CITY: As the Athénée Palace Hilton Hotel in Bucharest celebrates its 100th anniversary, BR takes a walk down memory lane to see how the site has transformed through the years »page 12
ROMANIA’S PREMIER BUSINESS WEEKLY
INTERVIEW
MAY 5 - 11, 2014 / VOLUME 18, NUMBER 16
REAL ESTATE FIRM GENESIS DEVELOPMENT IS ENTERING A CONSOLIDATION PHASE AND PLANS TO INVEST OVER EUR 1 MILLION IN TRAINING AND SOFTWARE »PAGE 8
PROPERTY FUND ON ROAD TO LONDON The Property Fund is preparing for a secondary listing on the London Stock Exchange in a bid to narrow the discount in FP shares, according to Greg Konieczny,the fund’s manager » page 5 EMPLOYMENT
FOCUS
Fee free
Delivery room
Authorities are trying to ban recruitment firms from charging jobseekers who want positions abroad, said participants at Focus on Employment
FAN Courier is looking to invest up to EUR 10 million in a warehousing facility, according to Felix Patrascanu, the company’s managing director
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www.business-review.eu Business Review | May 5 - 11, 2014
NEWS 3
NEWS in brief AUTO
Bank Leumi Romania 2013 net profit plummets to EUR 475,220
Two Western European auto investors planning EUR 75-80 mln of local projects
Bank Leumi Romania, the subsidiary of Bank Leumi Le-Israel, said last Monday that its 2013 net profit stood at RON 2.1 million (EUR 475,220), down by 84.5 percent against the previous year, citing lower income from interest and exchange rates, and higher provisioning costs. This was the second consecutive year in which the bank had posted a profit. The lender’s net interest income amounted to RON 44.4 million (EUR 10.4 million), down by RON 4 million (EUR 905,182) due to lower interest on loans. The commission income, meanwhile, grew RON 2 million (EUR 452,591) to RON 12.3 million (EUR 2.9 million). Laurentiu Mitrache, the bank’s executive president, said that some branches had been relocated, while one in Brasov had closed and the city’s main branch modernized, in an effort to streamline operations. The bank currently has 21 branches across Romania.
Two Western European auto companies are planning to invest EUR 75-80 million in the local market, according to Constantin Cstroe, president of the Romanian Car Producers Association (ACAROM). “The value of the two possible investments is not spectacular, approximately EUR 75-80 million, but they will have market. They are looking to associate with national producers that lack the technical equipment. We’re talking about 170 new jobs. We cannot turn our backs on this. These are rare flowers that are springing up in the auto industry in Romania,” said Stroe. He revealed that the firms in question are Western European but did not mention any names.
BANKING OTP Bank Romania in EUR 11.2 mln share capital increase OTP Bank Romania, the local subsidiary of Hungary’s OTP Bank, said last Monday that the Romanian Trade Registry had, on April 16, approved an increase of its share capital by RON 49.9 million (EUR 11.2 million) to RON 782 million (EUR 175 million). Following the move, OTP Bank Nyrt., the main shareholder in the lender, holds close to 3.3 million nominative shares and 99.9 percent of the bank’s share capital, while the rest is held by Merkantil Bank Zrt. OTP Bank entered the local market ten years ago.
ENERGY Romania will not exploit shale gas for five years, says PM
2 Megaonline.ro: Mega Image ex-
Although the shale gas sector is in its early stages in Romania, with US oil major Chevron having started the exploration of some shale gas deposits, Prime Minister Victor Ponta said the country has to put in place modern legislation governing the resource by the end of this decade before approving any exploitation. The PM said that Romania would exploit “not even a cubic meter of shale gas” in the next five years. He added that the country has to consider the exploitation of all energy resources, be it offshore gas or shale, to secure the energy independence of Romania and neighboring Republic of Moldova from Russia. PM Ponta said that Russia’s Gazprom was Romania’s sole gas importer in the region.
3 Check in and log on: Romania is
FINANCE
MOST READ www.business-review.eu 1 Voice of Russia: Romanian mili-
tary units moving toward Ukrainian border pands into virtual space to give Carrefour a run for its money the global leader of free hotel WiFi
4 Romania will not exploit any shale gas in the next five years, says PM 5 Anholt Investment bought 6,000
ha of land in Botosani for EUR 11 million
Three in five local firms are in financial trouble Over 60 percent of companies with an impact in Romania are grappling with lack of liquidity and over-indebtedness, with real estate businesses reporting the biggest losses, according to a study by CIT Restructuring. The study analyzed close to 20,000 com-
panies with assets of over EUR 1 million over the 2010-2012 period. In 2012, some 13,169 businesses generated profit totaling EUR 7.12 billion, while 6,663 firms registered losses of around EUR 4.8 billion. Out of the companies that posted losses, close to 2,400 were in real estate, followed at a great distance by those active in the production of electricity (196) and hotels (176). However, real estate also saw the biggest profits with 1,499 firms in the black, trailed by agriculture and consultancy firms. The study found that only 6,800 of the analyzed companies had a healthy solvency rate of above 200 percent, while 4,000 firms were insolvent.
RETAIL Mega Image expands with online presence Mega Image is planning to launch an online store, thereby entering into direct competition with Carrefour, which made the move into virtual space last year, writes economica.net. The first step for Delhaize Group was acquiring the domain megaonline.ro which happened on March 21 according to rotld.ro. Last week the website name was registered as a trademark at the National Office for Inventions and Brands (OSIM).
ONLINE eMag to add new product categories Romania’s largest online store eMag.ro plans to introduce new product categories this year, such as food, sportswear, car accessories and clothing. Initially an IT&C online store, the firm has gradually became a general retailer, adding books, cosmetics, toys and insurance to its portfolio of products. Total revenues, including money coming in from the Marketplace affiliate platform, average at around EUR 200 million. According to the company, the operational profit was positive, but officials did not specify the sum. On the international market, owing to the recent investments, the total net profit was “slightly negative”, said the firm’s general manager, Iulian Stanciu. eMag posted revenues of EUR 187 million last year, and hopes to achieve 40 percent turnover growth this year, to at least EUR 262 million, according to Stanciu. The company has planned investments of EUR 11.5 million for 2014, double the sum last year.
