Over the past few days four major investors on the Romanian real estate market have announced that they will drop some of the projects in their early stages of development, declines in the value of properties in their portfolio, intentions to sell assets, or in some cases, even exits, due to the international credit crunch, which is making it more difficult to secure loans.
Mivan announced it might give up development of the Tiago mall in Arad, City Mall's owners (the Australians at APN/UKA) announced a decline in the value of the mall in Southern Bucharest, and out of the funds listed on the London Stock Exchange, Equest and Fabian are considering the sale of assets bought several years ago.
"Hard times are looming ahead for the real estate market, as a result of a credit crunch that restricted access to cash, along with a higher loan cost and excessive increases in construction costs. They are putting pressure on the profitability of developers, who are willing to pay less for land," comments Mark Holdsworth, managing director of Fabian investment fund.
Fabian has authorised consultant Jones Lang LaSalle to sell its Baneasa Business Center building in Northern Bucharest, which it bought about nine months ago for only 23.9 million euros.
"Financing is no longer available on the capital market. It was a "carnage" in London for listed real estate companies," Fabian's manager says. The fund had 120 million euros worth of assets in Romania, and the Baneasa Business Center is now appraised at 29.5 million euros, an over 20% increase on the purchase price.
On the other hand, Equest Balkan Properties, in turn listed on the London Stock Exchange, is taking into account the sale of some assets from its portfolio on the Romanian market, with fund officials saying that "a large part of the projects announced will be postponed while others that have not started yet will be cancelled."
The perception of the Romanian real estate market has radically changed over the last few months, so that whereas investors would announce new real estate projects, price increases and extensive investment plans every day until the end of last year, the number of signals that show how the market has changed has increased.
Investors have changed their strategies and from buyers and managers of assets they have started to become involved in development, to maintain yields at the levels their shareholders require.
The land market, in particular, is one market that is experiencing a block, players say, caused by the speculation-inclined owners, given that developers are not willing to pay the amounts of money they ask.
"The days of land sellers' boom are over," Fabian's manager says.
On the other hand, the companies listed on the European stock markets and beyond, which operate on the Romanian market, as well, like Immoeast, Africa Israel and GTC have been severely punished over the last six months, with 30% or even more serious declines.
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