business review issue 41, nov 16-22, 2009

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Potential buyers may have to wait a little longer to acquire distressed real estateassets, as banks have not yet declared foreclosures, although many contracts havebeen breached and market values have fallen below loan values

See pages 16-17

Potential buyers may have to wait a little longer to acquire distressed real estateassets, as banks have not yet declared foreclosures, although many contracts havebeen breached and market values have fallen below loan values

See pages 16-17

MONEYBanks are launching products and serv-

ices for targeted niches of clients in an

attempt to attract new customers or

keep existing ones

See pages 10 - 11

ENTREPRENEURGabriela Man, the owner of a line of di-

et products, has seized the potential of

pre-mixes, and launched a recipe of diet

flour

See page 13

TRAVELOne of the European Capitals of Cul-

ture, Istanbul is a less expensive but

nonetheless interesting destination for

both tourism and business

See page 18

DISTRESSED DELAYSDISTRESSED DELAYS

EXPERT PETROLEUM GETS USD 25 MILLION FOR OIL AND GAS FIELD EXPLORATION; SEE NEWS ON PAGE 4

BUSINESS REVIEWROMANIA’S PREMIERE BUSINESS WEEKLY NOVEMBER 16 - 22, 2009 / VOLUME 14, NUMBER 41

www.business-review.ro

BUSINESS REVIEW / November 16 - 22, 2009 3

I N T O U C H

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Founding EditorBILL AVERY

Editor-in-ChiefSIMONA FODOR

Deputy Editor-in-ChiefCORINA S~CEANU

Senior JournalistsDANA CIURARUANDA DRAGAN OTILIA HARAGA

Copy EditorDEBBIE STOWE

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ResearchSIMONA BAZAVAN

PhotographerLAURENTIU OBAE

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ProductionDAN MITROI Distribution

EUGEN MU{AT

NOVEMBER 16 - 22, 2009 / VOLUME 14, NUMBER 41

B USINESS REVIEW

Week in

NUMBERS

The metro line from Universitate

to Drumul Taberei will cost EUR

883 million, according to the

ministry of transportation

The European Bank forReconstruction and Developmentis analyzing a EUR 50 millionloan to Pirelli for the expansionof its Slatina factory

883 million

50 million

The International FinancialCorporation has swapped its$20 mln bonds from BancaTransilvania to a 3.6 percentstake in the bank

3.6 percent

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Election 2009: No surprises, no perspectivesBy: John Faurescu

As a CNN commercial remind us, Romania is the “land of choice.”From breathtaking mountain views to warm sandy beaches; from the re-markably undisturbed citadels of Transylvania to the gleaming new glassskyscrapers of its capital city; and from the vibrant night life to the sleepyvillage life, Romania indeed lives up to the slogan – but what about its pres-idential politics? What are the choices Romanians will be asked to decideupon when stepping into the polling booth in just a few days? For the Amer-ican and British observers, coming from their respective two-party worlds,the cacophony of banners, posters, commercials, t-shirts, and assorted para-phernalia, of assorted colors and creeds must indeed look like choice – butis it really?

The answer is: yes and no. Yes – there is a formal choice. Do we re-electthe president for a five-year term or not? Do we vote for the delusional mes-siah or the local robber barons? Green? Hungarian? Gigi Becali? An inde-pendent who stands for nothing but independence? Lots of choice, right?

In reality, however, the answer is NO – there is no choice to be madebecause the president has sadly already made it for us. Many Romanianswill quietly go the polls, if not in the first round, at least in the run-off,pinch their noses, look the other way, say a prayer, grimace, and vote for“that other guy.” It doesn’t matter who he is or what he says – he will winbecause he is not Basescu and for no other reason.

How did this happen? When exactly did Basescu turn into Putin-lite? Romanians cynically grumble amongst themselves that the one time

navy captain thinks he is the commanding officer of a ship called Romania,and to this I say good! This is exactly what we need! Romania is a countrywith serious problems. Rising unemployment, a huge budget deficit, an al-most catastrophic GDP contraction, and, if you believe the experts, the re-al financial crisis has only just begun! Real problems call for real solutions,and only strong leadership can bring about it about.

Yet – a strong leader, Basescu is not. A strong leader in a multi-partydemocracy is not one who takes charge forcibly but rather one aroundwhom diverse and competent people rally around – a magnet, not a cannon.A strong leader is one who can identify the best people for a particular job,delegate to that person, and graciously thank his “team” for a job well doneor stand up and take individual responsibility when things go wrong – acoach, not Mein Führer. A strong leader is one who can build bridges acrossparty aisles and pass bi- or tri-partisan solutions – a pragmatist, not an ide-ologue.

Romania is a naturally center-left country. It has been and will for a longtime be ranked last or close to last on all economic barometers of wealthand living standards amongst its sister countries of the European Union.Four years ago, Basescu had a unique opportunity to form a solid center-right party, one capable of forging stable governing coalitions and pursuinga coherent center-right pro-business and liberal agenda with a view towardschanging this. He sadly let this opportunity slip away, and somewhere alongthe way he got tripped up by his own ego. For the past four years, Mr.Basescu has been running for re-election, and in so doing, he has given usample reason to deny him a second mandate. Why? Somewhere along theway he forgot why he ran for president, and we forgot why we voted forhim. For this reason, I will be voting for “that other guy.”

John Faurescu is a lawyer at Kinstellar SCA (formerly Linklaters CEE).He advises private equity and investment funds on investments throughoutthe Balkans, Turkey, and Central Asia.

O P I N I O N

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BRIEFSJD AGRO COCORA OPENSAFTER EUR 45 MLNINVESTMENTé The agriculture compound JDAgro Cocora has beeninaugurated following aninvestment of over EUR 45 millionin the past three years. Of thissum, over EUR 8.5 million wasused to build the location, whichincludes warehouses, equipmentand storage facilities. Thecompound is located in Ialomitacounty. This year, 3,100 hectareswere exploited in the compound,while in 2010 the entire surfaceof 6,000 hectares will be used foragriculture.

LOCAL PHARMA MARKETREACHES EUR 474 MLN INSALES IN Q3é The local pharmaceuticalmarket reached EUR 474 millionin sales in the third quarter of theyear, down 5 percent on theprevious quarter, while calculatedin RON it grew by 12.2 percent,according to data from Cegedim.The retail channel, made up ofpharmacies, increased by 14.8percent in sales in the thirdquarter.

ROMANIAN GDP FALLS 0.7PERCENT IN Q3é Romania’s GDP posted adecrease of 0.7 percent in realterms in the third quartercompared to the period April-June. After the first nine months,the GDP was 7.4 percent belowthe level of the correspondingperiod in 2008. In the secondquarter of this year, the economycontracted by 1.1 percent fromthe previous quarter while thedecrease in real terms comparedto the same period of 2008 was8.7 percent. The NationalCommission of Prognosisestimates a decline of 7.7 percentin the national economy this yearwhile the International MonetaryFund anticipates a decrease of7.5- 8 percent, below its previousprojection of 8-8.5 percent.

N E W S

BUSINESS REVIEW / November 16 - 22, 20094

Expert Petroleum, a Romania-based oil and gas company focusedon the rehabilitation of mature oiland gas fields, has received USD 25million from Lime Rock Partners, aglobal energy-focused private equi-ty firm. Expert Petroleum has ac-quired eight mature field licenses in Romania and is applying field redevelopment and rehabilita-

tion technology at those sites torestart oil and gas production.

The USD 25 million staged eq-uity investment will fund further ap-praisal, work over and drilling ac-tivities on the Romanian company’sassets. According to company infor-mation, Lime Rock’s financial com-mitment to Expert Petroleum will bephased in over the next two years as

needed.“For the last five years, we have

carefully assembled and conductedin-depth technical analysis and ap-praisal activities on our oil and gasproperties in Romania, fields thatare well suited to our strengths inmature asset rehabilitation. The cap-ital from Lime Rock will fund ourfuture development costs,” saidDavid Martinon, founding partnerand managing director of Expert Pe-troleum.

The firm was founded by Marti-non and Michel Louboutin, as partof NT&S Energy, a holding compa-ny of a group of specialized interna-tional oil and gas companies withoperations in the Middle East, NorthAfrica, Eastern Europe and NorthAmerica.

The company is currently devel-oping eight sites around theCarpathian Basin, TransylvanianBasin and Moesian platform. Al-most all of its projects are located infields that previously produced oilor gas. Lime Rock manages USD3.9 billion of capital for investmentin the energy industry.

Dana Ciuraru

Expert Petroleum gets USD 25 millionfor oil and gas field rehabilitation

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Expert Petroleum has acquired eight mature field licenses in Romania

Porsche Inter Auto (PIA) hascompleted a EUR 10 million invest-

ment in a 36,000-sqm showroom inTimisoara for Audi cars.