3Q Alexandra Olaru HR&communication director, McDonald’s Romania
What is the employee retention rate at McDonald’s? In a good year, only around 40 percent of the employees leave. This includes the temporary workers that we hire for the summer. Currently, there are 67 McDonald’s restaurants in 21 Romanian cities. Out of the total 4,000 employees in Romania, 2,500 are under 30, and only 60 are in support positions. The team of managers numbers 300 people. Employees go through 48 months of training. Annually, approximately 1,500 go through the McDonald’s training system, and since the beginning, over 26,000 people have been trained by McDonald’s. In some restaurants, over 70 percent are students but we also have senior employees. How much does McDonald’s invest in training in Romania? We have invested over EUR 100,000 per year over the past three years. The average McDonalds’ employee is aged around 27-28 years old. Managers are usually aged from 34-38, and here I am referring to the first two layers of management in the restaurants. Entry-level salaries are significantly above the minimum wage while management salaries are in line with the market. How many employees work in a restaurant, on average? It depends on what type of restaurant we are talking about: whether it’s a malllike restaurant, street outlet or a unit with a drive-in, which have the most employees. We can have as many as 100110 workers at a restaurant. They are trained to rotate and fulfill various tasks; for instance, they work as cashiers, in the kitchen or in the lobby. So far, seven of our restaurants are franchises, but the program is not ongoing at the moment. otilia.haraga@business-review.ro
www.business-review.eu Business Review | May 5 - 11, 2014
4 NEWS PARTNER CONTENT
GAMBLING
Fitness& Wellness
Gambling industry up slightly to EUR 650 mln in 2012, says PwC
Club Moving - Making Romania Healthier
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Under the slogan “Moving is life”, Club Moving is a great option not only for the sport enthusiasts and dynamic individuals who realize that in order to keep up with today’s fast pace and ever changing expectations a healthy mind and body are a prerequisite, but also for the ones that are starting an active lifestyle and require guidance and the needed attention of an instructor.
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All memberships include full access to any of the facilities and programs of the club, whether is it swimming pool, cardio, yoga, fitness or aerobic. Whether they like to train with a personal instructor or go for a fun class such as kangoo jump, boxing, rebound, Khai-bo or dance, they can choose from a great array of options. A healthy body also means a healthy mind, therefore anyone who would like to relax and let go of daily stress can enjoy a massage session, some relaxing time at the spa or simply a few quiet moments in a beautiful setting by the pool. Club Moving is also a place where all members of the family can come, a place where parents can enjoy a quiet workout while their children are having fun in the Kids Program. Children play and do lots of fun activities, under the supervision of the club’s staff. Ballet, dance, yoga for
We invite you to any of our locations:
Club Moving Otopeni: office@clubmoving.ro; 0213115011 23 Polona St. A Otopeni Ilfov
new study by professional services firm PwC Romania published last week revealed that gross gambling revenue (GGR) in Romania rose 2 percent to EUR 657 million in 2012, on a market that is characterized by fragmentation. Bogdan Belciu, partner, management advisory services at PwC, said the gambling sector had been reshaped in 2009 due to changes in regulation that tightened the licensing procedures for the industry. The market lost 21 percent in one year as a result of the move, and in the slot machine segment the number of operators fell by two thirds in around four years to 411. Some of the players have migrated to online gambling, which is loosely regulated locally. “In Romania, online gambling is not taxed at all and the market is neither authorized locally, nor forbidden,” said Belciu. According to the PwC study, slot machine games and fixed odds betting, mainly in sports, generated around
EUR 709 million of GDP through direct contributions or related services in 2012. The industry had 38,500 people on the payroll and paid EUR 333 million in taxes. The slot machine gaming market in Romania stood at around EUR 400450 million in 2012, excluding the black market. The country had 2,231 machines per 1 million inhabitants in 2011, just behind the UK with 2,887 machines, and ahead of Bulgaria and the Netherlands. Italy had 6,812 machines, the highest number out of the analyzed countries. The GGR per capita for slot machines was EUR 21 in 2011, similar to Sweden, while in Italy it stood at EUR 130. Meanwhile, the market for fixed odds betting was estimated to have hovered around EUR 100-130 million in 2012, on the back of around 2,600 agencies across the country. For this segment, the GGR per capita was EUR 5 in 2012, ahead of Germany on EUR 1, but behind France and the UK, which got close to EUR 40. ∫ Ovidiu Posirca
WHO’S NEWS BR welcomes information for Who’s News. Submissions may be edited for length and clarity. Get in touch at simona.bazavan@business-review.ro
Club Moving Cluj: cluj@clubmoving.ro; 0264433285 1st Calarasilor St. Cluj Napoca at Hotel Belvedere Club Moving Iasi: iasi@clubmoving.ro; 0232210765 31st Anastasie Panu St. at Hotel Moldova Moving Express Ploiesti ploiesti@clubmoving.ro; 0743434353 2nd Calomfirescu St. Ploiesti Prahova – at AFI Palace Mall Moving Express Bacau bacau@clubmoving.ro; 0742232232 2nd Milcov St. Bacau at Cora Gallery
Toni Volpe
has been appointed member and chairman of Enel. He has also taken over from Luca D’Agnese as country manager, according to company officials. Volpe joined Enel ten years ago and has been active as manager in several key positions for the group internationally. Between 2011 and 2014 he worked as the director of human resources planning, compensation, development, training and recruitment at group level. Previously, he held the Enel Green Power (EGP) country manager position for North America. Volpe is a cum laude graduate of the Polytechnic University in Milan, the Management College. He completed his studies with an MBA at the PostGrad School of Business in the Co-
lumbia University, New York. D’Agnese will take over another leadership position at Enel Romania.
