Victor Căpitanu, One United Properties: The Romanian real estate market has significant potential for growth, despite challenges
One United Properties will increase its investments in Bucharest by 15% this year, to EUR 235.6 million, to meet the increasing demand for new and sustainable apartments in good locations, says cofounder and co-CEO Victor Căpitanu. The company plans to deliver 1,500 new apartments in 2023 and has permits to build 3,850 more in the following years and aims to maintain its upward trajectory despite a more challenging business environment.
The Romanian real estate market has significant potential for growth and remains highly attractive to clients and investors due mainly to the large structural deficit of good quality homes, despite some challenges, such as inflation, the increase of interest rates, and urbanism problems in Bucharest, according to Victor Căpitanu.
ONE’s cofounder sees a positive effect from inflation as it pushes people to invest their money rather than keep the cash in bank accounts fuelling the demand for apartments and for property in general. As for the urbanism issues in Bucharest, these don’t affect ONE’s plans, as the company has secured permits for over 5,000 apartments and has a solid landbank for future developments.
“One United Properties' strategy for 2023 and beyond will continue to focus on the capital city of Bucharest, which has a higher GDP per capita than cities such as Vienna or Berlin and ranks among the top 10 largest cities in the European Union. Additionally, the average price for residential acquisitions in Bucharest is still significantly lower than in other important cities across the CEE region, presenting an opportunity for foreign investors to enter the market or for local homebuyers to upgrade their housing,” Căpitanu explains.
In the interview below, Victor Căpitanu, cofounder and CO-CEO of One United Properties talks about:
- ONE’s financial results and operational milestones in 2022
- ONE’s budget and plans for 2023
- The company’s shift from pure developer to developer and investor
- Romania’s attractiveness for real estate investors
- ONE’s investment plans and new projects in Bucharest
- Bringing to life historical buildings in Bucharest
- Sustainable real estate solutions
How would you describe 2022 for your company? What were the challenges and the accomplishments?
Victor Căpitanu: 2022 was a year of solid growth for One United Properties, despite the challenging market conditions. We reported a consolidated turnover of EUR 235.4 million, representing a 4% increase compared to the previous year, and a gross profit of EUR 116.2 million. With earnings per share of RON 0,14 (EUR 0,03), we delivered an annual yield of 15% to our shareholders. We have also successfully raised EUR 51.5 million from existing and new shareholders in our 5th financing round and 2nd one on the Bucharest Stock Exchange.
Throughout the year, we invested more than EUR 204.9 million in development while also paying our valued shareholders EUR 15.6 million in dividends. Thanks to our prudent financial management, we ended the year with a robust cash position of EUR 114.6 million, a 12% increase from the beginning of the year.
In 2022, One United Properties achieved significant milestones across all our residential, office, and commercial divisions. Our residential division experienced a year-on-year increase of 9%, reaching EUR 156 million and a net margin of 41%, a 6pp increase from 2021. As of December 31, 2022, 62% of apartments under development had already been sold. In addition, we received building permits for several significant developments, including One Mamaia Nord 2, One High District, One Floreasca Towers, One Lake Club, and One Lake District, where we plan to develop 3,733 apartments over the next 3-4 years.
Our office and commercial portfolio also had excellent results last year, registering an almost 7-fold increase, reaching EUR 16 million. These results were primarily driven by the revenues generated by tenants at One Tower, which is 100% leased out, and One Cotroceni Park Phase 1, which is leased out 87% but still needs to generate full income since some tenants are in the fit-out phase. We also acquired One Victoriei Plaza in Q3 2022, which is 100% leased out, and the impact of the results generated by Bucur Obor added to the overall success.
Furthermore, we made significant strides in the urban regeneration of the centre of Bucharest with the acquisition of One Downtown and One Plaza Athénée. Once completed, these developments will further strengthen the revenues from the commercial segment.
Despite facing challenges such as inflation and rising interest costs, we were encouraged by the increased demand for sustainable residential units last year. We obtained building permits to meet this demand, and we are confident that 2023 will continue this positive evolution for our business and the Bucharest real estate market. It's worth mentioning that in 2022, the number of units sold in the Bucharest region increased by 8.75% compared to 2021, while sales at the national level decreased by 4.1%. These numbers validate our strategy of focusing on the capital city.
What are your plans for 2023? Where do you see major challenges in your business sector?
Victor Căpitanu: We intend to maintain our upward trajectory and build upon our success from the past decade in the coming years. Therefore, our goals for 2023 include a consolidated gross turnover of EUR 290.2 million, a 23% increase compared to the result for 2022, and a consolidated gross profit of EUR 125.9 million, a 12% increase from the previous year.