The new showroom, which has a capacity of 14 exposed mod-els, has a new “terminal-style” con-cept. “Through its investments, PIAshows its confidence in network ex-pansion, even during these toughtimes. By completing this invest-ment, PIA is consolidating its cur-rent four-dealer network inBucharest and another one strategi-cally positioned in the west of thecountry,” said Dana Cortina,Porsche Inter Auto GM.

According to company data, thelargest local showroom includes,besides the Audi facility, a Skodashowroom, the buy-back serviceWeltauto and service units for Audi,Skoda and Porsche.

Dana Ciuraru

PIA finishes EUR 10 million investmentin largest Audi showroom

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The new investment is located in Timisoara


Rominserv Kazakhstan, a subsidiaryof local firm Rominserv, general con-tractor of Rompetrol Group, has inked aUSD 27 million deal to reconstruct theatmospheric and vacuum distillationplant (AVD) at Atyrau Refinery in Kaza-khstan.

“Based on the experience gained byRomanian company Rominserv in mod-ernizing Petromidia Navodari and VegaPloiesti refineries, Rominserv’s Kaza-khstan subsidiary was appointed the

winning company of a bid into which 17domestic and foreign companies partici-pated,” said Tudorel Dumitrascu, themanager of the international activitiesdivision of Rominserv. According tohim, the total value of contracts obtainedby the firm in Kazakhstan will reach ap-proximately USD 60 million by the endof this month.

Modernization works at the plantstarted at the end of October, and theircompletion deadline is estimated for theend of next year. The project is part ofthe modernization program of AtyrauRefinery, an important asset of KazMu-naiGas, aiming both to increase the an-nual processing capacity from 3.5 mil-lion to 5 million tons of crude oil, and toimprove the quality of manufactured fu-els, in compliance with internationalquality standards.

Rominserv estimates that it willreach a turnover of more than USD 146million this year, 22 percent down onlast year’s results, caused by the signifi-cant decrease in the number and value ofindustrial projects.

Dana Ciuraru

Rominserv gets USD 27 mln tomodernize Atyrau Kazakhstan refinery

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The modernization works are expected to endnext year

Guy Poupet will be appointed asthe new president and general man-ager of BRD-Groupe Societe Gen-erale starting January 1st. He willreplace Patrick Gelin, the currentleader of the bank, who will be retir-ing.

Poupet (57) has been workingfor Societe Generale Group since1975 and started his career as a con-troller. Since 1983 he has held topmanagement positions in thegroup’s subsidiaries from Argenti-na, Senegal, the Czech Republic andEgypt. Poupet will lead both the di-rection and administration boards.Gelin (64) has been working for So-ciete Generale since 1970, holdingtop management positions both inthe French and international net-work of the bank.

BRD has 2.6 million customerson the local market.

Anda Dragan

BRD to get new president-general manager

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Guy Poupet has been working for Societe Gen-erale since 1975

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Generali Asigurari posted aRON 370 million gross written pre-mium in the first nine months,which means an increase of 16 per-cent on the same period of 2008.General insurance rose by 20 per-cent to RON 306 million comparedto the same period.

While life insurance posted asmall decrease of 0.6 percent, grouplife insurance saw growth of 21 per-cent.

“The two-digit increase regis-tered by Generali Asigurari in thefirst nine months has been really ad-equate in the current macroeconom-

Generali Asigurari sells 16 percent morepremiums at nine months

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The bank increased its local credit portfolio by 20 percent

Intesa Sanpaolo Bank posted anincrease of 16.6 percent in its totalassets and 20.3 percent of its totalnet earnings at the end of the thirdquarter, according to the lender’s fi-nancial report.

It also increased its credit port-folio by 20 percent and deposits by45 percent in the same period.

All the financial indicators arereported according to InternationalFinancial Reporting Standards

(IFRS). “Intesa Sanpaolo Bankposted a good commercial perform-ance at the end of Q3, registering abalanced increase of its loans anddeposits. We will continue to con-solidate all of our activities by theend of 2009 and to offer productsand services that meet the currentmarket conditions,” said NicolaCalabro, CEO of Intesa SanpaoloBank.

Anda Dragan

Intesa Sanpaolo Bank posts 20 percentincrease in net earnings

good.bee Holding, a mixed com-pany founded by Erste Foundation andErste Group, has recently launched,with the Economic Development Cen-ter (CDE) foundation, good.bee creditIFN on the local market. The newcompany will offer micro-loans andconsultancy services to both rural en-trepreneurs and customers that lack ac-cess to traditional banking services,through 10 regional offices in 21 coun-ties. “Our objective is to offer overEUR 15 million of financing especial-ly to small businesses from rural Ro-manian areas, by the end of 2010,” saidSava Dalbokov, CEO of good.beeHolding Vienna. Agriculture, com-merce, small-sized production andservices are the domains that meet thecompany’s financing requirements.The maximum level of lending isabout EUR 50,000 for a period of fiveyears, depending on the details of thefinanced activity and the customer’strack record.

Anda Dragan

New company targetsrural entrepreneurs

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good.bee plans to offer EUR 15 million financing

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Generali has sold RON 370 million worth of gross written premiums in the first nine months of the year

ic context,” said Marie Kovarova,general manager of Generali Asigu-rari.

Fire insurance in commercialand industrial areas, house insur-ance and third party liability havebeen the most dynamic segments ofthe general insurance category.Green Card and mandatory car in-surance also grew significantly, by100 percent.

Generali Asigurari has 91 agen-cies and working points and offersall types of insurance.

Anda Dragan

BRIEFSBUDGET DEFICIT INCREASESTO 5.2 PERCENT OF GDPé The consolidated generalbudget deficit increased to 5.2percent of the GDP after the firstten months of the year, accordingto the interim minister of publicfinance, Gheorghe Pogea. In thefirst nine months, the deficit was5.1 percent of the GDP. Thedeficit target for 2009, agreedwith the International MonetaryFund, is 7.3 percent. The targetsregarding the budgetary deficitfor 2009 and 2010 remained thesame, at 7.3 percent for this yearand 5.9 percent for 2010.

EIB TO LEND ROMANIA EUR1.5 BLN IN 2010é The European Investment Bankintends to grant Romania loans ofapproximately EUR 1.5 billion in2010. The funds will be forinvestments in energy, supportingSMEs and city hall projects,according to the vice-president ofEIB, Matthias Kollatz-Ahnen. Hesaid Romania had high potentialin renewable energy but thatthere were not many investmentson this segment. At the beginningof the year, loans worth EUR 800million were granted for thefollowing period. Financingdestined for Ford (EUR 400million) and Petrom (EUR 200million) is planned.

TITLE INSURANCEDISCUSSED AT FIRST TITLEEVENTé First Title brought together agroup of experts in Romanianreal estate and title insurance todiscuss title insurance, what it is,and how it is used in Europe andRomania. The presentationscovered the applications of titleinsurance, how underwritingdecisions are made, how claimsare handled and case studies.Approximately 45 peopleattended the seminar includingattorneys, representatives fromsome of Romania’s largest banksas well as developers andinvestors active in Romania. FirstTitle CEE operating from Budapestis the First Title plc subsidiaryresponsible for CEE. In Romania,Oana Visoiu is the BusinessDevelopment Executiverepresenting First Title.

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Pharmaceutical company A&DPharma posted EUR 355 million insales in the first nine months of thisyear, down 3 percent on the sameperiod of the last, the company hasannounced. However, its sales re-ported in the Romanian currencygrew by 12 percent, the differencebeing caused by the volatility of the

exchange rate. “We continue to im-plement cost-control measures toimprove profitability,” said RobertPopescu, CEO of A&D Pharma.

The pharmacies division underthe Sensiblu brand has seen a 41percent increase in its turnover dur-ing this period on its RON results,while in EUR, the turnover grew by22 percent to EUR 135.7 million.The growth in revenues was due tothe focus on consolidating sales inexisting units and to the end ofthresholds imposed for each phar-macy, the company has said. A&DPharma runs 220 pharmacies in Ro-mania.

The firm expects the legislationapplicable to the local pharma busi-ness to get tougher in the comingperiod, due to several emergencymeasures imposed by the govern-ment, meant to increase the funds ofthe national health system.

Corina Saceanu

A&D Pharma posts EUR 355million in sales

Retailer Elmec has put EUR500,000 into opening four new fashionretail and sportswear stores inside therecently opened AFI Palace Cotroceni.The firm has introduced a new conceptwith the opening of its multibrand storeKix. It has also opened stores under theNike, Miss Sixty & Energy and CalvinKlein Jeans brands, all single brandstores.

Kix sells footwear and fashion ac-cessories under the Nike, UGG Aus-tralia, Converse, True Religion, Diesel

and G-Star brands, as well as collec-tions from Converse by John Varvatos.

Elmec owns 53 stores in Romania,both monobrand and multibrand, in-cluding 24 Nike, two Converse stores,six multibrand stores under the Fa-mous Brands name and two under theFamous Brands Gallery name. It alsoruns 11 monobrand stores, four FolliFollie units, three outlets and the Well-nessClub sports center in Plaza Roma-nia.