Cristina Saulescu
has been promoted to tax manager at PKF Finconta. She began her career in 2001 and joined the firm in 2009. Saulescu, who hold a bachelor’s degree in economics and a master’s degree in financial management, has been an active member of the Chamber of Tax Consultants since 2009. She has 13 years of professional experience in tax. Saulescu regularly advises clients on domestic, cross-border and international transactions including mergers and acquisitions, due diligence, financing and transfer pricing.
www.business-review.eu Business Review | May 5 - 11, 2014
FOCUS 5
Franklin Templeton targets London to remove Property Fund share discount Shareholders in the Property Fund (FP), the EUR 3.2 billion closed-end fund managed by Franklin Templeton, last week gave the green light for the secondary listing of the fund in London this autumn, in a move designed to remove the FP’s share discount. ∫ OVIDIU POSIRCA The FP manager, which has holdings primarily in large state-owned companies, had previously attempted to list the fund in Warsaw, but the deal failed due to the lack of links between the central depositaries in Bucharest and Warsaw. Franklin Templeton has secured a two-year mandate extension at the FP, with shareholders having the option to assess its performance after the first year and decide if the manager will remain on board. Under the new mandate, the FP shares’ discount would be cut in half to 15 percent. Greg Konieczny, FP manager, outlined in an interview with Business Review the strategy for the new mandate. “(e.n.We will be continuing) what we have been doing (e.n up to now). So on one hand we are working to increase the value of the portfolio of companies that we have and make the portfolio more liquid (…) Second is corporate action, meaning distributions to shareholders, buybacks, the London listing and increasing investors’ demand for the shares,” said Konieczny. Shareholders have also approved the fourth buyback program of 10 percent of the FP’s issued share capital. He said the listing in London should “ideally” be done in September or October this year and the manager has two options to do it, either through depositary interest or Global Depositary Receipts (GDRs). Koniecnzy said he prefers depositary interest because the shares would be settled more easily and would be cheaper for investors to buy than GDRs. He told reporters that Londonbased investors that are specialized in closed-end funds have over USD 100 billion under management, and the FP would rank fourth largest in this market by market capitalization and second based on assets under management.
Franklin Templeton calls for new IPO Konieczny said that the National Company for Ports in Constanta (CNAPMC), along with the Bucharest Airport Company and Salrom, the salt producer, are ready to be “IPO-ed as quickly as possible”.
FP manager Greg Konieczny says the secondary listing in London should reduce the current discount of around 30 percent for the fund’s shares
“With Salrom, we plan to sell stakes that attract large institutional investors,” said the manager. The FP has a 49 percent stake in the company, with the state holding the rest. Romania is pursuing a massive privatization program of state companies under a EUR 4 billion stand-by agreement with the International Monetary Fund and the European Commission, the executive arm of the EU. Konieczny added that at present the most advanced initial public offerings (IPO) preparations are for Electrica, the state electricity supplier and distributor. The FP holds stakes of 22 percent in four Electrica subsidiaries and is exploring options to sell them. The government is set to raise up to EUR 1 billion from selling its controlling stake in Electrica, with the listing to take place this June. Konieczny said that the IPO in Hidroelectrica, the hydroelectricity producer, will not happen this year after the company returned to insolvency. “The short term is bad, especially because the IPO will be delayed, but in the meantime we have a lot of confidence that Remus Borza (e.n the insolvency administrator) will be able to further improve the company’s operations,” he told BR. There are also issues with the Oltenia Energy Holding, where the FP has been struggling to get a voice in the boardroom. The government is aiming to list a 15 percent stake in the holding this year, which should raise
around EUR 400 million, according to media sources. “There are seven board members, and we have one. We had a memorandum of understanding with the government that we should have two, but the previous minister of energy did not comply with it,” said the manager. “We now hope that the situation will change, and while this company stays under the control of the minister of energy, Razvan Nicolescu, we will be able to deliver some real restructuring and positive changes. As of now, it has been the most disappointing out of the largest companies we have,” he added. Franklin Templeton is also aiming to improve the management of stateowned companies and has backed a government ordinance regarding the appointment of professional boards and managers for these companies, some of which have historically been
plagued by political appointees. According to Konieczny, there are still issues related to the speed and quality of the implementation of this program, but he believes it has worked at grid operator Transelectrica and gas producer Romgaz, both state companies listed on the Bucharest Stock Exchange. Due to the massive escalation of the conflict in Ukraine, the FP has decided to sell its stakes in Austrian Erste Bank and Raiffeisen Bank International, which were exposed in this region. “We do not think there will be any material impact on any of the other companies we have in our portfolio. Most of the companies are about the local market, and the trade relations between Romania and Ukraine are tiny,” said Konieczny. ovidiu.posirca@business-review.ro
www.business-review.eu Business Review | May 5 - 11, 2014
6
Authorities to clamp down on foreign recruitment firm fees The authorities will soon enact modifications to the legislation protecting Romanian jobseekers in search of positions abroad. This was just one of the issues debated by HR professionals who attended the Focus on Employment & HR event. ∫ OTILIA HARAGA “We want to strengthen restrictions so that Romanians are better protected from certain labor recruitment agencies. We are trying to impose restrictions so that any person looking for a job abroad will no longer have to pay any kind of commission,” Camelia Mihalcea, head of the International Relations, EURES and Mediation Directorate, at the National Agency for Employment (ANOFM), announced at the Business Review event Focus on Employment & HR, which took place on April 28. Law 156/2000 aims to ensure the protection of Romanians who are seeking a job abroad. The law will impose tougher conditions on private recruitment agencies that find workers for posts in other countries. The types of professionals that fall prey to flawed recruitment include highly skilled specialists, such as doctors, IT workers, and other technological professions, as well as unskilled laborers in fields such as agriculture or construction, said Mihalcea. According to Adriana Comaneci, founding and managing partner at Reviro, a company that places
“Undeclared labor has not been eradicated in any European state. In Romania, the number of undeclared workers has stayed broadly constant. No one has yet succeeded in presenting a winning formula for the market.” Ciprian Dragomir general state inspector at the Labor Inspection
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1. Madalina Balan, managing partner, Hart Consulting 2. Roxana Toader, senior consultant, Certified Senior Professional in HR, Ascendis 3. Mihaela Nitu, senior lawyer, Gruia Dufaut 4. Camelia Mihalcea, head of International Relations, EURES and Mediation Directorate, National Agency for Employment 5. Arun Krishnamurthy, HR director, Vodafone 6. Ciprian Dragomir, general state inspector, Labor Inspection 7. Marilena Balabuti, deputy chief inspector, ITM Bucharest 8. Mihaela Feodorof, managing partner, Yourway Life&Career Counseling 9. Alexandra Olaru, HR & communication director, McDonald’s
