Ross MacDiarmid, Dinu Patriciu Global Properties

Please tell us a few things about your company.

“The company is privately owned by a family wealth office. The owner, Mr. Patriciu from Romania, has many business interests, but one of his areas of activity is commercial real estate. We got involved in this in 2008-2009 when we acquired three companies that were listed on the London stock exchange and combined them with existing property assets.

“Since then and particularly last year we have been refining and consolidating the company, because as you can imagine when you buy companies, they have varied assets and locations, a lot of which we consider non-core. So there were a number of assets in France, the Netherlands, Sweden, Poland, which we have been selling off to focus on our core markets of Germany and Romania. Today about 75% of our portfolio is in Germany and 25% in Romania.”

How large is the portfolio? Will you be acquiring more properties?

“It is around €1.5 billion and includes approximately 140 properties. We will start further acquisitions this year. Right now our primary activity is to stabilize the portfolio by restructuring the debt with a number of banks and selling off assets that do not fit into the overall picture. For example we own two hotels and we are in the process of selling them.”

What can you tell us about the market in Romania?

“The market in Romania has deteriorated further in the second half of 2011. In our office buildings we have been getting €17 or €18 per m² and after August it dropped to €14 per m² for a standard, but good office building in the center of Bucharest. So the market has not shown much resilience there. Romania went into recession and financial crisis later than most countries and now it is still in decline, whereas certain other markets are stabilized.

“We have a number of development sites there. Ideally we would like to develop some buildings and although there is no development market now, we are going through the planning process and getting all the permits in place. That way, when the economy recovers and there is demand, we will be in a position to start developing, mainly office buildings around Bucharest.”

Have you had any interesting new acquisitions or projects in 2011? What do you see for yourself as a business and for the market for 2012?

“2011 was the year of consolidation, of resolving debt issues and divesting a number of assets. We made some small acquisitions, we bought in some freehold interests where we own the leasehold building and that sort of thing. So we undertook what you would call asset management initiatives on existing assets.

“2012 is going to be tough. The issues of bank lending and Basel III regulations have really thrown a damp blanket over the market. However, the German market was recovering quite nicely in 2010 and 2011 and it is doing pretty well. There are still certain banks that are lending there, mainly the smaller banks which were heavily regulated and were never allowed to get involved in mortgage-backed securities or anything like that. These are still reasonably active on the smaller end of the market, lending up to €50 million probably, within the market. So many of the deals these days are either all-cash or it is a local entrepreneur that has a long-standing relationship with a local bank, and the local bank will advance funds for acquisitions.”

How many people are on your team?

“We have a team of around 45 people and we do pretty much everything in-house; property management, a lot of the facilities management, leasing, all of the accounting and bookkeeping, even the directorships, by and large myself and some other people are directors of a lot of the companies in Luxembourg and the Netherlands and so forth. We think cost-wise there is probably a small benefit, but control-wise it’s a lot better, as we can control our people rather than outsource.”

What is the ultimate goal for your company in the next few years?

“I think we will probably try to relist. We want to refine the portfolio, get buildings with a strong cash flow and get the debt stable, so that it is an attractive institutional package. In order to relist we need at least €1 billion in assets, probably even €2 billion, to be successful and to have demand in the market. So we will need to acquire some more assets at some point.”

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