Corina Saceanu

Elmec puts EUR 500,000 into new stores,adds new multibrand outlet

German electrical appliancesproducer Miele has put EUR 24 mil-lion into its first factory in EasternEurope, which is located in Brasov.The greenfield unit will employ 300people when at maximum capacity,currently having 80 staff.

The plant in Romania is Miele’sfourth outside its home country Ger-many, with current units running inAustria, the Czech Republic andChina. The factory in Brasov pro-

duces electronic components whichare then integrated into electronicsand home appliances produced byMiele. The company decided to in-vest in this unit after its factory inGermany reached maximum capaci-ty. Works on the project started atthe end of last year, after the compa-ny acquired a 13.4-hectare site inthe Feldioara-Halchiu industrialpark.

Staff

Miele puts EUR 24 mln into Brasov factory

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A&D Pharma has 220 pharmacies in Romania

British Airways, which expectsto see a similar number of passen-gers on its Bucharest-London routethis year as it did last year, has re-duced its business class fares. Thecarrier, which runs 21 weeklyflights between Bucharest and Lon-don, has dropped business class tar-iffs three-fold, from EUR 1,400 forthe cheapest ticket last year, to someEUR 490 for a one-way ticket be-tween the cities this year.

While the number of passengersthis year should stay the same, revenues will not, said companyrepresentatives, without offering

further details. BA has cut its economy fares as

well and due to the crisis has de-layed expansion plans in Romania.A one-way ticket from Bucharest toLondon will cost EUR 99 for thenext two weeks.

“In the last five years we havehad the biggest market share on thisroute, Romania being one of themost important markets in Europe,and the sixth in terms of revenues,outranking Poland,” said EmilDelibashev, BA’s commercial man-ager for the Balkans area.

Corina Saceanu

British Airways drops business class tariffs,expects lower revenues in Romania

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Romania is BA’s sixth largest market in Europe in terms of revenues

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Totalsoft has an acquisitions budgetof up to EUR 2.5 million for 2010. Gen-eral manager Liviu Dan Dragan said thatin the first half of 2010, the company’sfocus will be on external markets such asGreece, Bulgaria and Serbia.

“On a market which is not saturated,it is better to open an office, not make

acquisitions. However, on a saturatedmarket like Greece, we are about tomake an acquisition, a company that hasa turnover of approximately EUR 1.5million,” said Dragan. He added thatthere is interest for an acquisition also inRomania, but he has not yet found anycandidate. “If we take over a companyhere, we do it either for its clients, itsproducts or if it has a new line of busi-ness,” he said.

This year, Totalsoft’s turnover esti-mations are EUR 20-21 million. Theaim of the company is to manage to sellits products and services half on the lo-cal market and half on foreign marketsby 2013. “In 2009 there has been a 15percent decrease on the market of ITproducts and services. I think the fallwill continue in 2010 as well, one causebeing the political instability. However,let us hope the decrease will halt laternext year” said Dragan.

Otilia Haraga

Totalsoft wants EUR 2.5 millionacquisitions on foreign markets next year

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Liviu Dragan, GM of Totalsoft

Romania is a priority for the Ulkergroup, according to Ulker representa-tives in Turkey.

“We did not include Romania in theBalkans area, precisely because it is veryimportant to us as a market. We have ourown distribution network in Romania,which comprises 40 suppliers,” theysaid.

In the European Union, Ulker hasproduction units only in Romania andBelgium.

“We opened in Romania because theposition of the group is better here thanin other countries in the region. At thetime when we opened it, we benefittedfrom the facility of a major investor.This did not translate into tax reductionsbut into facilities for the importation ofequipment, plus the depreciation andamortization of the equipment,” said En-der Bolat, general manager of Eurex Al-imentare SA, which runs the Ulker pro-duction unit in Romania.

Bolat says Ulker will increase in-vestments on the Romanian market agreat deal over the next three years.“These investments will be made inmarketing and in enlarging the range ofproducts that will be produced in the lo-cal unit,” he explained. Bolat said that hecould not specify a precise sum for theinvestments planned for next year, sincethe budget has not yet been approved.

At this point, the production unit has

three functional lines. However, the pro-duction unit can accommodate anotherfive lines on the same level. Most of theraw materials used in the unit are pur-chased from the local market.

“Initial feasibility plans included on-ly eight production lines, but their num-ber can be greater. If needed, we canconstruct additional buildings, since theland we acquired has a generous surfaceof 98,000 sqm,” said Bolat.

At the moment the Romanian com-pany exports to several European coun-tries – Bulgaria, Hungary, Germany,Macedonia, Croatia, Kosovo, Albania,France, Lithuania and the Czech Repub-lic – as well as to Senegal. In RomaniaUlker produces biscuit brands Ulker Pe-tit Beurre, Alpella Petit Beurre, Biskrem,Tempo and Clip.

Eurex Alimentare SA has 280 em-ployees. Ulker is part of Yildiz Holding,which in 2008 posted a turnover of USD10.9 billion and an operational profit ofUSD 268 million. The group investedover USD 500 million in 2008 and hadan export turnover of USD 1.3 billion.Last year, it invested USD 60 million ina chocolate production unit in Turkey.Ulker has a market share of 60 percenton the Turkish chocolate market and asimilar share on the biscuit market. In to-tal, the group has 46 production units inTurkey.

Otilia Haraga

Romania is priority market for Ulker

C A L E N D A R / W H O ’ S N E W S


WHO’S NEWSNICHOLAS BUTT has been appointed

service delivery op-erations lead at Ac-centure’s BPO de-livery center inBucharest. Since1991 he has been

involved in business process out-sourcing and has been with thecompany for the last 12 years, ful-filling a number of roles from salesand solution architecting throughtransition management and in-service delivery operations. Hismost recent responsibility for thefirm was as the EMEA regionallead and the finance and account-ing BPO lead for an Accenture de-livery center in Warsaw.

GABRIEL ALEXANDRU is the new salesmanager of Pepsi-Americas. He previ-ously held the posi-tion of vice-presi-dent at CrisTim.Over the last 12

years Alexandru has built up broadprofessional experience in the FM-CG industry, having worked forcompanies such as Elvila, Inter-brands, BAT and CrisTim. Duringthe seven years he spent at BritishAmerican Tobacco he held differ-ent sales positions, starting as areasales supervisor and advancing totrade marketing and distributiondirector. Alexandru graduatedfrom the Energy Faculty of the

Polytechnic Institute of Bucharest.

ALEXANDRU DONA is the new sales di-rector of SanomaHearst Romania, aposition he has tak-en over from CezarBurlan. His main re-sponsibilities will

be to coordinate the sales for all ofthe company’s 17 magazines and12 websites. For the past twoyears, Dona has been working as asales manager at RealitateaCatavencu, coordinating the salesfor the Money Channel and Tele-sport.

BERNARD HISTE, 48, is the new generalmanager of BRD Fi-nance IFN SA, afterhaving previouslyheld the same posi-tion at SG Con-sumer Finance

Crediflex Croatia. Histe has takenover the position from Vincent De-latte, who was promoted to CGI,one of the group’s French sub-sidiaries. He has been with SociétéGénérale for 22 years, serving asinspector, commercial director inFrance and Russia, general manag-er and internal auditor. Histe grad-uated from the HEC School ofManagement in Paris and holds amaster’s degree in business unitmanagement and human resourcemanagement.

Business Review welcomes information for Who’s News from readers.Submissions may be edited for length and clarity. Feel free to contact us at [email protected]

EVENTS, BUSINESS AND POLITICAL AGENDANOVEMBER 16é Junior Achievement Romania organizes an event for the opening of

Global Entrepreneurship Week 2009 and the launch of the START!Business project, at the Orange Concept Store. By invitation only.

NOVEMBER 17é Medical center HIFU Terramed Conformal organizes a press conference

to mark its official opening. By invitation only.

NOVEMBER 17é InfoClick organizes a press conference at Hotel Novotel. By invitation

only.

NOVEMBER 17é Konrad Adenauer Stiftung organizes a debate on anti-corruption poli-

cies in the Romanian justice system at Howard Johnson Grand PlazaHotel. By invitation only.

NOVEMBER 18é Muller Dairy Romania organizes an event for the launch of its eighth

product on the local market at Chocolat cafe. By invitation only.

NOVEMBER 18é Cinema City organizes a press conference for its official opening at AFI

Palace Cotroceni.

NOVEMBER 26é The Brokers’ Association organizes the Stock Market Awards at Hotel

InterContinental. By invitation only.

Millennium Bank has completedits territorial network developmentprocess and is now able to offer fullretail services through all its branch-es.

The previously specialized con-

sumer finance units have been sup-plied with teller desks, so customerscan also carry out transactions andmake deposits.

The process began in July andincluded development works at theformer credit centers, located in 15cities – Arad, Bacau, Brasov,Bucharest, Craiova, Cluj, Constan-ta, Galati, Iasi, Oradea, Ploiesti,Pitesti, Sibiu, Timisoara and Targu-Mures – as well as ongoing internaltraining.