Romanians who have studied abroad back in roles in their home country, approximately 5,000 Romanians start or finish their studies abroad every year. These could be a valuable resource for companies that are looking for a highly skilled labor force. “One cannot really stop the flow of talent abroad. The Romanian labor market needs to be competitive. The wage gap between Romania and the rest of Europe will eventually be bridged,” said Arun Krishnamurthy, human resources director at Vodafone Romania, during the event. “The phenomenon happening in Romania today took place in India about 15 years ago, as thousands of young people flocked to foreign universities,” he added. In Romania, unemployment is still an issue, especially in certain poor parts of the country. Romania had 503,000 registered unemployed citizens in March, giving it an average unemployment rate of 5.56 percent, according to recent data from the ANOFM. Half of the registered unemployed are in the 30-39 and 40-49 cohorts. The majority have not graduated
from high school and over 72,000 percent have been out of work for more than 27 months. People aged 40-49 top the unemployment list, with 143,574 out of a job. Those aged between 30 and 39 are the second most exposed age group, with 117,796 of them being jobless. The third biggest unemployed demographic is people over 55, with 71,311 in this age group out of work. Approximately 146,605 jobless people in Romania have been looking for work for the past three-six months. Vaslui, with an 11.53 percent unemployment rate, Mehedinti (10.34 percent), Teleorman (10.16 percent), Dolj (9.68 percent), Alba (9.30 percent), Galati (9.05 percent), Buzau (8.54 percent), Ialomita (8.21 percent), Olt (7.94 percent), and Gorj (7.79 percent) have the highest unemployment rates, according to the National Agency for Labor Force Occupancy. At the opposite end, the counties with the lowest unemployment are Ilfov (1.73 percent), Bucharest (2.05 percent), Cluj (3.32 percent), Maramures (3.85 percent), Bihor
(4.03 percent), Constanta (4.28 percent), Satu Mare (4.46 percent), Bistrita (4.68 percent) and Sibiu (4.73 percent). The lack of a proper job drives many to seek work on the black market. “Undeclared labor has not been eradicated in any European state. In Romania, the number of undeclared workers has stayed broadly constant. No one has yet succeeded in presenting a winning formula for the market. Without the participation of other institutions, there is no way of eradicating undeclared labor. We are also limited by the number of labor inspectors that we have right now,” said Ciprian Dragomir, general state inspector at the Labor Inspection (ITM). “Compared to the European average, black market labor in Romania is a widespread phenomenon, as shown by the EU Eurobarometer. Romania has a high percentage of employees who receive some of their remuneration ‘under the table’ – 7 percent, compared to the European average of just 3 percent. In our opinion, the real percentage is even higher,” Mihaela Nitu, senior lawyer at Gruia Dufaut Law Office, told BR. “In Romania, undeclared labor mainly involves employees who work for a business owner, and sole traders. Most unofficial employees work at small firms with fewer than 5 employees, according to public data. Romania is also among the countries with a high incidence of employers with more than 100 employees who resort to unofficial labor,” she added. Nitu noted, “The rather substantial social contributions that companies must pay are often the main reason for hiring on the black market, and inexperienced young people who are interested in immediate financial gain, to the detriment of social protection, and unskilled workers are the most widespread victims of this practice.” She called on the authorities to axe the social contributions paid by employers but also to make work relations more flexible. During the Business Review event Focus on Employment & HR, the Romanian authorities announced new modifications to the human
www.business-review.eu Business Review | May 5 - 11, 2014
All photos: Mihai Constantineanu
“The rather substantial social contributions that companies must pay are often the main reason for hiring on the black market, and inexperienced young people who are interested in immediate financial gain, to the detriment of social protection, and unskilled workers are the most widespread victims of this practice.” Mihaela Nitu, senior lawyer at Gruia Dufaut Law Office
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Participants in Focus on Employment & HR 2014 witnesed a workshop held by Roxana Toader, senior consultant, Certified Senior Professional in HR, Ascendis
Yesterday’s versus tomorrow’s employee X and Y generations: l Results-oriented l Self-critical l Find it harder to work under pressure and stress l Relatively ambitious l Friendly and sociable but can be critical of others l Cautious, go by the rules, with a need to control, prone
to micro-management l Relatively curious and creative l Willing to learn
X and Y’s values and motivations: l Power l Security l Tradition l Aesthetics
Millennials are least interested in: l Planning l Nature-agriculture l Teaching l Social services l Elementary teaching l Office work
Source: Yourway Counseling Respondents: Adults aged 30-53 (sample group from the X,Y generation born between the ‘60s and ‘80s) Teenagers (sample group from the Millennial generation aged 14-19)
Millennials are: l Assertive l Expressive l Enterprising l Logical resources legislation. According to Dragomir, one of the laws that will undergo amendments concerns day labor, which will come into force
Millennials are most interested in: l Interpretative arts l Adventure l Dominating management l Inter-personal trust l Engineering l Finances l Social sciences
on June 17. The modified law will permit day labor in a greater number of fields. “We have also started to roll out a
project to revise the General Record of Employees (REVISAL). We will organize discussions with the business community and the main employers
will be invited to present their take on the matter,” said Dragomir. otilia.haraga@business-review.ro
www.business-review.eu Business Review | May 5 - 11, 2014
8 INTERVIEW
Leaving the land of confusion Genesis head expects more sustainable growth for office sector After opening one office building after another, both before and after the crisis, Romanian realtor Genesis Development is now entering a consolidation phase, Liviu Tudor, the company’s president, told BR. Should an opportunity present itself, the developer is ready to resume expansion, but, overall, the market is showing no signs of a paradigm shift. ∫ SIMONA BAZAVAN
CV Liviu Tudor
Last November you said the crisis would last another eight, ten years. Do you still believe this? Yes, I said that and afterwards there were some negative comments about this statement. I told you back then that this was something that I could back up with arguments. Unfortunately, I believe it will take more than eight, ten years given the recent developments in Europe and around the world. It will be a long crisis of more than ten years, so long that it is no longer appropriate to call it a crisis but another way of doing business. Before, there was a fast development period while now – although there continues to be ups and downs – money is moving at an entirely different speed. Basically, capital is still running after profits but the speed at which this is happening is different. Addressing the systemic issues that led to the collapse will take time. But the fact that the development pace has changed is not necessarily a bad thing.