We plan to achieve these goals by increasing our residential sales while expanding our revenues in the commercial segment. With the recent completion of the second phase of One Cotroceni Park, we have increased our commercial GLA by 34.5k sqm to 138k sqm. As a result, we anticipate that the revenues generated by this segment will continue to grow quarter-on-quarter in the years to come.
We started the year with a strong pipeline of several large-scale developments, including One Lake District, One High District, and One Lake Club. These projects will create modern communities that meet Bucharest's growing demand for sustainable, high-quality housing. We have also acquired a new plot of land to extend the well-known urban regeneration development of One Cotroceni Park. This development will give rise to One Cotroceni Towers, the tallest residential buildings in the city, contributing to a new area of Bucharest that will be known as One Cotroceni City.
Furthermore, we are excited to enter the hospitality market with the construction of One Plaza Athénée, a 5-star lifestyle hotel. With this new venture, we aim to provide our customers with a complete lifestyle experience that reflects the quality and innovation that One United Properties is known for.
Last year you marked a shift towards being both a real estate developer and an investor. What does this imply for One United Properties?
Victor Căpitanu: Indeed, last year we solidified our position as a real estate investor, which means that our strategy encompasses developing but also capitalizing on market opportunities through acquisition. In this regard, last year, we finalized the purchase of a majority stake in Bucur Obor and expanded our rental portfolio by acquiring One Victoriei Plaza. We are always on the lookout for investment opportunities that offer significant benefits to our stakeholders. These acquisitions made in 2022 will continue to enhance our results in 2023 and beyond, as the rental revenues, comprising rental income and revenues from services to tenants, are expected to reach EUR 33.2 million in 2023, more than double compared to 2022 (EUR 16 million).
Many voices argue that the real estate industry is marked by inflation, the increase of interest rates, and urbanism problems in Bucharest, which may lead to a blockage. How would you describe the current real estate market in Romania?
Victor Căpitanu: Despite the challenges you have mentioned, the Romanian real estate market has significant potential for growth and remains highly attractive to clients and investors due mainly to the large structural deficit of good quality homes. While there may be concerns regarding interest rates and urbanism issues in Bucharest, these are temporary difficulties that can be overcome – strictly on the urbanism side, we own today permits for more than 5.000 apartments and we also have a solid landbank for future developments (so we have enough permits for the next 5 years and land plots secured for the next 10 years of development).
In what concerns inflation, this has the opposite effect and increases the demand for apartments and for property in general – people don’t trust to keep the cash in the banks and just lose money every day from inflation, they prefer to invest it in properties at least to protect the real value of money. On top of this, the banking crisis that started this year in the US and afterward in Switzerland shows clearly that it is more effective to own property than cash in banking accounts.
One United Properties invested over EUR 204.9 million in Bucharest development last year, and we plan to increase this budget by 15% to EUR 235.6 million this year. This capital will be used to fuel not only development projects but also land and property acquisitions. The housing demand in Bucharest has been increasing. Last year we saw an especially high demand for new and sustainable apartments in good locations, which we can now address after receiving multiple building permits.
Homebuyers in Romania are seeking great communities, located in new and secure compounds that meet the latest standards in terms of integrated technologies, design, and energy efficiency. Furthermore, as Romania moves towards becoming an emerging market, the potential reclassification of the market from the frontier to emerging by MSCI, following the listing of Hidroelectrica, will further enhance its position on the international stage, attracting more institutional investors – to capital markets, but also to the economy, by putting Romania on the global map. Additionally, with the potential convergence of salaries towards the EU average over the next ten years, demand for quality housing is expected to increase, leading to higher prices of housing units. Still, at the current level of salaries, the properties in Bucharest and Romania are some of the cheapest in Europe, in nominal terms, but also compared to the purchasing power.
Overall, Romania is at one of the best moments in her post-communist history and has a bright future. The country has a robust economy with a GDP of almost EUR 300 billion, and the Bucharest-Ilfov area alone has a GDP approaching EUR 100 billion. Bucharest alone significantly outweighs for example the total economy of Croatia or Bulgaria and amounts to more than half of Hungary's GDP.
How is Romania positioning itself in the CEE region in terms of investments in real estate? Is our market attractive to foreign investors?
Victor Căpitanu: Romania is a robust economy in the Central and Eastern European (CEE) region, making it an attractive market for foreign investors and presently offers the highest yields and returns in the region and in European Union. The Bucharest and Ilfov area alone generates a third of Romania's GDP and is home to almost 3 million people, making it one of the most developed regions in Europe.
