“MIPIM gave us two clear messages: Romania is not the center of the world and the market will not return this year”
My interview to Money Channel and Elisabeta Roman:
(Last week I gave an interview to Money Channel about my company's participation at MIPIM 2010. You can press here in order to watch the interview. Or you can read the following text, which is the written translation of our discussion with Elisabeta, having the necessary modifications from oral to written text).
Introduction by Elisabeta Roman: MIPIM, Real Estate Exhibition from Cannes has just closed its doors last week, this is the event which must send a signal to international real estate market, not locals but also Romania is part of it. The official figures showed us a pretty good atmosphere if we look at the statistics, 18.000 participants, from which 3.500 investors were expected during the 3 days of the fair. In 2008 they were 35.000 participants comparing to what this year was at the fair.
What happened to investors, to developers and consultants of the world, we will try to find out fromour guest of Mr. Ilias Papapageorgiadis, CEO of MORE Real Estate Services, who attended last week this fair.
"What was the atmosphere at MIPIM?"
Elisabeta Roman: I saw many of your stories about MIPIM, what was the atmosphere there, together with the big names from international real estate market? Do we talk about an event or not?
Ilias Papageorgiadis: We talk about no 1 real estate of the world. The top players of real estate are there, the top developers too, this is clear. But the world's market is still down. It's not only about Romania or about the Balkans, the entire market is down and the interest was half comparing to 2008-2009. The event showed us that the market will continue to be like this throughout 2010. Unfortunately Romania's presence this year was quite weak.
"Why Romania's presence was not strong this year?"
Elisabeta Roman: I just want to point out that, having the lists of the participants from Romania who attended MIPIM, I counted about 22 companies from Romania. Among them also the Ministry of Regional Development and Tourism. This is much less comparing to the past, when the Romanian presence was big and the companies were sending a lot of people. Many of them were also developers and businessmen who were searching for financing. Why do you think Romania's presence was not strong this year?
Ilias Papageorgiadis: Romanian companies know very well that the world does not concentrate to Romania today; the western markets are the priorities now. Romania is the 3rd or 4th priority for foreign investors and this has not changed yet. Therefore many companies in Romania have decided not to attend the event and unfortunately were so few people present there. The top players and the developers were not present. Let's say that this year the Romanian presence was almost invisible (comparing to the past).
"Why we lost ground in terms of attracting new investors?"
Elisabeta Roman: Many voices say that MIPIM is a "must attend" event. Based on your feedback from there, when will we hear that the international real estate market returns? Do we know to which direction the money will be invested? Is it true that the Investment Funds have money but they don't know where to invest? Finally, did Romania lose ground in terms of attracting new investors?
Ilias Papageorgiadis: Romania did not lose ground just because it was not present at MIPIM. The main problem is the behavior of some people here. Until 2008 we didn't treat investors in a good way and today they punish us for this. We are punished for having done this last year and they will do it this year too.
If you ask an investor today, he will tell you that the prices in Romania (after the crisis) in some categories are the same as those in London. With this in mind, what is their initiative to return here and buy apartments or other properties? Plus, people talk too much about "country risk".
"Many investors came here just to speculate"
Elisabeta Roman: Do you think that some investors and developers came here just to speculate? There were many who invested, obtained their profits and left the market. They didn't come here to make money and contribute to the urban development, to Romania's real estate development.
Ilias Papageorgiadis: First of all, whoever invests, wants to have a profit too. If you talk with investors, more than half of them are upset on Romania. They consider they were not treated correctly. So, what are we doing now? We go there, at least my company was, present the real situation and we encourage them to come back. That's why my company introduced the project "Romania Returns". We said that Romania can return at the spotlight of attention and become again an interesting destination for investments. But this year the investors' priorities are Western Europe and Poland.
"Why Poland became attracted more investors comparing to Romania?"
Elisabeta Roman: So, the foreign investors punished us and they concentrated more to Poland. Why did this happen? Why Poland succeeded to attract more investors than Romania?
Ilias Papapageorgiadis: For various reasons:
- Poland was the only country that had a positive GDP growth during 2009, while the rest of the countries were falling apart.
- Poland will organize the European Football Cup in 2012 and they were very active connecting this event with real estate projects.
- Poland participated at Mipim with many stands, each of them having more than 300 sq.m. They promote their business environment saying that they are very close to Germany.
In Romania we believe that we are the center of the world and everybody is looking at us. But how did Eastern Europe start growing in the past? There was some kind of "clock", moving eastwards. It started in Poland, then moved to Czech Republic, Hungary and finally Romania and Bulgaria. It looks like that this clock started again. I don't say that the interest will reach Romania in 5 or 10 years after Poland (how it happened in the past). For sure Romania will return faster but it will take some time to gain ground again.
"Where does the money come from? Europe or USA?"
Elisabeta Roman: When you describe investors looking at developments, in Romania, Poland or elsewhere, do you mean the European players or the American ones? Where are they originated from?
Ilias Papageorgiadis: At Mipim this year I saw people from Europe, United States, Japan, China, even from Africa and Australia. In 2007 I met people from many countries but now money comes mainly from Europe and United States. Plus, some investors told me that it is easier for them to complete a fundraising in United States than in Europe. Europe has more problems than the United States. Americans are expected to exit the crisis a bit faster
But for Romania the problem is different: My company participates at MIPIM since 2007. In 2008 we had 141 meeting reports, in 2009 we had 35 and this year just 19. Out of which 14 were very serious, because who was there to make business, he was determined to move on. So, yes, some serious people, but no new clients,
"No new clients"
There is noone who doesn't know Romania already. I met 5 just investors but their companies already know the country, they feel comfortable in this business environment. Unfortunately, I don't see a strong interest by new investors to enter in the Romanian market today.
"Will we pass the crisis during 2010?"
Elisabeta Roman: To have a conclusion, what is the message from Mipim? Will we pass the crisis during 2010?
Ilias Papageorgiadis: No. 2010 is a year, that we will reach rock bottom. I don't expect the market to go much lower than the actual level but keep in mind that I refer to the real price of transaction, not the asked one. I expect Romania to return during 2011 or 2012. This is the best scenario. Meanwhile we have to work, to be more serious, more careful and to provide to Romanian and foreign investors better product and better business environment.