He has more than 24 years of professional background in business and 15 years in real estate. He controls and heads Genesis Development which developed Novo Park and West Gate office projects in Bucharest which have a combined surface of some 150,000 sqm. The company has also developed the West Gate Studios private student campus. Before going into real estate, Tudor, who is dubbed the largest Romanian office space owner, founded Digicom, the first Romanian satellite communication company. He is also president of the Romanian Association of Building Owners (RABO) and VP of European Property Federation (EPF).
What about the overall evolution of the real estate market? If we are talking about the real market, then it should be broken down into its main components – office, commercial, residential and logistics. Each has its own dynamic and I can only talk about office. Here, things are relatively okay, by which I mean that the relocation of companies from the West to Romania and the expansion of some of the existing tenants is something that continues. These are mainly companies from Western Europe and the US. They come here attracted by cheap labor costs,
Courtesy of Genesis Development
Talking of the European context, does the situation in Ukraine impact the local market in any way? Not in a major way. However, there are some companies that want to relocate their operations from Ukraine to Romania. These are mainly IT companies because it is easier for them to relocate. They are looking at Bucharest and I know of such companies. We are in advanced negotiations to sign one such relocation deal, but it is too early to say more. rents and a coherent economic and legal system.
a break, if it is possible, and consolidate this growth.
And has this trend of relocations to Romania been growing of late? It has been pretty constant since 2009. I suppose this is something that speculative developers have counted on and this has been their vision. I see that they are delivering office buildings and starting new ones.
And what will this consolidation involve? Because we have grown at a fast pace, even since the crisis started, we feel the need to introduce training programs for our teams in order to change from a fast growth paradigm to a continuous upgrade paradigm. So we are no longer interested in building at a fast pace and launching new buildings, but instead want to upgrade our buildings to a world quality level. We want there to be no difference between a non-central office project in London, Paris or Munich
What about you? Are you planning the construction of a new office building? We have been building throughout all this time and now we would like to take
and ours. This is the target. This will mean investments in the actual upgrade of the buildings, technological and design upgrades. It will also mean green upgrades. All our buildings now have a BREEAM certification. We want our buildings to look the same as they did the day they were inaugurated so that a tenant who is a newcomer thinks the building was just opened. Continuous upgrade is a complex concept and it requires numerous elements. It is hard to do and it is not usually done. And how long should this phase take? I would like it to take about a year or two. This should also be a time during which we change our team’s mentality from growth and expansion at all costs to meeting the requirements of tenants who relocate. We have brought knowhow and trainers from the UK. We have been working with the British Institute for Facility Management (BIFM) for several years now and we have aligned to their standards. Our people need to be as qualified as those in London. How much are you investing in this? We are talking about more than EUR 1
www.business-review.ro Business Review | May 5 - 11, 2014
Genesis Development posts 5 pct growth in 2013 The revenues reported by Genesis Development in 2013 from renting the 150,000 sqm West Gate and Novo Park office projects and the West Gate Studios private campus amounted to EUR 33 million, up 5 percent y-o-y. The growth came after the developer completed the fifth office building of the West Gate project (15,000 sqm) and slightly increased the occupancy rate, according to company data. The latter currently stands at 97 percent.
million in human resources and software. For continuous upgrades the budget runs to several millions. I don’t have an exact figure but it will be around EUR 3 million to EUR 4 million over the next five years. And at the end of this period will you resume the construction of new office buildings? We will resume depending on demand. If one of our tenants wants to grow and we have no space available to offer we will start a new project. But only then. We don’t do speculative developments. There are two broad ways to look at a
INTERVIEW 9 developer. There are the speculative developers who build a project first and then start looking for tenants, and at the other end of the spectrum there are those who pre-lease 80 to 100 percent of an office project and then start the construction. We are not speculative developers and we never have been. Not even before the crisis. So it is not a change of attitude. I admire the courage of those who do speculative developments because they take on a lot of risks. Have you seen banks being more open to financing real estate developments of late? I don’t think so. I am not very active in this direction but banks having an appetite to finance real estate developments is something that one would immediately notice. Unfortunately this is no longer trendy. It used to be, but since the collapse, since the bubble burst, banks have become reluctant. However, this doesn’t mean that if one has a good plan for a real estate development it won’t get financing. It is a not a complete refusal from the banks, only that they are not as open towards real estate as they are towards other sectors, such as energy for instance. There has been talk recently about the start of a new real estate cycle. Is this the case? I think this is the “w” we were talking
about in 2009. After a very abrupt fall there will be several attempts to restart things, a psychological kick-start when we all pretend that we have resumed everything and that there is a powerful comeback. It has a lot to do with psychology and I think this is what we are experiencing now. The basic requirements for a powerful comeback of the real estate sector are not there. As the name suggests, real estate is a solid business where one can place liquidities, but it doesn’t function at high speed. And I’m not convinced this is a bad thing. So, we are basically looking at slower, more solid growth ahead? More solid, more sustainable, based on more solid grounds and built upon better research. And as long as there are empty blocks, I don’t see why there should be faster growth. As long as there are empty office buildings, I don’t see why new ones should be developed. There are empty projects and I don’t understand this speculative development. However, it is a way to develop real estate and it requires courage and boldness. What about investing in office space outside Bucharest? Yes, on the office side this is something I am looking at. And I am doing this because I see tenants are looking to expand outside Bucharest to the large
cities. I am looking at Iasi, Timisoara and Cluj-Napoca. Do you plan to buy land for such developments or have you already done so? For now I am only following this phenomenon. I will decide later. To sum up, what are the main objectives this year for Genesis Development? The main target is to improve our team’s degree of qualification. This means training, know-how and aiming to reach European standards. Of course, if the market requires us to start a new building, we will. We are waiting to see where the market heads. If it kick-starts we will follow. Do you see such a fundamental change taking place by year-end? Any fundamental change can only come from the banks, because banks lend to both buyers and developers. Should lenders fundamentally change their approach to the economy, there could be some consequences in real estate as well. I don’t see this taking place right now. I see a period of consolidation and portfolio optimization taking place at European and global level. And because we are talking about giants, this optimization will take some time. Therefore, I don’t expect banks to fundamentally change their attitude. simona.bazavan@business-review.ro
www.business-review.eu Business Review | May 5 - 11, 2014
10 FOCUS
