Victor Căpitanu, Co-Founder and Co-CEO of One United Properties spoke with Property Forum at Mipim in Cannes about the company’s residential development pipeline valued north of €1 billion and Bucharest’s capacity to provide high yields for real estate investors.
This is your first time exhibiting at Mipim and presenting your company on this international stage. For those who might not know One United Properties, could you explain the journey that led you here and share some figures about your current operations?
I co-founded this company with my partner Andrei Diaconescu almost 15 years ago. This is the second business together with him, as we previously had an investment banking advisory for five years. Thus, we have a really solid partnership.
At One United Properties, we started with high-end residential, then we accessed the medium-high and medium-income segments. At present, we cover more residential in the upper half of the market. Around seven years ago, we started to raise capital in a bid to accelerate the growth of the business. We did three private capital raises and two public as a listed company. This is when we decided to start developing mixed-use projects and build a rental portfolio.
We managed to build a fantastic rental portfolio of 160,000 sqm from scratch in just six years and probably the best office portfolio in the market. All were delivered post-Covid and meet the LEED Platinum certification criteria.
Last year, we had 13 construction sites and delivered four projects with 1,430 units that have a combined gross development value of €350 million. The other nine sites comprise around 3,500 units with a gross development value of €1.15 billion. I can say that 10 years down the road, we have our pipeline secured.
Our focus right now is building, delivering to our clients and reinvesting the profits. We are lucky that the competition is not so big and the long-term margin is over 35%.
Since we listed in July 2021, we delivered to our shareholders a total return of 27%, according to a stock report, while the real estate sector recorded a drop of 37% across Europe in the same period.
Do you have any plans to diversify from office and residential?
We are also doing retail. We own two commercial centres, one of which is from the communist period, located in a high-density location in the centre of the city. The other one is under construction at present, in the former Ford factory. This is the largest private investment in a protected building in Romania. It will have a gross development value in excess of €90 million. We are remaking the building as it was 100 years ago and the project will be called One Gallery. At the moment, the leasing process is underway.
On top of this, we recently launched the hotel line and we signed a partnership with Ennismore, the fastest-growing lifestyle operator in the world. The company is managed by Sharan Pasricha, the founder of Ennismore, who still owns one-third of the operator. I was very impressed by the fact that he is a founder and also manages the daily business operations. I believe that any business that is managed by the founder, who has a good stake in the company will outperform others. This is one of the reasons why we signed with him. We decided on the Mondrian brand to bring to Bucharest and I hope that this 5-star lifestyle hotel will be the most desired place to stay in the city. It will feature 100 rooms and will be located close to the Atheneum building.
Do you have any plans to step outside Romania?
We have been looking for the last three years, but I think that for the short and medium term, our opportunity in Bucharest is too large to defocus. But in the medium and long term, we will act when a clear opportunity comes. I am looking mainly at EU countries because countries outside the EU are too risky.
From this perspective, Romania is the last sizable emerging market opportunity in the EU so it makes sense to focus there. This year, Bucharest alone will reach a GDP of €100 billion with a population of 3 million. All in all, for its size Romania is probably the fastest growing economy in Europe. This is why are actively involved in making Bucharest more attractive for visiting, living, working and leisure. We are also looking to bring new brands in the city like the Armani/Casa partnership for One Lake Club.
What is your view on the investment market?
The investment market is slower now, which is normal because the interest rates have increased. In their turn, the yields are increasing, while asset prices are not increasing or they will decrease. By the time central banks will give the sign of decreasing interest rates, investors will relax and start investing more, because there is plenty of money around.
In my opinion, Bucharest has by far the highest yield of all capital cities in Europe for high-quality products like ours. In the case of our portfolio, if we just refinance and sit on it, we have an IRR or 12-13%. But, we are doing sales from time to time. However, development is what we know to do best.
What we sold last year was at yields between 5-8% and we are looking to sell some more assets from our portfolio. For the best buildings in the market, the market yields are between 6-7%.
Do you expect to see more resi-for-rent projects in Romania?
I believe there will not be many projects of this type unless the selling prices of homes double and the affordability decreases. Only then the rental market will grow.
At present, the average price of an apartment in Bucharest is €72,000 and the average net wage is €15,000 per year so you can fully pay it in around six and a half years.
How will the development of the capital market influence One United Properties?
The IPO of Hidroelectrica worth €2 billion was the largest listing from Europe in 2023. This will lead to an upgrade of Romania’s capital market in the MSCI indexes from frontier to emerging market. The country should be on the watch list by the end of this year and full on the index next year. This will have a big impact because the index funds coming to emerging markets are 60 times larger than the ones searching frontier markets. This will mean an increased capital flow to the capital markets in Bucharest, Romania, having a positive impact on the overall market and our company.
Another favourable factor for the company is the year of elections. It looks like potential candidates are more pro-development, so we hope the new administration will be in favour of faster development of the country and of the city. Also, it seems the central banks might start to decrease interest rates maybe by 0.25 - 0.5% and this will also give a sign to the market.
Permitting and zoning is always a hot topic in Bucharest, developers are generally not in a favourable position. What’s your take on this?
Permitting is an issue across all of Europe, and I do not believe, for instance, that this process is faster in Western Europe. The present administration in Bucharest has not been the most favourable to development. However, I must mention that most of the sites we have under construction now were permitted under this administration. It took a little bit longer than we expected it, but still, we did it.
The most recent building permit was issued in December 2023 for Hala Ford which will be renamed One Gallery. During this administration, zoning has been put on hold. However, our business is not to zone lands. We like to buy lands that are already zoned or already permitted and just, you know, just build ourselves to make the project design, build and sell. We do not want to take too big risks like rezoning.
