Sofia Airport’s new terminal saw good use on February 21, when more than 20 international property and real estate journalists arrived in Bulgaria for the Sofia International Real Estate Press Tour.

The five-day event was organised by CEPIF and Sofia Echo Media, and sponsored by Landmark Property Bulgaria, West Properties International and Best of Bulgaria Property Services.

Those who had arrived by mid afternoon took a walking tour of notable sites in the centre of Sofia, then returned to the Arena di Serdica Hotel, where the attendees were lodged, for a presentation by Landmark’s executive director Tanya Kosseva on “Great opportunities or misplaced optimism: Bulgaria’s property market overview”. As most of the participants had not been to the country before, this provided a general picture of the ups and downs of Bulgarian property in all its aspects.

That evening, after a dinner of roast lamb at the traditional Bulgarian restaurant Chevermeto, those who were still awake enough went to the club Gramophone, located right next to the hotel – for better or for worse. As one person put it, “the music from the club was so loud in the hotel that I figured I might as well go dance”.

Building for the future
Thursday, the first full day, opened with presentations on the Bulgarian office market and on Landmark, by Richard MacDonald, chairman of the management board of Landmark. Luxembourg-based Landmark was established in April 2005 by British and Icelandic investors with a focus on investing in properties in pre-European Union accession countries. Currently, the company holds property in Bulgaria, Croatia and Turkey, following the idea of buying in underdeveloped areas and creating a master plan.

Landmark’s current Bulgaria portfolio is 30 per cent development, 56 per cent office, seven per cent industrial and seven per cent retail (sector weighting by purchase price), so far having invested 100 million euro in the country. Target cities include Blagoevgrad, Pazardjik, Pernik, Pleven, Sliven and Stara Zagora.

One of their major sources of pride is the Landmark Office Building, which has full occupancy, where office space is rented for 24 euro a sq m. The regional average is 14 euro a sq m.

Their future holds numerous current and planned projects around the country – shopping malls in Plovdiv; the restoration of two historic buildings in Varna, turning them into office space; the Black Sea Rama golf resort, of which Landmark has acquired 50 per cent of the company; and a sale-lease back programme of 13 Alexandra Video shops. Also planned are at least six business centres/parks in Sofia, totalling more than 537 000 sq m.

The next session was an overview of what CEPIF is, given by press tour organiser Rupert Swanson.

Lunch at Spaghetti Company brought the press tour participants to TZUM, the oldest retain centre in Sofia and an impressive historic building in itself.

A field trip down Simeonovsko Chausse to the FOT Residences project, an investment of West Properties International, where project manager Kenan Kahraman, Lozenets borough mayor Lyubomil Ivanov and Lozenets borough head architect Todor Todorov explained the goings-on at the site. The four blocks of luxury 112 flats will be completed in July 2007; a one-bedroom apartment sells for 79 000 euro. Seventy per cent have been pre-sold, mostly to UK and Irish investors.

At the West Properties office a few minutes later, Brian Conneely, director, and Colin Hanley, marketing manager, greeted the press tour and gave an overview of the residential property market. Despite a 35 per cent increase in property price in 2005, the country continues to have the lowest prices in Europe. Rental yield runs at six per cent annually. Bulgaria has one of the highest home-ownership rates in the world, due in part to restitution after the end of communism, rapid market and supply growth, easier access to mortgage lending, lower rates and increased purchasing power. In addition, there is high demand from overseas.

More than 200 000 real estate transactions occurred in Bulgaria in 2006, an increase of 27 per cent over 2005.

As concerns mortgages, rates are currently higher than in the rest of Europe, but increasing competition among lending institutions has made this a more viable option for many.

Across the country, 1399 residential projects are underway, with 423 more in the planning state, for a total of 16 million sq m. According to West, average prices for living quarters in Sofia range from 650 euro to 850 euro at the lower end and 1200 euro to 1800 euro a sq m at the higher end. West also said that prices at the higher end of the spectrum are increasing at a steady 15 per cent a year.

