The Isle of Man-incorporated residential and tourist developer uses local managers working through the offices of parent company AG Capital to put together land assets for leisure resorts and mixed-use projects in Bulgaria
When Isle of Man-incorporated Bulgarian Land Development listed on London’s AIM in March last year, its focus was on residential and tourist development in Bulgaria, and on the potential of commercial sectors.
On flotation, the company’s market capitalisation was £25m and a placement in March 2007 raised an additional £15m in equity. The company’s present value is around £40m.
Bulgarian Land is a division of AG Capital, the country’s largest real estate advisory company, which chief executive Christo Iliev founded 14 years ago as a small agency. Former City of London planning chairman and property doyen Michael Cassidy is the non-executive chairman.
Iliev says: “We are opening up our strategy, and the deals we are working on now for future development involve office and retail and especially mixed-use projects.” Iliev is targeting the country’s capital, Sofia, for offices and mixed projects and the bigger regional cities for retail.
AG now employs 800 staff, and its 60-office network helps to market and sell Bulgarian Land’s projects.
He stresses the advantages of the development company using local skilled management with on-the-ground experience and market knowledge. “We are not like the other foreign-based property funds that have established management companies to operate here. We know all the market pricing and can evaluate what projects will be successful.”
Often, putting development sites together can be a convoluted process because land ownership fragments over generations. For example, the 100,000 m2 site for the holiday complex in the Black Sea town of Kavarna was put together in 30 deals involving 200 split ownerships.
Although land prices in Bulgaria rose by 22% last year, the company is still targeting annual returns of 40-50% on new development. “Margins on development vary a lot,” says Iliev. “It depends on whether the land we buy is agricultural to be turned into residential use, or whether we are acquiring plots with planning consents already in place.”
Bulgarian Land has four main residential developments underway. At Borovets mountain winter resort, the company is planning a 50,000 m2 resort complex of apartments and villas. The local authority has given consent to major development activity that will create 33 ski runs. And last September the company acquired development rights for a 13-storey, 32,000m2 mixed scheme in the centre of Sofia. The developer is negotiating for a hotel operator to participate in the venture, which is called BLD Sofia Tower.
Harmony Hills, in the Black Sea resort of Varna, comprises 102 homes, of which 50% were sold and 7% reserved as of the end of August. When the resort is completed next summer, it will comprise 180 apartments and 22 villas.
Bulgaria Land has also purchased several portfolios of off-plan properties that it is selling on. Last year it paid €6.8m for 146 apartments in various Black Sea and mountain ski resorts 25% of them were reserved and a further 53% had sold by the end of July. In June the company acquired more off-plan investments at Sozopol and Bansko, and reports good progress in finding buyers for the properties.
Iliev is unfazed by the recent stock market turmoil in some countries and explains that CEE markets remain unaffected by the US subprime crisis. “Bulgaria is still among the European countries with the lowest real estate prices and they will continue to rise in all sectors.” He also points out that the number of foreign tourists increased by 5% year on year for the January – July period, and in the first half of this year tourism revenues rose by 16% year on year.
Conducting business in Bulgaria has its problems, concedes Iliev, but he says the practices are becoming more transparent, thanks to EU regulations. For the future, the company envisages owning a mixed portfolio of residential and commercial property on the country’s coastal regions, in ski resorts, and in the capital Sofia. In addition, Iliev is keen to expand into bordering Romania.
