK firm Linklaters, where he assisted transactions such as the steel factory Sidex sale to Mittal, the gold mine project in Rosia Montana and power distributor privatisation to CEZ, Electrica Oltenia. He specialised in working in real estate after moving to Linklaters.
Peli studied maths and informatics at high school, but says he does not remember why he decided to become a lawyer. “I think many lawyers study sciences during high school and many have a mathematical thinking, which is helpful in this area,” he adds.

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