Sofia, 11 September 2006, The Stroitelstvo i Gradat; ; Interview with Pier Cherky, Managing Director of RREEF by Deyan Todorov
Trade and logistical estates are promising markets

We firmly believe that there will be multiple opportunities with the business real estate market development in Bulgaria.

We believe that supply in retail trade does not suffice yet, and we are looking for a good opportunity to invest in it.

Pier Cherky is the Managing Director of RREEF, the Department for Management of Real Estate and Infrastructure Investments within “Deutsche Asset Management”, fund manager in Deutsche Bank Group. The company manages funds for investments in infrastructure and real estates at the expense of big institutional investors- pension and investment funds, insurance companies, as well as smaller private investors. Approximately two months ago RREEF announced that it commences to operate in Bulgaria as well by starting construction of 600 flats in two housing estates in Sofia - projects which RREEF is going to implement jointly with the Bulgarian real estate developer “Winslow Development”. Mr. Cherky is in charge of RREEF operations in Central and Eastern Europe.

Mr. Cherky, when did you decide to enter the Bulgarian market with RREEF? What were the basic market conditions which confirmed this decision of yours?

We have been following the Bulgarian market for about two years. In this case, our decision depended on finding the right project and the right partner – someone who has a good understanding of the market and has the right skills that complement ours. In broad terms, we were attracted to Bulgaria for it is a newly emerging economy with a middle class growing in a quick pace. Many people can now afford modern real estates and want to move in higher-end lodgings. Since lodgings of such quality are still relatively few in number and the demand is still comparatively high, especially in Sofia, we considered that this is the right time to enter the housing market.

Why do you start with share participation in a housing project? In what way does this fit into your strategy for Bulgaria and the region?

The decision to start with a share in a housing project has been conditioned by the fact that we have a significant experience with many such projects in the rest Central and Eastern European countries. For instance, at present we invest in a number of housing sites in Prague, Saint Petersburg, Budapest, and Bucharest. We regarded the joint work with “Winslow” as an excellent opportunity to enter the Bulgarian market as well. This seemed sensible to us, having in mind our skills.

How long has your company operated on the markets of Central and Eastern Europe? What other projects have you implemented in the region?

We have operated on the real estate markets of Central and Eastern Europe since 1998. First we invested in Poland in a partnership with Globe Trade Center (a company registered in Poland, whose shares are traded on the Warsaw Stock Exchange and on the Pan European Euronext which is part of the Israeli group Kardan –editor’s note). Since then we have invested in the office, trade and housing segment in several Central European countries.

In what way have your investments in Central and Eastern Europe been allocated between the different market segments – from housing construction to erecting or purchase of business buildings?

We actively consider all market segments. We have made considerable investments in the business sector (trade and office estates) as well as in the housing sector.

Do you think that you can find opportunities in the business estate investment market in Bulgaria? What are your views on the return on such investments?

We firmly believe that there will be multiple opportunities with the business real estate market development in Bulgaria. For instance sales areas and logistical sites are two promising segments which we could consider in the long-term perspective.

Trade estates have been regarded lately as a rather “hot” market in Bulgaria with several investment transactions and many other projects for vast shopping malls or smaller retail centers in the future. Which are the underdeveloped niches in the trade area market where you might find opportunities for investments? And what about the logistics sector which is also regarded as underdeveloped as of the present moment?

We believe that the supply in the retail trade sector in Bulgaria does not suffice yet and we are looking for a good opportunity to invest in it. This applies to the logistics sector as well.

Do you consider direct investments apart from new construction? If you do, have you found any new projects which satisfy your needs as an investor?

We, in RREEF, consider almost any kinds of investments in real estate property, including in existing portfolios or separate assets, construction and sales with reverse tenancy. So far we have turned only to housing construction in Bulgaria. Yet, this does not mean that if a good opportunity came up, even if it was not for a construction project, we would not consider investing in it.

What are the main risks related to Bulgarian real estates?

The risks related to Bulgarian real estates are not much different than those in any other Central or Eastern European or non-European emerging market. Real estates remain a local business and it is important that we know the local business environment and take it into consideration. Therefore, partnership with a local company which has operated in this environment for many years is very important and allows us to understand better and manage investment-related risks.

Have you studied other big Bulgarian towns apart from Sofia? Do you see any potential for investments in smaller and resort towns? If you do, in which real estate sectors – business, housing, or tourist sector – acquisitions or construction?

At present we focus on Sofia, but we also carefully consider the opportunities for housing construction in mountain & seaside resorts. If they are economically feasible, we will certainly consider such investments.

Do you have any plans to invest indirectly in Bulgarian real estates, for instance through Bulgarian public investment dealers for real estates?

We do not have such plans for now.

Do you plan to offer any of your investment products to Bulgarian investors?

The funds of RREEF, who invest in the market of Central and Eastern Europe, are directed to big international institutional investors. At this point, we do not have any plans to raise funds from private Bulgarian investors.