Pirelli RE, the real estate company controlled by Italian conglomerate Pirelli, continued its expansion in Central and Eastern Europe this week with the launch of two new branches in Romania and Bulgaria in partnership with the Unicredit Group.
The joint venture agreement will give Pirelli RE 80 percent of Pirelli RE Romania, while UniCredit Tiriac Bank will own 20 percent. Pirelli will own 75 percent of Pirelli RE Bulgaria, while UniCredit Bulbank, the Bulgarian branch of the bank, will own 25 percent.
Romanian banker UniCredit Tiriac Bank has total assets of €3.7 billion ($5.1 billion), over 600,000 customers and 138 branches throughout the country. UniCredit Bulbank has total assets of about €3.8 billion, over 1 million clients and about 300 locations.
The branches follow the recent growth of Pirelli Pekao Real Estate, a Polish arm launched as a joint venture with Bank Pekao one year ago. That company currently has more than 80 employees and approximately 300,000 square meters of residential development projects under management.
Pirelli says the two joint ventures will focus on the development of local asset management platforms and specialized services, while also attracting investment capital from foreign financial players for co-investment.
The Romanian real estate market has a particularly interesting growth perspective compared to other Eastern European nations. In 2005 real estate investments amounted to approximately €250 million and, according to Pirelli’s Dario Fumagalli, the firm estimates that they will reach €500 million in 2007.
The firm has identified the residential sector as an area with growth potential as a vast urban renewal process is underway and the population is increasing at an average annual rate of 1.4 percent. As the middle class grows, they are looking for larger and better quality housing accommodation, yet the supply for such property is diminishing. According to Fumagalli there will be a shortage of 700,000 to 1,000,000 housing units over the next several years.
Housing prices in Bucharest have increased 20 percent since 2006, with the average price for apartments being between €1,000 and €1,600 per square meter according to Colliers research. Last year, 19 residential projects were announced in the capital which should result in an estimated 11,000 additional housing units over the next two to three years. Residential development projects in other cities, including Pipera, Trafic Greu, Militari and Pantelimon-Colentina, are also generating increased interest.