Ireland native Conneely founded West Properties in 2004, with the goals of promoting Bulgarian and increase its attractiveness to potential investors, and then supply retail demand for its completed projects. West has since grown legal, travel, and construction and engineering arms. The company currently has 19 projects underway in Bulgaria.
The day ended, for some, at least, with a cocktail party at the Arena di Serdica. Those with more nighttime propensities headed out in search of a club, finishing up at Planet Club.

No angels at City Hall
A visit to City Hall, or really, with chief architect Petar Dikov and, later, mayor Boiko Borissov, started the second full day. It probably also proved one of the more memorable, if not also amusing, presentations.

“I’m very optimistic about the perspective of Sofia as a place for investment,” Dikov said. Countries with the largest FDI in Sofia are Austria, Germany, Greece, the UK, Cyprus and the US. These countries provided 61 per cent of Bulgaria’s FDI in 2004.

Investment is good, but using the money to help the city along is better.

“The most serious problem for Sofia is infrastructure. We’re fully aware of the gravity of this problem and are going to rectify it as soon as possible,” he said. When it comes to infrastructure, the city relies heavily on public-private partnerships (PPP), but, unfortunately, the legal framework regulating PPPs in Bulgaria is not developed enough, he said. “We’re not trying to engage Sofia representatives in Parliament to help us with that. We’re trying to learn from the experience of Western Europe of PPPs, taking as an example Spain, because Sofia’s development follows Spain’s in many ways.”

One of the goals Dikov stated for the city was to increase competitiveness to become a knowledge-based economy.

The city has an about 700 million leva investment programme for the next four years.

“In my opinion, Sofia has a vast field of opportunities in this area, starting with the land market,” he said. “It’s a very heated market right now because it turns out that land designated for development is scarce. Even though we just voted for the master plan at the end of last year (before this, Sofia did not have any master plan), we are already trying to tweak it to allow more space for development.”

Commenting on the residential sector, Dikov said that despite some people claiming the market oversaturated, he still believes that there is room for development. Currently, there are many low-quality, not-maintained living quarters.

“I anticipate that the newly constructed residential properties will not only fulfil the demand, but also replace the poor-quality ones – in pace with the economic development of Sofianites,” he said.

Demand for office space continues to be huge, despite the large supply.

One area that has been overlooked, and that he said greatly needed attention, was the administrative, municipal and institutional buildings. It is becoming such that a lack of space is causing the public administration to have to rent.

Where concerns retail, Dikov anticipates market saturation in four to five years.

“Our research shows that Sofia can sustain a maximum of 10 to 15 retail centres. Right now, we have six or seven that have started construction or are about to start. In terms of entertainment centres, Sofia is lagging. I believe this to be a great sector for investment,” he said.

The city administration is willing to work with investors, he said.

One of the participants in the press tour asked about financing. Bulgaria currently does not have a secondary mortgage market, which Dikov called “a problem for us”, nor is there clear framework on how it would work in Bulgaria. But he was optimistic – “I believe it could happen,” he said.

“In a short period of time (two to three years), Sofia will look very different.”

When Borissov stepped into Dikov’s presentation some 40 minutes late(r), causing slight alarm to those who did not know his face, he also emphasised the importance of the city master plan. “Without a master plan, it’s the easiest way for personal interests to kick in, which is basically what has happened,” he said. When the restitution law was passed, there was no mechanism for the government to reimburse the owner for him finding that he owned (part of) a park, a stadium, a playground and so on, which caused much in the way of these places’ destruction.

He said that there is great public support for the master plan, a document that had been stalling in Parliament for years. “Public pressure is our strength,” Borissov said.

He also addressed the issue of brain drain, saying that about 1.5 million people have left since 1989, first to the US, and now many to Europe as well. “I cannot blame them for that,” he said, “because Bulgaria continues to be a communist state. The people who govern us today are the sons and daughters of former communist leaders. Realistically speaking, I don’t believe that anything good will come of them being in power in the next few years.”