FAN Courier builds key tie with e-commerce The business of local delivery company FAN Courier has been reshaped by the boom in e-commerce, which generated one fifth of its turnover last year. Managing director Felix Patrascanu told BR in an interview that the company has opened a subsidiary in Bulgaria and is looking to tap the warehousing segment due to higher online demand. ∫ OVIDIU POSIRCA
CV Felix Patrascanu 1998-present managing director, FAN Courier 1995-1997 COO, Cargus International 1990-1993 Electrician Universul SA Holds a law degree from the University of Bucharest
Photo: Silviu Pal
Patrascanu said the firm was planning to invest up to EUR 10 million in a new logistics center near Bucharest that will be used mainly for e-commerce business, although he did not mention a timeframe for its construction. “We have seen the development of large companies from abroad that have a wide array of services. If we look at FedEx or DHL we see they have a lot of services including shipping and warehousing, cross dock – things we can implement because sometimes the market is asking for them. A warehousing service would be welcomed by some of our most important clients,” said Patrascanu. The company will have to buy land and hire new people for the warehousing facility, which should be built at its hub near Bucharest. He added that additional investments will be made in automatization equipment at the Brasov and Cluj hubs. As the e-commerce industry has gained significant ground in Romania over the last few years, with everything from insurance to food being for sale on the internet these days, Patrascanu predicts that this will further contribute to the company’s turnover, which climbed 16 percent to over EUR 60 million last year. He expects a further increase of 10 percent this year. He reckons the courier sector has the advantage of adapting quickly to the growth industries in the economy. The MD cited e-commerce as one of the sectors that will grow for an extensive period going forward. “We have around 16,000 customers from all fields and we work with the biggest in almost all sectors. In telecom we work with the three biggest players, in cosmetics the same, on e-commerce with eMag which has around 60-70 percent of the market and with other players,” said Patrascanu. “We are still working with dealerships, car importers, auto firms – a very developed market because of the high sales of second hand cars that need spare parts,” he added. He said the country has seen “a nice development” of food e-commerce in the recent period.
FAN Courier: Felix Patrascanu says that e-commerce will be a strong growth engine for FAN Courier in the coming years
“We are working with Carrefour which has opened a pilot project, which is working – this is in fine-tuning mode at this moment. Deliveries were initially made only from Baneasa but now the retailer has also started to make them from Militari.” “There are dedicated cars and people. This is also a big market. There are market rumors that even Cora and Mega Image are planning to do it,” stated Patrascanu.
Management models When asked by BR which entrepreneurs inspire him, Patrascanu immediately named two managers of companies that have long-standing relations with FAN Courier. He closely observes eMag founder
Iulian Stanciu for his business development skills. “I have seen him very focused on each business detail. Even the scotch tape he used for the boxes, he was looking for it somewhere where it was cheaper than in the other place. We three (e.n. the FAN Courier founders) thought he was missing the wider business picture but he sees it very well. He sets himself some targets that he meets,” said Patrascanu. “In my opinion, he is very thorough in business. We are not doing charity here – it’s business,” he added. Stanciu announced last week that he was planning to grow eMag, which is controlled by media giant Naspers, by 40 percent to EUR 262 million this year. FAN Courier does the majority of de-
liveries for Romanian firm eMag, controlled by South African media giant Naspers. Patrascanu said that he also appreciated the team management skills of Srdjan Mijuskovic, a Serb who managed the local operations of Avon Cosmetics Romania. They started working together in the late 90s, when both companies were in their early development stages in Romania. “I was impressed by the way he built the team. They were so dedicated that they were staying day and night, a couple of them, and I wondered what he was telling them to make them so dedicated because they were not that well paid at the start in 1997-1998,” said Patrascanu. Dragos Anastasiu, president of transport and tourism group Eurolines, alongside Mihail Marcu, the president of the board at private healthcare services provider MedLife, were the other inspiring figures mentioned by Patrascanu. He also referred to several intrapreneurs including Bogdan Ion, the country manager of professional services firm EY Romania, and Ioana Filipescu, managing director at Raiffeisen Investment. Patrascanu is in fact working with some of them in helping more Romanians open businesses, as part of a program within the Romanian Business Leaders (RBL) association. “We are mentoring some start-ups. In business you can go for a while, and then you are stuck with three employees, with a turnover of a few tens of hundred thousands in RON, and need help,” said Patrascanu. He said the program aims to more than double the number of entrepreneurs in Romania to 57 per 1,000 inhabitants, which is the EU average. This should be achieved by 2020 and Patrascanu confidently says that Romania can save itself through entrepreneurship.
Taking the Black Friday test In the past three years Romanian retailers (first online, then bricks and mortar) have started to step up promotions in imitation of Black Friday in the US. This was pioneered by eMag, which did a similar thing in Bulgaria. Black Friday has brought delivery firms to the forefront of the e-com-
www.business-review.ro Business Review | May 5 - 11, 2014
FAN Courier operational facts linitial training of a courier takes one
week
la new courier can start doing deliv-
eries alone after two-three weeks
l a courier becomes profitable after making 70-80 deliveries daily l 1,200 couriers employed by FAN Courier, including 400 in Bucharest; the overall number of employees stands at around 2,650-2,700 l delivery cars have to be replaced
every two years
merce business, but this has been a doubled-edged sword for some of them. “Some delivery companies shut up shop two years ago because they were engulfed by a wave of deliveries,” said Patrascanu. He said the company made some profit last year during Black Friday and that it was taken “a little bit by surprise” by a torrent of white goods deliveries. “From the logistics perspective, last year we had to deliver around 7,000 white goods. We can fit 160 in a truck. All were ordered on Black Friday. We in-
FOCUS 11 vested around EUR 3 million last year around Black Friday to buy new trucks,” said the managing director. “I am glad that people understood what e-commerce is – all kinds of products can be included there. Even cars, but that was an image thing.(…) I asked some Polish businesspeople how they did on Black Friday and they asked me what it was, because it has not caught on with them – the same is the case in Germany,” he added. “Online sales in Romania are in the single digits (e.n. out of all sales) so the business opportunity is fantastic here,” said Patrascanu. One of the characteristics of local online sales is that very few people pay by card, generating additional costs for delivery firms. “In Romania and in Eastern Europe the cash-on-delivery system is very popular and few people pay by card before seeing the product,” said Patrascanu. He said that the lowering of interbank fees, which has been proposed by the European Commission, the executive arm of the EU, should support the growth of online card payments. Patrascanu said the fact that e-commerce players are operating with profit margins of below 1 percent in Romania leaves little room for any price hikes. He said the rollout of the new fuel excise will hike FAN Courier’s cost of services by 3.5 percent, while indirect prices of
car parts, stationery and services will also go up. The company is also grapping with the poor road infrastructure, which hampers efforts to cut transit times. “Every investment we have made in automatization and devices has been cancelled out by the impossibility of crossing the Carpathians on time,” said Patrascanu.