One United Properties' strategy for 2023 and beyond will continue to focus on the capital city of Bucharest, which has a higher GDP per capita than cities such as Vienna or Berlin and ranks among the top 10 largest cities in the European Union. Additionally, the average price for residential acquisitions in Bucharest is still significantly lower than in other important cities across the CEE region, presenting an opportunity for foreign investors to enter the market or for local homebuyers to upgrade their housing. Consequently, despite economic challenges, we anticipate that more Romanian families will invest in ONE's safe, energy-efficient, and sustainable developments, contributing to the increased demand we have experienced over the past decade.
How many developments do you have in plan for the next years in Bucharest? Do they address the high-end segment primarily?
Victor Căpitanu: In the upcoming years, One United Properties has an ambitious plan to develop multiple new communities in Bucharest. In 2023 alone, we target to deliver almost 1,500 apartments across four developments: One Verdi Park, One Cotroceni Park, One Floreasca Vista, and One Timpuri Noi. Moreover, building opermits have been issued for another 3,850 apartments that will be located at One Lake Club, One High District, One Lake District, One Herastrau Vista, and One Floreasca Towers. Works have already started or are set to begin shortly, and deliveries for these units are estimated between 2024 and 2027. Additionally, our latest acquisition, One Cotroceni Towers, part of One Cotroceni City, will add another 1,300 apartments.
In 2023, we will continue to focus on developing properties that cater to the needs of residents and tenants across the medium, upper-medium, and high-end segments. We expect to see in 2023 a growing demand for quality developments; therefore, we target revenues from the residential segment of EUR 204.7 million in 2023, representing a 31% increase from 2022. The following developments are expected to generate the most sales in 2023: One Lake District, One Lake Club, One High District, One Floreasca Towers, and One North Lofts.
You have recently entered the restoration market with the acquisition of some important historical buildings in the center of Bucharest. What is their status? Why this strategy, and do you intend to invest further in this type of property?
Victor Căpitanu: As part of our long-term strategy to develop Bucharest, we are committed to restoring the city's cultural heritage, including its downtown area. This initiative aligns with our broader sustainability strategy, which we began implementing in 2021 after joining the UN Global Compact, the world's largest sustainability initiative. In line with this commitment, One United Properties has acquired several important historical landmarks in the center of Bucharest, which we plan to restore and repurpose.
One Athénée, also known as the Braikoff house, is the first building we purchased for restoration. We have also acquired an abandoned structure on the same street, which we will rebuild as One Plaza Athénée, a 5-star lifestyle hotel that will be operated by an international hotel chain. We have also purchased three other buildings on Academiei Street, near the Odeon Theatre and the Ion Mincu University of Architecture and Urbanism. These will be restored and developed into a new project named One Downtown (including the Muntenia Hotel, which has been abandoned since 2006). In addition, we are working on restoring the first Ford Factory in Romania, located next to One Floreasca City development, which will become One Gallery, a modern space with commercial and office functions that will preserve its historical accents and heritage.
We aim to invest at least EUR 70 million between 2023 and 2024 to regenerate abandoned historical landmarks in Bucharest and preserve Romania's cultural heritage. We are proud to be actively involved in restoring and protecting Bucharest's historic buildings, and we intend to continue investing in this type of property in the future as part of our commitment to sustainable development and to increase the attractivity of Bucharest as a great place to live, to work, to shop, and to spend quality time in general.
Energy efficiency is a pressing topic these days. What solution have you found for sustainable real estate?
Victor Căpitanu: At One United Properties, we are committed to addressing the pressing issue of energy efficiency in real estate. Our sustainable approach involves investing in clean energy, innovation, infrastructure, responsible consumption, and production. In addition, we understand the importance of building developments that are not only modern and accessible but also environmentally conscious and built to last.
To ensure energy efficiency, we use high-quality materials and invest in innovative water and sewage management solutions that reduce future costs for our customers and promote responsible waste management at all stages of construction and delivery.
Nevertheless, the biggest contribution of our new developments to sustainability is the implementation of the cutting-edge energy solution of heat-exchange geothermal pumps that use the thermal energy of the earth to generate heating and cooling for our compounds.
These innovative technologies enable us to build environmentally clean and energetically independent buildings. The geo-exchange systems for example will be implemented in several upcoming developments, such as One Lake District, One High District, One Lake Club, and One Peninsula – in total for more than 3700 units - bringing environmental and financial benefits to all of its future residents.
*This interview was edited by Romania Insider for One United Properties.