At present, Millennium Bankhas 74 branches located inBucharest and 17 counties.

Anda Dragan

Millennium Bank completes its territorialnetwork development

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Millenium has 74 branches in Romania

The government’s car replacementprogram will resume next year, this timeincluding both individuals and compa-nies. According to official data, the pre-mium paid by the state to those who re-turn used cars will remain unchanged atEUR 900, but it will be awarded througha transmissible voucher system. In thethird phase of the program, only Daciaand Renault Romania managed to sellmore than 100 cars, according to statis-tics from the the Environment Fund Ad-

ministration. Dacia exhausted its quotaof 3,350 units in the first half of Novem-ber, after selling about 2,000 cars in Sep-tember. Renault-Nissan Romania sold300 vehicles in the third stage, whileOpel and Chevrolet dealer Radacini Mo-tors sold 57. Ranked fourth is SkodaAutec Autotechnik dealer, which ownscenters in Pitesti, Targu Jiu and Craiova.Fifth is AutoItalia, a Fiat importer, with30 cars sold through this program.

Dana Ciuraru

Car replacement program to apply tocompanies starting 2010

Next year’s car replacement program will target both individuals and companies

M O N E Y


After many years of intense

expansion nationwide, lenders are

now trying to find new ways to

amass new customers. Launching

new products and services that

address specific targets seems to be

the key feature in their strategies.

Lenders put the puzzle pieces together when it comes to their clients, and come up with targetedproducts

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Anda Dragan

Lenders have been racing to getmore customers for years in Roma-nia. But the current downturn hasintensified the need to do so, both inthe banking industry and other eco-nomic sectors. Many players, nomatter what field they are active in,are using significant discounts,grace periods and other incentivesas marketing tools to increase theirnumber of customers, and keep theexisting ones.

But things are a little bit differ-ent in the banking industry in thisrespect. Before the crisis, locallenders’ efforts to attract customersconsisted of launching an increasingnumber of branches, designed togive them nationwide coverage andthereby a larger number of cus-tomers. The lending boom of thelast few years also drove banks toscrabble to attract new borrowers.But since the crisis, things havechanged dramatically: lenders’plans for future development havebeen canceled or postponed, as a re-sult both of significant cost-cuttingmeasures and the freeze in lending.In such a context, entering accessi-ble market niches seems to be

banks’ new weapon of choice. Pensioners, members of the

liberal professions, children,teenagers, students and tenants as-sociations are some of the availableniches that lenders have set theirsights on. At present, there are twocategories of banks active on suchniches in Romania: those that hadalready had one or more such prod-ucts in their portfolio for years andthose that have tackled this businessline more recently.

A visible trend on the localbanking market is segmentation,both for individual customers andcorporate ones. Moreover, banks ofall sizes have taken a similar ap-proach. The focus is now on launch-ing products for specific categoriesof customer. BRD-Groupe SocieteGenerale, BCR, Raiffeisen, ING,Piraeus, OTP, Alpha Bank, CEC,UniCredit and Bancpost are amongthe lenders that have entered differ-

ent niches in recent years. For example, OTP launched a

savings account for retirees in April.“Pensioners play a significant rolein Romania as individuals who in-tend to save money and are an im-portant segment of customers thatneed specific products and servic-es,” says Adrian Chichita, deputymanager of the retail division atOTP Bank Romania. He adds thatthis account is the first step towardsa wider range of products and serv-ices for these customers, which alsoincludes, for example, the paymentof pensions into debit card accountsand free withdrawals from ATMs.

Meanwhile, Piraeus Bank haslaunched a banking service to de-posit allowances, allocations, othersocial benefits and pensions into itscustomers’ accounts. According toPiraeus representatives, the servicewas launched both to meet the needsof its existing customers and to at-

tract a new segment with high po-tential and low coverage.

But how do specialists on the lo-cal market see this trend? “Special-ization and segmentation are normaltrends while the banking system ismaturing,” says Dragos Cabat, man-aging partner at consultancy firmFinancial View. Chichita of OTPshares this view, adding that bankshave understood that they need totake a different approach for eachcategory of customers, due to the in-creased competition.

But the reasons for entering suchniches differ depending on the sizeof the institution. Cabat says thatsmall lenders in particular cannotcompete on multifarious segmentsof the market and so have set abouttrying to attract the kinds of cus-tomers that bring them the maxi-mum benefit. “But available nichesare profitable for large lenders too,”says Cabat. In his opinion, the keyissue is loyalty: once people choosea bank, they hardly ever move theirmoney to another one. But he cau-tions that for lenders of every size,this specialization had advantagesand disadvantages. It offers higheryields but also exposes the bank tothe higher risks of such a customerportfolio.

Entering new niches is also a re-sponse to the current crisis. Withlending stalling, banks need to findnew ways to generate income in or-der to get through this difficult peri-od. “If lenders don’t grow quickly,distressed loans will increase veryrapidly. So, they need to attract cus-tomers as fast as they can. Thistrend is more visible at the end ofthe year when banks will rake in

Banks specialize in race for new customers

OTP is targeting retirees with a dedicated product

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money from many sources,” saysCabat.

But while Chichita believes thatbanks’ orientation towards specificcategories of customers is an impor-tant condition to get new ones, Ca-bat says that it is more difficult to at-tract new clients in this context. Thereason is that the main way to do itis still through loans. The FinancialView representative says that theeasiest thing is for banks to retaintheir existing customers – due to the

higher costs of refinancing a loan –while the hardest is to attract newones. In his opinion, entering newniches means specializing in differ-ent segments of the market andeventually improving the bank’s ac-tivity rather than upping the numberof customers.

“Banks are pushing their exist-ing customers while offering newproducts to other ones. Customersare no longer moving to anotherbank for the same products,” says

Cabat. And this is valid both for in-dividual and corporate customers.Moreover, companies are moreclosely attached to their bank, be-cause of the track record that mayhelp them in the future. As Cabatsays, the first signs of recovery forlending will be in the loans for tra-ditional, existing corporate cus-tomers with whom banks have had along-term relationship.

HOW PROFITABLE ARE NICHES?Generally, in the segmentation

process, banks consider the cate-gories that afford them the biggestopportunities to make a profit. “Insome cases there is a combination ofshort-term objectives – such as at-tracting deposits with convenientinterest rates – with long-term ones,future customers that will use thebank’s services being one of them,”adds Cabat.

Segmentation is a real sign ofstrong competition and continuousgrowth on the local banking market.To remain competitive, somelenders need to work on their posi-tioning. Despite this, the Romanianbanking marketplace is still not verysophisticated. “It is probably aboutthree to five years behind more de-

veloped countries in Central andEastern Europe and about seven toten years behind the developed onesin the EU zone,” says Cabat. But fu-ture economic growth and greatercompetition will increase its level ofsophistication. Besides, segmenta-tion will be an ongoing process,based on the principle of coming upwith different products and findinga customized one for each client.

As for the launch of products fornew categories of individual cus-tomers, representatives of Piraeussay that the lender will act accord-ing to the market evolution and theexisting needs of its customers.“The results posted by OTP for pen-sioners are above our expectations,which allows us to continue in thesame direction in the future,” saysChichita. He adds that from the verybeginning OTP’s strategy has beento reach specific types of customersthrough customized products andservices. The programs “co-brand”and “Affinity,” launched in the lastfew years, illustrate OTP’s strategy.“In the current context, this ap-proach is becoming a key factor inamassing and serving new cus-tomers in the future,” concludesChichita.

Piraeus has launched a deposit product for social benefits

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Oil price continues to hike on

international markets. Because of

this, local oil market players

estimate that next year Romanians

will have to spend 5 percent more

on fuel.

Romanians are expected to spend 5 percent more on fuel, according to estimates

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Dana Ciuraru

While before the 90s Romaniansmostly used their cars on weekends andfollowing a timetable imposed by theauthorities, now the streets are full of ve-hicles driving up and down at all hoursof the day and night. The economicgrowth registered in the years before therecession consistently increased pur-chasing power, leading to a hike in thenumber of individuals who own cars andin companies’ car fleets. At the sametime, with the growth of the car market,the price of fuels went wild, escalating tothe current value of approximately EUR1 per liter of gas.

At this level, the minimum amountof money an individual spends permonth on fuel is EUR 150, in the contextin which the average gross salary thisyear reached EUR 425 and Romania isstill struggling with the recession.

Why have fuel prices gone sky-rocking? Market specialists say that thefuel price is influenced, among otherfactors, by the fluctuations of the oil bar-rel quotations and oil products on inter-national markets. Lately, these quota-tions have been rising, after the drasticfall at the end of 2008. At the same time,the fuel acquisition price is set by addingcosts such as transportation, refining, ad-ditivation, storage and distribution anddepends on the foreign exchange rates.