Expanding regionally Patrascanu founded FAN Courier 16 years ago in partnership with the Mihai brothers (Adrian and Neculai). He has a 20 percent stake in the company, while the brothers have 40 percent each. The three share an office at the company’s HQ near Bucharest, which also includes a warehouse. This hub, which required a greenfield investment of over EUR 20 million, was inaugurated in January 2011. The company’s investments since 1998 have amounted to EUR 50 million and Patrascanu said this will continue throughout 2014 The delivery market has returned to the pre-crisis level of EUR 250 million and is forecast to grow by 10 percent this year, according to Patrascanu. He added that the company was close to having a 50 percent market share for domestic deliveries alone. It falls to 2730 percent when including both the domestic and international markets. Holding the leading position locally
and working in a market with further growth potential may well have attracted the attention of investment funds. Patrascanu said that over the years a lot of funds have expressed interest in the company, but the latter has been able to develop on its own so far. He added that an investment fund could support the company’s regional expansion, but that at the moment the owners were not talking to any fund. The company has ventured abroad on its own, opening FAN Courier Bulgaria with an HQ in Ruse last month. “We just launched it. We have some customers there who asked us to go there. eMag and Avon are also in Bulgaria, along with other firms. We hope to go into this market. Even though it is a small market, we have seen some handsome (e.n financial) figures of some local courier firms,” said Patrascanu. FAN Courier has also looked at the Republic of Moldova, but Patrascanu said that any further steps have been put on hold due to the crisis in Ukraine. Asked about potential acquisitions locally, he said the company was open to this but has never reached a due diligence process with any firm. Business Review named Patrascanu entrepreneur of the year in its annual Awards Gala in March. ovidiu.posirca@business-review.ro
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12 CITY
Back in time
Athénée Palace hotel at 100 This year, the Athénée Palace Hilton Hotel celebrates its 100th anniversary. BR took a look at how the hotel has changed over the last century and discovered in its archive such historical treasures as inter-war advertising and the 1961 New Year’s Eve French menu, providing a unique insight into the place known as Bucharest’s leading hotel.
Photo: Hilton
The capital by night, capturing the hotel’s pastry shop, and Calea Victoriei as it looked in the communist period
∫ OANA VASILIU Capital’s new meeting place
The talk of the town Describing the hotel as it looked back in 1938, A. L. Easterman, a journalist on London’s Daily Express, referred to its “heavily ornate furnishings, marble and gold pillars, great glitter-
ing chandeliers, and the deep settees placed well back in the recesses of the lounge as if inviting conspiracy.” Later, in his book King Carol, Hitler, and Lupescu, Easterman called it the “most notorious caravanserai in all Europe … the meeting place of the Continental spies, political conspirators, adventurers, concession hunters, and financial manipulators”. “Bucharest was delightfully depraved,” wrote the New York Times foreign correspondent (and nephew of publisher Arthur Hays Sulzberger) C.L. Sulzberger in the 1930s, in A Long Row of Candles, his memoir of 1934 to 1954. “I moved to the gaudy Athénée Palace to enjoy my wait for war.” It was a good plan. “This was a comfortable establishment with excellent
Photo: Hilton
The building of the Athénée Palace began in 1912 and was completed in 1914, at the start of World War I, when it had 149 rooms, 10 suites and a restaurant. Designed by the French architect Théophile Bradeau, the hotel had a French fin-de-siècle look and an international staff. “Here was the heart of Bucharest, topographically, artistically, intellectually, politically – and, if you like, morally,” wrote Countess R. G. Waldeck about the place in the 1930s. Her book, Grand Hotel, describes it as “the last cosmopolitan stage on which postWorld War Europe and the new-order
Europe made a joint appearance.” “During the interwar years, and especially in the early stages of World War II, it provided the perfect venue for a short era of hard-drinking, devilmay-care decadence before the storm,” wrote journalist Dan Halpern about the location in his article The Walls Have Ears, in June 2005. The hotel was possibly Europe’s most notorious den of spies in the years leading up to World War II, noted various journalists and authors who visited it.
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CITY 13
service... a corrupt staff always seeking to change a customer’s money at black-market rates, and continual competition by ladies of easy or nonexistent virtue to share the warmth of a client’s bed,” Sulzberger added. In his writings, Halpern notes, “The place was lousy with spies, not to mention ministers and diplomats and industrialists and the occasional fugitive king, and not to mention gigolos living on blackmail and dangerous ladies in silver furs, and certainly not to speak of journalists. Indeed, the hotel’s strategic location drew scores of British and American writers, who saw Bucharest as an ideal vantage point from which to watch the developing war. British intelligence was there in force, Gestapo agents were all over the joint, and the spies of King Carol II’s police chief were crawling out of the closets.”
Nip/tuck
An ad from the inter-war period, where the place is described as an “elite hotel, situated in the heart of the Bucharest, which can satisfy the most special requirements”
of plush red couches, is more likely to contain young American businessmen with the beginnings of wealthy waistlines than it is to hold femmes fatales eliciting state secrets,” commented Halpern in The Walls Have Ears. In 2005 it was bought by Ana Holding, which is currently managing the hotel. In 2011 the first floor and the restaurant area got a facelift.
