Element Group is a Romanian real estate investment and development company, with a solid track record in office, retail and industrial development.. The group is one of the shareholders of One United's office division, develops retail parks such as Bistrița Retail Park under Element Development brand, and a series of logistics parks in Bucharest and secondary and tertiary cities in Romania under Element Industrial brand
Element Group has a strong track record of projects in Romania as well as a generous landbank for future developments. How easy is it to find good parcels in Romania nowadays, and which geographic areas are you targeting today?
Regardless of its segment, real estate revolves around three main parameters that one must get right: location, access and reputation of the developer. For our logistics division, Element Industrial, we are targeting land parcels able to suit 20.000 up to 70.000 sqm development projects, in areas with optimal transport infrastructure, easy access to workforce and less engaged competition. We also accommodate smaller projects through the Eli Express brand, that can accommodate leased areas of 500 up to 1200 sqm to attract demand of any size in the hubs that we have already delivered. The first one is located in Bucharest – Chitila/ Buftea area . The brand Eli Express was in fact created to attract smaller clients as we intend to be a flexible player and strive to accommodate all requirements. This is one of the differentiators that set us apart from our direct competitors.
In terms of locations, we have either secured land or intend to do it in Ploiesti, Pitesti, Craiova, Braila, Bacau, Iasi, Alba Iulia. Diversifying in key locations from Romania is our way of being proactive to clients’ preferences.
Our targets are all sorts of companies from start-ups to large retail and e-commerce players, whose businesses boomed during the pandemic. We have all been called to re-think our business models and approaches in this context, from resizing to online delivery.
Speaking of the global pandemic, can you briefly explain what it meant for your business? Did it change your strategy in any way?
We have a good appetite for variety. Our financial resources and development strategy helped us sustain our interest in two of our core sectors, office and logistics. In the office segment, even if we felt that the rental process and tenant’s decisions were slightly slower than previously due to readjustments in their plans, we succeeded in closing transactions and obtaining a very good rental percentage in our office projects which are under development. In respect of logistics, leasing is on an upward trend now and our reaction was to strengthen our respective teams as we want to grow in this segment. Overall, segment diversity and balancing were key to our fighting off the pandemic.
What are the sources that you typically engage for project financing? Would you say the financing climate in Romania is favorable at this point in time?
We have so far used 70% in private debt from commercial banks while the remainder came from our internal resources, regardless of the segment a specific project pertained to. We never start a project without first having prospected for and secured the intended client. Another important element is self-reliance. If taking a commercial loan may take more time than we expected due to the approval process flow, we only start the project that we are sure we can deliver by our own means
Banks are generally open to real estate and have almost the same selection criteria that we developers use whenever embarking on new projects: location must make commercial sense; the cash flow must come from a reliable source and be predictable within a given time frame; the developer’s reputation, etc. Today we are noticing an increased appetite for logistics projects, provided comfortable pre-rental projections are offered (.
There are different pricing schemes between local banks, and this is due to the interbank cost of lending specific to the jurisdiction their parent company is registered in. The banks whose core business is financing real estate projects usually have lower costs.
Element Group is a consortium that takes charge of everything, from planning to exiting. As a CFO, what do you see as the most difficult stages of business in Romania?
We cannot complain about real challenges, even during the pandemic. As a standard practice, every developer creates a dedicated business plan for every intended project. Difficulties appear whenever the projected milestones and actuals do not match, hence exiting is affected. Nevertheless, a successful exit is always the result of a solid development stage. This is when anticipation takes place. Ideally things must add up, and we prefer prospecting and securing clients as part of the planning process, as I mentioned earlier.
What are your priorities for the next three to five years and what is your vision on the investment pace for the same period?
With our logistics division, Element Industrial, we expect to reach the 500,000 sqm target. We also would like to welcome new foreign investors. Romania still offers a high-quality workforce at affordable costs in key economic sectors, which is a strong point in attracting foreign investors. Judging by our tenant portfolio, we are happy to see that our premises are occupied, almost to matching proportions, by foreign clients and Romanian new companies alike.
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