Confident in Romania

Despite this optimism, he admitted that the situation wasn’t all together rosy, with the effects of the credit crunch still very much in evidence on the market. “We’re still in the crisis here, but you can see small steps towards improvement,” he added. The 30,000 sqm shopping centre, which opened on October 3rd, clearly represents one of these small steps. The mall is anchored by a 13,000 sqm Cora hypermarket, while service outlets are situated on the ground floor. Its fashion boutique offer can be found in the upper gallery. The company claims to have turned down potential tenants looking to open fashion stores on the ground floor, with the only exception being a two-storey H&M store. Nevertheless, the mall was close to 95 pct leased on its opening day. One conspicuously empty area is the 1,500 sqm entertainment section, a space which is likely to be the eventual location of a restaurant, a bowling alley and a climbing wall. Negotiations are currently underway with a single tenant for the space, but the two parties have yet to agree on the final concept. The six-screen Cinema City multiplex is another feature of the centre that has yet to open. Construction work is still underway and should be completed around March or April next year. When asked about the possible future sale of the mall, David Hay replied that developers are always thinking about the eventual sale of their properties, but he then stated that: “Our strategy is to develop the best product we can and then manage and stabilise it, which takes around two years. We often come to selling it at around the time of the first lease renewals.” He takes as an example AFI Palace Flora in Prague, which was completed in 2003. A year later half of the mall was sold to Avestus Capital Partners in a deal valuing it at EUR 120 mln. In 2011 both partners sold the centre to Atrium for a total of EUR 191 mln.

Planning for the future
AFI admits to being on the lookout to build other retail projects and there are two already in the company’s pipeline. In Arad a retail park with a shopping centre is to be built on an 8 ha site. A building permit has been issued for a 10,000 sqm DIY store, as well as for a 10,000 sqm hypermarket with a shopping gallery. Another building permit has been secured to build a 36,000 sqm shopping centre on its 15 ha B.Noi site in Bucharest. Construction work on the project should begin once leases have been signed with anchor tenants. AFI intends to deliver the centre in two years’ time, at the same time as the completion of the neighbouring metro station. Around 1,600 residential units are eventually planned, as well as an office building of app. 12,000 sqm. But these are only a few of AFI’s current projects in Romania: the company has not yet completed the development of its mixed-use project in Bucharest’s Cotroceni district. The 80,000 sqm AFI Palace Cotroceni mall has been in operation since October 2009, but when it comes to the other sections of the project, so far only the first office block with 12,000 sqm gla (AFI Park 1) has been completed. AFI Park 2 (12,200 sqm) should be finished in April 2014, while AFI Park 3 (12,200 sqm) is scheduled to be ready the following November. The first building is fully leased to tenants that include such companies as Microchip Technology, Endava Romania and Cameron. The leasing of the entire second building should also soon be completed – to a single tenant. Negotiations are also currently in progress for an area of 5,000 sqm in AFI Park 3. The final planned buildings for the site, AFI Park 4 and AFI Park 5, will eventually offer 24,000 sqm gla. Work on them will begin once AFI Park 3 has been 50 pct leased. All the buildings should eventually be LEED ‘Gold’ certified. One final office project in Bucharest is the AFI Business Park, which is to offer 50,000 sqm gla. The leasing of the project should begin in early 2014. David Hay feels justified in his confidence in the country: “Romania has great potential. It has natural resources and now work is at an advanced stage to construct the highways that will connect Romania with Western Europe. Another factor is the domestic consumption, as Romania is considered as a market with constantly increasing consumer spending – a rare positive trend in the economies of the world at the moment. In the office market we are seeing increased demand from multinational IT and communications companies, who are choosing Romania as their IT hubs for back office or development departments,” he explained. Indeed, in order to cater for such IT tenants AFI has even built a 25 mW electrical substation for its Cotroceni site in Bucharest.