Recently, the oil price surpassedUSD 80 per barrel for the first time sinceOctober last year. Moreover, the Interna-tional Energy Agency (IEA) predicts arecovery for oil prices, with the figureforecast to reach USD 100 per barrel in

2020 and USD 115 per barrel in 2030. But where will it end? Market play-

ers say it is hard to predict. “Regardingthe oil barrel quotations, it is difficult tomake estimates for several reasons, suchas financial speculation, the economiccontext and the demand/supply ratio. Inaddition, the oil price is very sensitive tosocial and political issues, which makesit even more difficult to predict. In thefuture we hope the speculative capitalwill be reduced, and the price to be influ-enced only by demand growth,” ZsoltSzalay, country chairman of MOL Ro-mania, told Business Review.

This international context will havea noticeable impact on next year’s fuelprices. In 2010, Romanians will have tospend even more on petrol. According tomarket specialists, the impact of theRON’s depreciation on the excise levelcould lead to pump prices rising. The in-crease of other taxes such as VAT or anadditional increase of excises could alsoimpact on the figure.

“At the same time the fuel pricegreatly depends on the evolution of in-ternational quotations of the oil barrel.The eventual hike of the oil barrel pricewill also lead to increased fuel prices. Inconclusion, in 2010, considering allthese factors, the pump price in RON

could go up by over 5 percent,” said theMOL Romania country chairman.

CONSUMPTION DOWN, EXPANSION UP

The price of oil positively affects netproducers and negatively affects netconsumers. Since Romania is an oil-im-porting country, higher oil prices hurt itseconomy. However, Romania has muchgreater oil resources than many othercountries in the region, hence this nega-tive effect is much smaller than else-where. Oil companies with significantupstream activity benefit from higher oilprices.

But we must also consider the big-ger picture. Romania entered a recessionthis year after the economy grew at thefastest rate in the European Union in2008. Nowadays, the country has to facethe global credit crisis, which is slowingindustrial output and pushing up unem-ployment. The car sales, transportationand construction fields registered a dras-tic reduction in activities. In addition, theunemployment rate grew very rapidly,while the public’s purchasing powershrank. All of this contributed in the firstnine months of 2009 to a decrease in de-mand. The economic crisis’s effect onthe national economy, as well as a down-

turn in business activities, which implic-itly leads to a fall in incomes and pur-chasing power, are only a few of the rea-sons that have led to the shrinkage in fu-el demand. But market players expect aslight bounce back in fuel sales in thenext period.

“The total fuel volume sold by MOLRomania decreased by 2.9 percent in H12009, as compared with the same periodlast year. On the corporate segment fuelsales fell by 14.1 percent in H1 2009,compared to the same period of 2008,”said the MOL Romania official. Mean-while, the oil and gas producer Petromannounced that it had registered a 3 per-cent decrease in its oil production to23.62 million barrels.

But this is not stopping players fromcontinuing their investments. The mostimportant players on the oil retail seg-ment have announced their expansionplans for next year. According to Con-stantin Tampiza, Lukoil’s GM, the com-pany plans to invest USD 8.7 million.Currently, the Russia-based companyhas a filling station network of 310 unitsacross Romania. Also, MOL Romaniatold Business Review that in H1 2009the company invested around EUR 4.5million in the opening of three fillingstations in Bors, Barlad and Codlea.Currently, the Hungarian company has alocal retail network of 135 units.

“Our 2010 network development in-vestment plan is project-based, depend-ing on the international context and onthe local market conditions. We have asolid financial situation and we constant-ly focus on efficiency. The investmentsplan reflects exactly this aspect, as forRomania we want a qualitative develop-ment instead of quantitative,” said theMOL Romania country chairman.

Fuel prices keep rising against recession

1999 17.48

2000 27.6

2001 23.12

2002 24.36

2003 28.1

2004 36.05

2005 50.64

2006 61.08

2007 69.08

2008 94.45

2009 58.9

2020* 100

2030* 115

OPEC’s yearly basket price (USD/barrel)

* International Energy Agency forecast

SOU

RCE: O

PEC, IEA

E N T R E P R E N E U R


In a time of crisis, GABRIELA MAN has set up an innovative business,entering on a very limited market: diet products. With an initial investmentof EUR 300,000, the entrepreneur intends to make a powerful brand fromher company.

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Anda Dragan

Being green is a trendy lifestylechoice nowadays. From recycling to di-et food and environmentally-friendlycars, many of us are beginning to adopta healthier attutide, for ourselves andthe planet. For Gabriela Man, the own-er of both the Lose Weight by Eatingbrand (Slabeste mancand) and the firmDietetica, the “green niche” has seemedto be a successful one. Being highly ex-perienced in medicine, with a ten-yearcareer in the pharmaceutical industry,seven years of which she spent as a re-gional manager for Ardeal area at amultinational, Man decided to set up herown business. She created a diet flour atthe end of 2006, initially for her fami-ly’s consumption. But later on she no-ticed that industrial production of thesepre-mixes could be a good business.She registered the brand Lose Weightby Eating, and the industrial recipe ofher flours at the State Office for Inven-tions and Trademarks (OSIM) in 2008.Today, the entrepreneur owns a produc-tion unit with a total capacity of about300 tons a month. The flours are avail-

able through the company’s site, whilethe end-products of which they formpart – bread, pastry and confectionery –are distributed through external partnerssuch as Ana Pan.

“I decided to launch this businessbecause I believed in the real potentialof the diet products market and I thinkthat the Romanian one still is underde-veloped at present,” says Man. She addsthat she was convinced that Romanianswere becoming increasingly attracted tothe idea of health and beauty. Toachieve such a goal by using diet prod-ucts that seem to have no connection tosuch a concept could therefore be a pret-ty good solution for consumers. More-over, Man’s belief that she was runninga business in a market with high poten-tial was also consistent with her plansfor future development. To extend theproduction and distribution of the end-products made of these diet flours na-tionwide through partnerships is herfirst objective. In this way, the business-woman hopes to turn a small firm into amass market one. Man says, “The great-est challenge consists in convincing thesupplier of the end-products that cus-

tomers are willing to buy them andawaiting their arrival on the market.”

But such a turnaround needs time.Man is first using the Lose Weight byEating flour mixes to consolidate thebrand image. “Starting from this point,the range of mixes will be extended.This will be a result of two factors: anincreased demand for diet products anda larger number of producers from dif-ferent food industry segments that in-tend to produce under license othercomponents of a complete range of dietproducts,” says Man. On the topic ofselling her brand at some point, she saysthat she would consider it once LoseWeight by Eating becomes a strongforce on its market. As for a partnershipwith an investment fund, the entrepre-neur says that this approach would be anoption only after her business model istested and proves itself.

In Man’s opinion, Dietetica’s maincurrent advantage in Romania is thelack of competition: there are no hy-poglucidic and high-fiber flour mixeson the local market at present. Plus,these mixes are designed by a medic,and the quality of their glucides struc-

é Number of employees: 7

é Initial investment: EUR 300,000

é Total investment: EUR 350,000

é Production capacity: 300 tons a month

Dietetica

ture is carefully monitored. As for theturnover, the entrepreneur says that shecannot give an estimate, as “We arenow in discussions with large produc-ers to enter the mass market segment.”In Man’s opinion, one of the biggestchallenges she faces is that many Ro-manian producers and distributors arenot interested in getting involved on thediet products market because of thecurrent economic crisis. “I knew fromthe very beginning that I would be a pi-oneer on this market and it would bevery hard to succeed. But this work de-mands patience,” she says. The entre-preneur adds that she launched produc-tion when the crisis had hit Romaniatoo, so she has come up with scenariosfor numerous alternatives and possiblesolutions.

Organic growth provides healthy profits


P R O P E R T Y

Several local real estate devel-opers that have not met their off-plan apartment delivery obligationsare being taken to court by foreignbuyers, as projects have been de-layed or canceled, according to lawfirm Enescu & Cuc.

“In the last few months we havebeen contacted by dozens of clientsintending to sue a number of devel-opers in the country, located in cities such as Bucharest, Brasov,Cluj and Arad,” said Mihai Cuc, a partner at Enescu & Cuc inBucharest.

Most of the developers haveslowed down or even halted con-struction works due to lack of cash.“There are also developers that havenot even started the work or neverobtained the authorization to build,while sale-purchase contracts weresigned as early as 2007,” addedCamelia Enescu, a partner at thesame law firm. “This situation

makes us doubt their goodwill. Allthat was required during Romania’sreal estate boom in order to startselling something which didn’t existwas a plot of land and an architec-tural plan designed to impress,” shecommented.

The law firm believes most ofthose who sue the developers havehigh chances of winning, but the is-sue is whether the developers willhave the means to pay back the re-quired sums.

“The reality is that Romanianlegislation is extremely permissivewith these developers, which are re-ally not obliged to offer any guaran-tee before starting to sell off-planprojects. In many European coun-tries, they have to deposit a sumequal to part of the project’s value inthe bank or there are requirementsrelated to their minimum socialshares,” added Cuc.