But people going to live, work and/or study abroad is not necessarily a negative, Borissov said, because these people, if they return, and they do return, adopt a different view of life. He described the Bulgarian mentality of having remnants of communist thought, of all being equal – but equally poor – and expecting the state to take care of everyone.

“I believe that, sooner or later, these people (who have gone to live abroad) will return to Bulgaria and will lay the foundation of a true reform in Bulgaria,” he said.

He makes it his duty to lead by example and show how things should be done, with honesty, and not corruption.

But corruption is not unique to Bulgaria. “There is corruption in all countries in the European Union. Don’t think you’re a saint, because you aren’t. The greatest corruption schemes in 2006 happened with citizens of Germany and Switzerland,” Borissov said. “We’re working to actively limit corruption, to not leave any corruption unpunished. I personally checked eight municipal companies and we discovered millions of leva in their accounts. They’ve all been brought to court.”

Still, the legal system remains what he called the Achilles’ heel of government institutions in Bulgaria.

From the airport to the pub
Following City Hall, a visit to Sofia Airport’s new Terminal 2 included a presentation by Tishman Bulgarian Real Property on the industrial market. Tishman has been in Bulgaria for four years, and started focusing on the area around the airport about three years ago.

In 2005, they bought 142 000 sq m of land for the Sofia Airport Center, which is expected to break ground “in the next month”, journalists were told. The office areas will be low to mid-rise, and the logistics and retail buildings will be two to three stories. It will include office and logisitics space, and a 250-room hotel with a 1500 sq m conference centre. Rental prices for main office space will be 15 euro a sq m, logistics space will be five to six euro a sq m, and office space near the logistics space will be 10 to 12 euro a sq m.

“There is little modern industrial property around Sofia. Most (locations) are old and un-economic to run,” he said.

This was followed by transport to Business Park Sofia, for a tour of the 220 000 sq m grounds. Resembling somewhat France’s La Defense, though on a much smaller scale, Business Park Sofia was conceived in 2001, and by 2002, had five buildings. Two years later, there were five more, and today, there are 15, with four more under construction. Many are corporately/privately owned. Companies in the park include an IT hypermarket, a luxury car dealer, a cinema, a hotel, cafes and restaurants, branches of banks, dental and medical offices and dry cleaners. At present, about 5000 to 6000 people work there.

In the works is also a residential area, to be built by Lindner – the business park was not meant to be only offices, the tour guide said. Linder was the original and major project investor of Business Park Sofia. Grammercy recently bought the entire development for 180 million euro.

The city metro line is to reach the business park by 2009.

After lunch at the Hilton Hotel, press tour participants attended a presentation on the holiday property market, by Haris Menelaou, managing director and partner of Best of Bulgaria.

Sixty per cent of holiday property buyers are from the UK, he said. The UK was also the number one investor in 2006, with 686 million euro. The Netherlands came in second, with 668 million euro, followed by Austria (448 million euro).

A trip to the National Museum of History to see the Thracian golden treasures exhibit rounded off the afternoon, making way for dinner and drinks at JJ Murphys Irish Pub.

On Saturday, many of the press tour journalists went to Borovets for a day of skiing and snow fun, ending up again in Murphys to catch the game. Some things just cross all borders.

As one of its numerous property-related arms, the Polish company redNet Property Group hosts CEPIF (Central and Eastern Europe Property and Investment Fair) press tours in developing countries in the region.

The Central and Eastern Europe Property and Investment Fair itself (this year from June 4-5 in Warsaw) was the original component, with the press tours being added later to allow journalists to introduce people to what they might be investing in.

Sofia’s press tour was organised largely by Rupert Swanson, CEPIF press tour organiser; Vanya Rainova, editorial director, and Desislava Leshtarka, reporter, of PropertyWise Magazine; and Atanas Paskalev, commercial director of Sofia Echo Media. Austria, the Czech Republic, Germany, Holland, Ireland, Italy, Lithuania, Poland, Romania, the UK and Ukraine were represented at the event, which ran from February 21 to 24.