Commercial segment rents are overvalued

Bertrand Catteau, owning the commercial galleries of Orhideea and Cora Esplanada, says rents on the commercial segment of the Romanian real estate market are too high.

“I don”t believe the Romanian real estate market has reached its uppermost potential, but prices, instead, have hit the ceiling. As a matter of fact, rents in Romania are too high at this moment, they are overvalued,” says Bertrand Catteau.

This will lead to a double movement on the market, Catteau further comments: on the one hand, the profitability rate for investors will drop below the current level of 12-13%, and on the other hand, rents will go down.

“Things are happening too fast on the Romanian real estate market, which makes me think twice before deciding to invest in further projects in Romania,” Catteau also states.

He says that the current high level of rents on the market, which is overvalued, is a risk factor long-term investors like Catinvest need to take into consideration.

“Investors in the Romanian real estate sector that have overlooked this aspect could have some surprises in the future,” comments Catteau.

In France, the profitability rate investors in the commercial segment of the real estate market register has reached a level of 6-7% at the moment. Catinvest is headquartered in France, but derives 50% of revenues abroad.

“Entrance on the Romanian market in 2003 was a logical step in Catinvest”s expansion to Central and Eastern Europe,” considers Catteau.

“We started with the Czech Republic in 2000, we went on to Hungary one year later and in 2003 we started to focus on Romania, where the profitability of real estate investments was higher than the one in the other countries with markets tending to stabilise,” says Catteau.

Catinvest”s strategy includes long-term investments, for periodic revenues.

Bertrand Catteau says his company has never sold any of the properties it acquired. Catinvest buys commercial spaces, then rents them out and amortises investments from rents, over several years.

The same strategy is applied on the Romanian market.

Catinvest”s first project in Romania was Cora Esplanada, which was developed by Louis Delhaize group, owner of Cora hypermarkets. Catinvest acquired the commercial galleries of Cora in a deal worth above 10 million euros. Bertrand Catteau stated the investment is due to be recouped in about 7 years.

The investment in Orhideea commercial centre followed, a project developed by Vinci French group. Catinvest acquired the commercial galleries of Orhideea in the wake of investments worth above 15 million euros, estimating it would amortise them in almost 7 years.

Cora Esplanada and Orhideea last year brought Catinvest turnover worth 5 million euros, according to Bertrand Catteau.

Catinvest

* A family business, set up in France

* Expanded outside France in 2000, through an acquisition in the Czech Republic

* In 2003 purchased Cora Esplanada commercial gallery from Cora”s owner, Louis Delhaize group, for over 10m euros

* Bought Orhideea commercial galleries for 15 million euros next

* The third project, Tom commercial centre, is due to be opened in Constanta this autumn.