Corina Saceanu

AFI plans its secondBucharest shopping center

Some developers have slowed down or even canceled works on residential due to lack of cash

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Buyers start suing developersover apartment delivery breaches

Israeli developer AFI Europe isplanning to start working on a sec-ond shopping center in Bucharestthis year, after having recentlyopened its first such development inthe capital, AFI Palace Cotroceni.The new investment will requiresome EUR 50 million, out of which

Reuven Havar, country manager AFI in Romania

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EUR 30 million should consist ofbank financing. The developer iscurrently negotiating with severalbanks for this loan.

The firm has plans for fourshopping mall projects in Romania,including AFI Palace Bucharest, thesecond in the capital. The mall willbe located alongside the AFI GoldenCity residential project, in north-west Bucharest, and will cover20,000 sqm of GLA. By compari-son, the already finished shoppingmall developed by AFI features76,000 sqm of GLA.

Aside from its newest Bucharestdevelopment, AFI Palace Ploiestiand AFI Palace Arad are also on thelist. The project in Ploiesti will in-clude 31,400 sqm of GLA of retailarea and 10,000 sqm of offices. InArad, there will be 33,000 sqm ofretail GLA and 12,000 sqm of of-fices.

Corina Saceanu

CBRE Eurisko head of marketing setsup Verbio communication boutique

Despina Ponomarenco, formerhead of marketing and communica-tion at CBRE Eurisko, has left thefirm to set up her own company,Verbio, a communication boutiquethat targets real estate players. Pono-marenco, who has five years of ex-perience in the real estate communi-cation field, had also worked forColdwell Banker Affiliates of Ro-mania as manager of PR and market-ing. “While in recent years firms

adopted an aggressive communica-tion strategy, using in particular ex-pensive promotion techniques likeoutdoor, nowadays developers areeither cutting their budgets by 100percent or keeping them to a mini-mum. I feel there is real demand inthe market for consultancy and theimplementation of cost-effectivetactics,” said Ponomarenco, manag-ing partner of Verbio.

Corina Saceanu

REGIONAL NEWSDEKA BUYS SPARKASSEN’SOFFICE BUILDING IN PRAGUEFOR EUR 110 MLN

Sparkassen Immobilien has soldGemini, a commercial and office build-ing in Prague, to Deka Immobilien. Onfull occupancy the purchase priceamounts to some EUR 110 million, thecompany has announced. The building,which was completed last year, consistsof approximately 40,000 sqm of lettablearea and an underground garage with430 parking spaces. The building is cur-rently let to 29 Czech and internationalcompanies, the three largest of which areHill’s Pet, Unipetrol and Novartis. Im-morent, Erste Group’s property sub-sidiary, was involved as project develop-ment partner. Sparkassen Immobilien in-vests in residential, office, hotel andcommercial property in Austria, Ger-many, the Czech Republic, Slovakia,Croatia, Hungary, Romania and Bulgar-ia. As of 30 June the total value of itsportfolio was EUR 1.85 billion and totallettable space was 1,517,300 sqm.

The DekaBank Group is the largestprovider of open property funds in Ger-many. The two investment managementcompanies, Deka Immobilien Invest-ment GmbH and WestInvest

Gesellschaft für Investmentfonds mbH,together manage a fund portfolio ofEUR 20 billion.

RENEGOTIATIONS,INCENTIVES FOR TENANTSAND LOWER RENTS ONOFFICE MARKET, DTZ

The office market in Europe sawrenegotiations, incentives for tenantsand increased pressure from occupiersfor landlords to lower rents during thethird quarter of this year, according to areport by real estate agency DTZ. In thefirst nine months of the year the totalamount of office space transactedreached only around half the levelrecorded during the same period in2008. There were European marketswhere take-up increased quarter onquarter, due to the halt in rent decreases,such as Paris, London City and LondonWest End. Availability continued to risein most markets, taking the averageavailability ratio in Europe to 9.5 percentat the end of September. In London City,Paris and Warsaw rents are bottomingout, while in other European marketsthey are likely to continue fallingthroughout 2010, albeit at a considerablyslower rate than in 2009.


P R O P E R T Y

Come to Rin Grand Hotel, on November 20th& 21th and enjoy a memorable experience.

For over 40 years, Bob Proctor(www.bobproctor.ro) has focused his work andteachings on helping people use the power of theirmind to achieve lives of prosperity, rewarding rela-tionships and spiritual awareness.

He is the best-selling author of You Were BornRich and has transformed the lives of millionsthrough his books, seminars, courses and personalcoaching. A Teacher for the wildly popular “The Se-cret,” Proctor is considered one of the living mas-ters and teachers of the Law of Attraction. Bob seeshimself as an educator with a gift to reveal to oth-ers the secrets that turned his life around and theincredible power and potential they hold withinthemselves.

As Doug Wead, former Special Assistant to thePresident of the United States, so eloquently stated,“Zig Ziglar may be the master motivator, Mark Vic-tor Hansen and Jack Canfield of Chicken Soup forthe Soul, the master story tellers; Anthony Robbins

may be the guru of personal development, but BobProctor is the master thinker. When it comes to sys-tematizing life, no one can touch him.”

Proctor’s vision and teachings are about howeveryone has the power to unwrap the cocoon oftheir life patterns and profoundly change their lives,achieve real and meaningful transformation andunleash their infinite potential for happiness andsuccess. He shows how the mind works — how todelve into the sub-conscious thinking and life-con-ditioning scar tissue and roadblocks. He teacheshow the cognitive mind and spirituality, along withspecific actions, can lead to life success.

Proctor’s teachings and programs are basedupon the lessons learned along the way in his ownlife’s journey. He comes from a life of want and lim-itation. In 1960, he was a high-school dropout, witha resume of dead-end jobs and a future clouded bydebt. Then one book was placed in his hands —Napoleon Hill’s Think and Grow Rich, which plant-ed the seed of hope in Bob’s mind. In months, andwith additional support from the works of EarlNightingale, Bob’s life literally spun on a dime.

In just one year, he was making more than$100,000 and soon topped the $1 million mark.Bob then moved to Chicago to work for his real-lifementors, Earl Nightingale and Lloyd Conant. Afterrising to the position of Vice President of Sales atNightingale-Conant, he established his own semi-nar company in 1973.

Proctor says, “It doesn’t matter how you grewup, or what you’ve struggled with in life — yourmind is unscathed by any circumstance you’ve yetto live ... and it’s phenomenally powerful!”

www.dmi.ro – for special offers

AD

VERTORIA

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Bob Proctor - Laws of Attraction Philosopher fromTHE SECRET - comes to Romania

French retailer Auchan has opened a new hypermarket in Timisoara, inside Iulius Mall, the retailer

has announced. This is the seventh Auchan unit in Romania and the retailer’s largest in the west of

the country. The hypermarket was opened within the Iulius Mall extension. The Auchan store covers

10,500 sqm and employs 350 people. The retailer is planning to open another hypermarket next year

in Constanta.

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Those hoping to buy real estateproperties at a discount may have towait a little longer. Banks are doingtheir best to keep their real estateclients floating, even if some havebreached loan contracts, and seemto be happy as long as payments aremade. With hopes for market valuesgoing back up next year, they mighthowever see tenants causing an endto the flow of cash, which mighttrigger the real wave of distress nextyear.

Few opportunities to buy distressed properties have come on the market, despite previous expectations

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Corina Saceanu

One of the main opportunities in-vestors with cash in their pocketshave been waiting for during this realestate downturn was to cherry pickdistressed properties. But much totheir surprise, although it’s been al-most one year since the real estatesector felt the first signs of worry, notso many distressed properties havecome on the market. Banks whichhave provided the money for real es-tate developments haven’t called inloans, nor started foreclosures.

One of the most common prob-lems players have faced during thisperiod was the decline of projects’market value, which impacted theloan-to-value (LTV) in the contractwith the bank. Such a breach in a con-tract could be enough for the bank tostart foreclosing on properties, butbanks have opted not to do it, at leastnot yet.

BANKS ARE HAPPY TO GETMONTHLY PAYMENTS

“Banks are not calling the loansbecause they are still getting theirdebt serviced. They are not preparedto take care of real estate assets and

they hope that the market confidencewill recover and values will go up abit,” Michael Lloyd, principal andchairman of Quintet, tells BusinessReview. “It was unusual for yields togo up so fast. Banks are hoping foryields to go back again, which willcure by natural forces the LTVbreach,” says Lloyd. But if that does-n’t happen next year, “which it mightnot, we will see a big cleaning of thebalance sheets by the banks, and thenthe serious distress,” warns Lloyd.

It will be interesting to see that atsome stage, when it becomes appar-ent what the yields are on the market,owners may realize that they will notget back their equity portion in theproject and they are only working forthe bank’s debt, Blake Horsley, man-ager of the investment and office di-vision at Colliers International in Ro-mania, tells BR. “At that stage ven-dors might stop feeling attached tothe project and then we might seethem no longer working with the

bank on solving the situation,” headds.

There could be another reason forbanks not starting foreclosures in Ro-mania yet. Blake has seen somethingsimilar in his home country, NewZealand. “When a property is comingfrom the bank, people expect a high-er discount than when it’s comingfrom the vendor, so banks prefer towork with owners and use them topublicly face the sale process. A lot ofthe distressed assets came directlyfrom the vendor,” Horsley explains.