Tasting the past For those interested in tasting original dishes that evoke the hotel’s history, Chef Marco has prepared some culinary treats, such as magret de canard with chicory and mashed cherry, served over the years in the famous Le Brasserie, and the special anniversary recipe, a delicious crust, dark chocolate, marzipan and walnut crisp soaked in lemon syrup and wrapped in cream cheese and quince jam. And the Amalfi cocktail, the favorite tipple of the Countess Waldeck, is on the drinks menu. Moreover, the hotel has unearthed the festive menu served on New Year’s Eve 1961, which consisted of cocktails, tartines au caviar frais, fois gras au Porto, consommé aux pailles parmesan, truites meunieres aux pommes vapeur, cochon de lait roti, dinde roti, pommes pailles, petits pois au beurre, salade d’andives, gateau au chocolat, parfait aux pralines, fromages, fruits, noisettes and café filtre. oana.vasiliu@business-review.ro
Photo: Hilton
“Here was the heart of Bucharest, topographically, artistically, intellectually, politically – and, if you like, morally,” Countess R. G. Waldeck
Photo: Hilton
The hotel was modernized between 1935 and 1937 by architect Duiliu Marcu. Having suffered bomb damage during World War II, it was remodeled once it was taken over by the communist government in 1948, before again sustaining damage in the Romanian Revolution of 1989. An advert that appeared in the communist period made reference to rooms with bathrooms and WCs, telephones, luxury apartments, a reception hall, bar, restaurant, Wagon slits office, hotel cook, air conditioning as well as a hair salon, cosmetics and hairdressing. In 1994, the Athénée Palace closed its doors. The hotel was sold at auction to Hilton International, which began a USD 42 million renovation in 1995, reopening the property in 1997. In Business Review issue 18, from May 1998, our journalists wrote that the reopening was attended by the minister of tourism Sorin Frunzaverde, mayor of Bucharest Viorel Lis, chief executive officer of Hilton International Davis Jarvis and Dan Mihai Opran, chairman of the hotel’s owners, the Athénée Phenix Group. Expanded to 272 rooms (including five presidential suites), the Athénée Palace Hilton resembles the old hotel fairly closely, despite a healthy dose of modernization. “The famous English Bar, dimly lit and full
This ad presents the hotel’s facilities, flagging up its “international reputation”
www.business-review.eu Business Review | May 5 - 11, 2014
14 CITY
Five directors premiere DON’T MISS one-minute movies on MAY 9 CONCERTS FOR EUROPE DAY abandoned children Radu Jude, the Romanian director who is present at this year’s Quinzaine des Réalisateurs section of the Cannes International Film Festival, is among the five film directors commissioned by Filminute, a partner of the Art for Children project to publically debut oneminute films tackling the theme of abandoned children
John Ketchum
The screening of the films will take place on May 8, at the Bucharest Central University Library. “Filmmakers were given information about the status of children in Romania as well as a series of tagwords; abandonment, hope, home, family, support, education and love. The films had to be exactly 60 seconds in length and made on a micro budget of EUR 1,000,” said John Ketchum, executive director of the Filminute festival. “I aimed to show the abandoned children – at the time of the filming – in a Bucharest maternity ward. As a sort of proof. Because although there is a lot of talk about this, we hardly see anything about it,” said Jude. Alongside Jude, best known locally for his award-winning shorts and feature films, whose Cannes entry this year is It Can Pass Through The Wall, the filmmakers commissioned for the proj-
ect are Anca Damian, an award-winning director best known for Crulic: The Path Beyond; Catalin Leescu, a four-times shortlisted director at Filminute; Bodgan Dumitrescu, a director at PRO TV and a director and producer of five shorts; and Olivia Caciuleanu, known for After Mathematics (2011). Conceived as a series of cultural events that will culminate in an art auction, Art for Children brings together important contemporary Romanian artists to support the cause of the country’s disadvantaged children, with the support of UNICEF the National Bank of Romania, and Artmark.
oana.vasiliu@business-review.ro
WHEN: The films will be shown on May 8, at 18.30, at the Bucharest Central University Library. Free Entrance. editorial@business-review.ro
Tiberiu Soare is the most acclaimed conductor of Romania
FOUNDING EDITOR Bill Avery PUBLISHER Anca Ionita
EXECUTIVE DIRECTOR George Moise SALES & EVENTS DIRECTOR Oana Molodoi SALES & EVENTS Sales managers: Ana-Maria Nedelcu, Oana Albu, Raluca Comanescu MARKETING Ana-Maria Stanca, Ana Maria Andrei, Iulia Mizgan PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat
EDITOR-IN-CHIEF Simona Fodor JOURNALISTS Otilia Haraga - senior journalist, Simona Bazavan, Ovidiu Posirca, Oana Vasiliu COPY EDITOR Debbie Stowe PHOTO EDITOR: Mihai Constantineanu
ISSN No. 1453 - 729X
Member States but rather to celebrate their shared values and unity in diversity. It expresses the ideals of a united Europe: freedom, peace and solidarity. The event will be overseen by Tiberiu Soare, principal conductor of the Romanian Radio Orchestras and Choirs, one of the country’s most active musicians. Known as a brilliant, charismatic and open-minded musician, Tiberiu Soare is the principal conductor of the National Radio Orchestra (since 2012). He was the conductor of the Bucharest National Opera (until 2013) and the coordinator of the Ludovic Spiess Ballet and Opera Experimental Studio. In 2003 he won the Music Critics Award for Traviata – 150 years. The soloists are Iulia Isaev, soprano; Sidonia Nica, mezzo-soprano; Marius Vlad Budoiu, tenor; and Octavian Dumitru, bass, accompanied by the Romanian Radio Academic Choir, conducted by Dan Mihai Goia.
Photo: Virgil Oprina
Radu Jude
Radio Hall, 19.00 The Ninth Symphony is one of the most popular musical scores of all time, a Beethoven masterpiece, which the Ode to Joy, the famous hymn featured in the last section, has made a public favorite. The composer’s last complete symphony, it was the first noteworthy example of a great musician making use of human voices in a symphony. Ode to Joy is also the national anthem of the European Union and the Council of Europe, both of which refer to it as the European Anthem, at the suggestion of Count Richard Nikolaus von Coudenhove-Kalergi in 1955. It is considered a semi-modern composition with a mythological flair, and represents Europe as a whole, rather than any organization. The anthem was launched alongside a major information campaign on Europe Day in 1972. In 1985, it was adopted by EU heads of state and governments as the official anthem of the then European Community – since 1993 the European Union. It is not intended to replace the national anthems of the
LAYOUT Beatrice Gheorghiu ART DIRECTOR Alexandru Oriean
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