National Railway Infrastructure Company (NRIC), the infrastructure spin-off of Bulgarian State Railways BDZ, is mid-way into a multi-million project to revamp the Central Railway Station in Sofia and erect from scratch a multi-functional complex on the adjoining 1.4 ha land plot, Hristo Alexiev, deputy director general of the company, told The Sofia Echo on June 10.

NRIC will implement the project in partnership with an investor under the right-to-construction for reimbursement model, he added.

The project is part of a full-blown strategy to improve the management of NRIC's non-operating assets. The strategy has been drafted in co-operation with the Dutch government and Dutch consultancy AVD. It envisages replicating the property upgrade model across other stations in the country and eventually write the assets off to a newly-formed property management arm.

"The company will be created once the model matures," Alexiev said, adding that he thought it could happen in five to six years. This property management concept has been operational in a score of European countries and NRIC hopes to attract an investor with experience in the field.

The pilot project in Sofia has been drawn up by Bulgarian tie-up Architectonica, selected among five bidders at a December 2007 open tender. It entails the repair of the Central Railway Station and the construction of two new buildings and a parking lot.

Once renovated, the Sofia Central Railway Station is set to have a new facade allowing for more light inside, new solar panels that would cover 30 per cent of the station's electricity needs, as well as an extra level to host 25 per cent of all retail outlets in the station area.

On the other hand, greenfield construction is set to take place to the east of the station. It would entail the construction of a 21-storey B+ or B++ building, whose floorage would be a mix of office, administrative and retail space. The second building and its eight floors will house office space alone. All buildings would be inter-linked and leading to a 1000-place parking lot, with six above-ground and six underground levels. The entire floorage would comprise 70 000 sq m.

The complex will not house a hotel because the viability study has shown it would hardly be profitable. For example, the occupancy rate in Princess Hotel, in immediate proximity to the central railway station, is around 60 per cent, Alexiev said.

Alexiev warned against expectations for an immediate start of the project. The NRIC will first call a tender to devise a detailed spatial arrangement plan for the complex, and then another to find an investor in the project. "The more detailed design will guarantee clear parameters on striking the deal to ensure what reimbursement one could expect and to ensure that the investor would hold on to our vision," Alexiev said.

While the design tender winner is expected to be named in six to seven months and the agreement to be signed in January 2009, the investor selection procedure is hoped to be wrapped up by February 2009.

NRIC opted for finding a strategic investor under the right to construction for reimbursement formula because it was the sole possible legal alternative. Alexiev pointed to regulatory loopholes, which prevented the company from utilising the public-private partnership model and create joint ventures.

Under the current model, drawn in line with the Law on State Property, NRIC retains title to the land in return for a reimbursement. The reimbursement will be two-pronged. In the first place, the investor will be obliged to repair and cover repair costs for the central railway station. The railway station revamp is estimated to cost 35 million leva, according to Alexiev. In addition, the investor will be expected to assign a portion of its rental proceeds from the buildings to Railway Infrastructure. Alexiev believes the percentile would be in the 10 to 20 per cent range.

Several international companies have already expressed interest in the tender, among which Riofisa of Spain, Wien Sud of Austria and an Italian operator. The complex will be part of a bigger construction site, where Spain's Riofisa and a tie-up between Austria's AGP Group and Spain's Urbas Guadahermosa are currently building retail complexes.

Alexiev expressed no concern over potential competitive pressure from the adjoining real estate projects.

"The three projects are, rather, complementing each other," he said. "We want this area to become an attractive complex for business, trade and recreation."

While the Sofia project is NRIC's first one, another one is planned in Plovdiv. Alexiev said the procedure would run in a similar way.

In another real estate effort, NRIC is planning to build blocs of flats, again utilising the same formula. On plots of land, to remain in ownership of NRIC, a preferred investor would be allowed to build residential blocs of flats. The NRIC would also be given a portion of the apartments, to be rented to workers of the company at a lower rate.