He puts office assets on theBucharest market into three cate-gories, each with a different yield.The real prime properties, located inVictoriei Square, bear a nine percentyield, followed by properties in a cen-tral location and with good tenantsbut not in the top tier of the market,with a yield of around 10 percent.The third category, buildings in pe-ripheral locations, with bad parking,bad access and poor public trans-

portation are well into the double-digit yield, says Horsley.

The first two categories haven’tseen much distress. “Only next yearwe might see some of the betterbuildings in distress. A lot of the goodones aren’t coming up for renewal oflease soon, so a lot of the great stockseems to be relatively well placed.There will be some buildings whichwill face issues with tenants leavingor with the LTV having gone under,”the Colliers manager says.

POTENTIAL BUYERS REMAINCAUTIOUS, WITH THEIR MINDON FUTURE EXIT

So although many loan agree-ments are in default on some of theclauses, banks are not eager to fore-close. “Instead they are renegotiatingthe loan agreements, so there are on-ly a few distressed sellers. If it’s agood asset, the bank doesn’t have toworry too much even if some of theconditions have been breached,” saysGijs Klomp, managing partner atING Real Estate. “If there are oppor-tunities on the market, they are notbeing taken at the moment. Our re-gion has become a no-go area forcompanies based in Western Eu-rope,” he goes on.

“If you don’t see disposals on themarket, this doesn’t mean we are notthinking about it. We have spent end-less nights thinking about it,” saysDan Weiler, executive director of cor-porate finance and investments atBCR, the biggest lender on the Ro-manian market.

Perhaps there would be moreforeclosures if there was anyone towhom to sell properties, say bankerson one hand. But on the other, poten-tial buyers are complaining aboutbanks not cleaning their balancesheets yet, so they can start pickingup some bargains.

There are no more than ten in-vestment funds looking at the Ro-manian market for acquisitions, ac-cording to Blake Horseley, and be-fore buying in, they have to thinkabout their future exit, even if that isnot something immediate. Buyers toomust be cautious. “Buyers need tocarry out colossal due diligence andtrack their potential investment verycarefully. There won’t be many bid-

Discount shopping spree, not yet openedfor real estate properties

F O C U S


ders out there competing,” says TerryCarter, partner in restructuring servic-es with Ernst & Young Central andSouth Eastern Europe.

Potential buyers have gone tobanks looking for distressed proper-ties or even distressed debt to buy,even starting from the end of lastyear, says Horsley. “The little stockthey have seen was a surprise,” hesays.

Banks might start to clean theirbalance sheets if some of them decideto withdraw from the Romanian mar-ket, if the market is not a strategic onefor them. Smaller lenders which arenot very exposed on real estate assetscould do this. But the bulk of lenderswhich have fueled real estate invest-ments in the last couple of years arethe larger lenders on the local market.

There have been quite a few dis-posals of non-performing loans, ei-ther to recovery companies, in whichcase the loans were already registeredas losses, or to non-banking financialinstitutions within the group to whichthe bank belongs, either cross-borderor locally, says Mihai Dudoiu, man-aging associate with law firm Tuca,Zbarcea & Asociatii. But thoughbanks are trying to keep larger clientsin their portfolio, there have beensome sales of assets from smallerclients, says Dudoiu.

So for all these reasons, therearen’t many distressed assets on theRomanian market at the moment andbanks seem to be happy as long asthey get their monthly repayments.But for how long can this go on?“Most tenants are still paying theirrent. The first half of this year wewere living from the growth of lastyear, so we may see the first realproblems hitting the corporate seg-ment next year. We’ll see distresscoming in the second half of nextyear from the corporate end, corpo-rates handing out space, getting out oftheir obligations,” predicts Lloyd.

This corporate reaction raisesproblems too. “We see tenants think-ing they could be walking away froma leasing contract without anythinghappening to them. Are lease con-tracts in this country strong enough?There hasn’t been any precedent of alandlord winning over a tenant hav-ing breached a leasing contract,” saysTim Wilkinson, joint managing direc-tor with DTZ Echinox.

DISTRESSED PLAYERS, MOREATTRACTIVE THAN DISTRESSEDASSETS

When talking about distressed re-al estate, one should make the distinc-

tion between a distressed project,which was badly conceived to beginwith and which now faces problems,or which doesn’t have as many ten-ants or revenues from them as expect-ed. On the other hand, there are dis-tressed real estate players which needto service their bank debt but don’thave the stable income flow theywere hoping for.

Distressed assets come in two cat-egories: secondary quality productsor poorly managed products withturnaround potential, says GijsKlomp. On the other hand, distressed

sellers are those companies that needto sell assets to offload debt, and theirholding might include prime assets,which are more liquid and tend to besold first, Klomp goes on. “I wouldrather target distressed sellers thandistressed assets,” he says.

Investment funds in distress,which might need to pay off bankdebts, could offload some of theirproperties elsewhere to pay that debt.But in this case the acquisition oppor-tunities will have to be found on oth-er markets in the region, where moretransactions have been recorded, so

their assets are more liquid there.There have been some such cases. In-vestment fund Equest Balkan Proper-ties has sold its stake in a project onthe Bulgarian market and used themoney from the sale to settle a loan.It has also sold other properties, in-cluding offices in Macedonia, andsome retail warehouses even in Ro-mania. The fund had previously saidit had breached loan contracts for itslocal properties Moldova Mall andVitantis, which have been in a loanrestructuring process.

[email protected]

T R A V E L


A city with an official population of 12.7 million in 2009, but with unofficial estimations verging on 17 millioninhabitants, Istanbul is the main financial, commercial and cultural center of Turkey, and the only large city in theworld that spans two continents, Europe and Asia. It is also close to Romania, just a little more than an hour byplane, offering an accessible weekend getaway, a good escape for a shopping spree and, last but not least, a place todo business. Next year, Istanbul will be one of the European Capitals of Culture, which will further boost the numberof tourists within its ancient walls.

Otilia Haraga

For a weekender in Istanbul, thepriorities are to visit Hagia Sophiaand the Blue Mosque, two of themost important and imposing placesof prayer in the city, which nearlymirror each other in both positionand architecture, having a historythat is closely entwined with that ofthe Ottoman Empire.

Also high on the list of attrac-tions are Topkapi Palace andDolmabahce Palace, the GrandBazaar and the Taksim area, as well as a boat ride across theBosphorus.

These are the bare essentials fora weekender, but the truth is, to takethe pulse of the city more than 10days are necessary. Ideally, this timewould allow the tourist not only tovisit the multiple monuments that Is-tanbul has to offer, but also discoverits small mosques, loiter on some ofits many narrow streets, brimmingwith history, and visit some of itsrestaurants and clubs. Last but notleast, any opportunity to taste Turk-ish cuisine, including the very richvariety of Turkish delights, pastryand cakes, is not to be passed up.

Turkey received over 26 millioninternational tourists in 2008, a re-cession year, according to statisticsfrom the country’s tourist office.Many of them pass through Istanbulas well.

In fact, it is possible that the re-cession gave the city an advantagesince many tourists may have pre-ferred Istanbul to more expensivedestinations. For Romanians, Istan-bul is an equally important destina-tion for business and leisure. MariusNegre, business development man-ager with Vola.ro, an online flight

booking agency, tells Business Re-view that half of the tickets to Istan-bul sold by his firm are purchased bybusiness travelers. “These clientsgenerally go during the week, whilethose who want to visit the city usu-ally go over the weekend, for a peri-od of at most three days,” says Ne-gre. “We estimate that the traffic toIstanbul represents 3-5 percent ofthe number of tickets sold byVola.ro.” Business travel throughVola.ro has increased as a result ofthe current trend for companies toreduce their travel expenses. Ap-proximately 20 percent of the ticketsbooked on Vola.ro to Istanbul areweekend getaways. “This percent-age is very important, so we havedeveloped a system through whichclients can check the available priceonly for flights over the weekend fora period of three months ahead, justby a simple click,” says Negre,adding that about 10 percent of thetourists who travel to Istanbul gostrictly for shopping.

In the case of travel agency Ac-cent Travel and Events, generalmanager Lucian Boronea tells Busi-ness Review that this year, 40 per-cent of the agency’s clients travelledfor business and 60 percent forleisure. By contrast, in 2008, 70 per-cent of the journeys to Istanbul werefor business purposes and only 30percent for tourism. Generally, cor-porate packages include transporta-tion services – 95 percent of clientsprefer flying to any other means oftransport – as well as accommoda-tion – on average, customers preferfour-star hotels – and transfer, most-ly from the airport to the hotel andback. “The offer is customized de-pending on individual requests suchas accommodation in a certain area

of the city, or flying with a certainairline,” he says. Most of the de-mand for tourism packages is forshort stays or long weekends, whichmeans approximately three-fournights in Istanbul. Weekend tourismrepresents 35 percent of the totalnumber of packages sold by AccentTravel and Events for Istanbul.

It is hard to estimate how muchshopping tourism represents since itis mostly combined with other pur-suits. “However, shopping tourismin Istanbul is very popular in Febru-ary and March. It varies with the tra-ditional price reductions for items ofleather clothing. At least half of theweekend travelers have shopping astheir main aim,” says Boronea.Tourism on winter holidays repre-sents 45 percent of the total numberof sold packages. However, this yearBoronea expects an increase of 10-15 percent in this period, on the backof more reasonable prices for trans-portation and accommodation. Nextyear, when Istanbul becomes Euro-pean Capital of Culture, it is expect-ed to welcome 10 million tourists.

More business and leisure travelto Istanbul expected next year

Traditional cuisine gives Istanbul its charm

Dried fruits and Turkish delight in one of the nu-merous Taksim stores

This store in Taksim was full of narghile devices

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A giant cake in a dedicated cake and sweets storeThe Blue Mosque is a tourism landmark

B U S I N E S S R E V I E W E V E N T


Legal eagles survey the market

■ 1. L to R; Terry Carter, partner with restructuring services for Ernst & Young Central and South Eastern Europe, and Dragos Cabat, managing partner of Financial View ■ 2.L to R: Cornelia Bum-

bacea, partner with Ernst & Young, Terry Carter and Dan Weiler, executive director of corporate finance and investment banking with BCR ■ 3. The first of the Legal Series events took place last

week and focused on investing during a downturn ■ 4. Dan Weiler of BCR ■ 5. The event was organized by Business Review and targeted legal and tax experts, CFOs, business consultants, ex-

ecutives and entrepreneurs ■ 6. Bogdan Renea of CEZ ■ 7. Mihai Dudoiu, managing associate with Tuca, Zbarcea & Asociatii ■ 8. An audience of around 60 attended the event ■ 9. Terry Carter

of Ernst & Young ■ 10. Ana Birchall of White & Case ■ 11. Tim Wilkinson of DTZ Echinox ■ 12. Gijs Klomp, managing partner ING Real Estate

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B U S I N E S S R E V I E W E V E N T


Downturn report: financingfreeze, distressed players, no-go ar-eas and unresolved toxic loans.

Financing conditions havechanged dramatically for real estateprojects in Romania, while the syn-dicated financing and club deals forreal estate projects have disappearedfrom the market, said Mihai Du-doiu, managing associate at lawfirm Tuca, Zbarcea & Asociatii atthe “Investing during a Downturn”event organized by BR last week.The sums financed have droppedconsiderably, while loan-to-valuehas fallen to less than 50 percent. Fi-nancing also comes with very strictpre-sale and pre-lease conditions,which are very difficult to meet giv-en the contraction of the real estate

market, added Dudoiu. While we’vealready endured serious economiccontraction, the troubles are notover yet. “We will see a secondwave of problems across Europe inthe summer of 2010,” said TerryCarter, partner in restructuring serv-ices with Ernst & Young Centraland Southeast Europe. But it will bethe consumer who will turn every-thing around. As for banks address-ing their toxic loans issues, Cartersays that while everybody seems tobe blaming everybody else, bankerstend to make the same mistakes dur-ing all economic downturns. Thecurrent situation may offer plenty ofopportunities, but is there enoughcash going around, he wondered. Ifthere are opportunities out there,

they are not being taken at the mo-ment, said Gisj Klomp, managingpartner with ING Real Estate. TheCEE region has become a no-goarea for investors in Western Eu-rope. However, pricing has becomemore attractive and buyers have theupper hand while they can do stockpicking. Financing a business dur-ing a downturn might be an issue,but many have used this period tostart their own companies. The mainadvantages of a start-up during aneconomic downturn are less compe-tition and the possibility of moreeasily reducing costs, said DragosCabat, managing partner of Finan-cial View. Even with opportunitiesaround, with cash having run dry,the number of mergers and acquisi-

tions has dropped by 62 percent thisyear in Romania, compared to lastyear, according to Dan Weiler, exec-utive director of corporate financeand investment banking with BCR.

The average transaction thisyear was worth EUR 10 million,compared to EUR 29 million lastyear. “Shareholders and entrepre-neurs were and still are adjusting tothe new market conditions after re-jecting offers last year two-threetimes higher than the ones receivednow,” said Weiler. Many Romaniasellers are often behind the curveand end up selling for a lower pricein the end, he added. But there’s asilver lining too: strategic buyers areslowly coming back to the marketworldwide.

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Romanian director Cristian Mungiu’s 4 Months,

3 Weeks and 2 Days (432) has made a list of the

best films of the last decade, in British daily The

Times. The film, which won the Palme d’Or tro-

phy at the Cannes Film Festival in 2007, is 14th

in the paper’s choice of the best 100 movies of

the decade, beating Lord of the Rings, Milk and

Brokeback Mountain. The top film is Cache,

from Michael Haneke, which has garnered 21

trophies and 22 nominations at renowned inter-

national festivals.

ISABELLE VAUTH

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The National Museum of Contem-porary Art Bucharest presents the firstretrospective exhibition of paintings byAdrian Ghenie, a well-known Roman-ian artist who lives and works in Clujand Berlin. Ghenie is an ardent re-

searcher of the history of the 20th centu-ry, being preoccupied with unearthingforgotten narratives, marginal eventsand seemingly insignificant details in or-der to compose a visual vocabulary thatis both compelling and uncanny.

Contemporary artist opens exhibitionon memory and modernity

The Jukebox band, one of thebest-known outfits on the local musicscene, who play at clubs as well asprivate and corporate parties, willlaunch their first album of originalsongs. Most of the tracks are writtenby the members of the band, with therest resulting from collaborations withRomanian singers such as RaymondVancu (of Proconsul), Laci Kovacs(from the band Desperado) and Sorin

“Pepino” Vasile (from Parlament).The new studio effort is called Picuride Rai (Bits of Heaven) and is the re-sult of two weeks of work for the bandwho took some time off from playinglive. The official launch of the albumwill take place on November 26 whenthe band will give a concert in Juke-box club. The band has previously re-leased two albums of covers.

Otilia Haraga

The album will be launched on November 26

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Jukebox launch first album of original songs The exhibition is open at MNAC

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The Concert, a feature-length filmfrom Romanian-born director RaduMihaileanu, will premiere inBucharest on November 20, in thepresence of the director. The film wasthe most watched premiere in Frenchcinemas on Wednesday. It starsFrench actress Melanie Laurent, whocame to world renown as a result ofher performance in Quentin Taranti-no’s Inglourious Basterds. Laurentplays the role of Anne-Marie Jacquet,a successful international soloist whogets a contract to sing with the grandorchestra of the Balsoi Theater. TheConcert was mostly shot in Romania,at Castel Films studio, Ana Aslan In-

stitute and at Arenele Romane. Therest of the scenes were filmed inMoscow and Paris. Radu Mihaileanuis one of the most successful Roman-ian directors. In 1980 he moved fromRomania to Israel and from there toFrance, where he launched his career.His first notable success was Train deVie, on which the direction assistantwas Cristian Mungiu, another famouslocal director who later won thePalmes d’Or at the Cannes Film Festi-val. However, Mihaileanu’s most suc-cessful film was Va, Vis et Deviens,which earned him a Cesar prize forthe best original script in 2005.

Otilia Haraga

Director Radu Mihaileanu releases newfilm in Romania

The first online center in Romaniafor the counseling and treatment of al-coholics was launched last week bythe Alliance for the Fight against Al-coholism and Drug Addiction (ALI-AT) with the support of Heineken Ro-mania. The site can be accessed atwww.alcohelp.ro. Conceived by spe-cialists in mental health and in thetreatment of problems caused by alco-hol abuse, it is a free resource for theprevention of alcoholism and can con-nect the user with specialized servicesthat are both easy to use and confiden-tial.

ALIAT estimates that approxi-mately one million urban-dwellers

with internet access could benefitfrom the services on offer. For 25- to44-year-olds, the project aims to pro-vide ways to cure their alcoholism.For teenagers, it has a preventativefunction. And for the over-44s, theplatform will serve as a gateway to aspecialized care system to treat thehealth problems caused by their ad-dictions.

While in Romania these types ofservices are a first, in Western Euro-pean countries e-health platforms forcounseling and intervention for alco-holics have been used efficiently andeffectively for years.

Otilia Haraga

Romania gets first e-health platform for alcoholics

Starbucks has closed its coffee shop in the Liberty Center shopping mall in Bucharest, one year after

opening. The 300-sqm unit was the second largest in Romania, after the one in Iulius Mall, Cluj-

Napoca. The Starbucks franchise is operated by Marinopoulos Coffee Company in Romania. Star-

bucks has however recently opened a new unit in AFI Palace Cotroceni shopping mall.

LAUREN

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business review issue 41, nov 16-22, 2009

Documents

market values

loan values

robusiness review

distressed real estateassets

businesssee page

contracts havebeen

et products

recipe of dietfloursee