How to design an efficient strategy for real estate investments? Doru Lupeanu Senior consultant Fix Up marketing Zilele Biz - Cluj-Napoca –

Contents The need for strategy on the real estate market Relevant questions for an optimal strategy Rates of yields and risks The development of Cluj real estate market Target audience Choosing the location The mixes involved

Zilele Biz - Cluj-Napoca – Riding the wave – the usual situation in the growing markets Most often used strategy is copying the “success stories” The need for strategy on the real estate market

Zilele Biz - Cluj-Napoca – Under the wave – usual situation in the downturn markets To survive you have to know at least how to swim The need for strategy on the real estate market

Zilele Biz - Cluj-Napoca – Relevant questions for an optimal strategy - Real estate market has in general a cyclical evolution There are many opportunities for those who can forecast the upturns and downturns of the market -Any strategy involves a differentiation and a positioning for each and every company - The optimal strategy is not necessary the most expensive one: “ You don’t have to swim faster than the shark, but only faster than those around you” -The foundation of every strategy is the information -Relevant information can be obtained by answering the questions: Who am I? What do I build? To whom? Where? How?

Zilele Biz - Cluj-Napoca – Who am I? What are my skills? What experience I have in this field? What are my objectives? What kind of financing resources I have? Developer vs. Investor

Zilele Biz - Cluj-Napoca – What do I do? What sector do I target? What kind of risks are involved? What yields can I expect? What is the dynamic of my market?

Zilele Biz - Cluj-Napoca – What do I do? What is my segment: Segment Options DEVELOPER Returns Options INVESTOR Returns Residential Build to sale 100% Build to sale 80% Build to lease 10% Build to lease 7-8% Offices Build to sale 100% Build to lease 7-8% Build to lease 20% Commercial Build to sale 100% Build to lease 6.5-7% Build to lease 22% Industrial Build to sale 100% Build to lease 12% Build to lease 20% - Risks involved

Zilele Biz - Cluj-Napoca – Cluj-Napoca - Second city in Romania as economic potential after Bucharest -Most new start-ups after the capital new companies registered between Population between ages 15 to 35 represents approximately 40% of the city population - The most important university center din Transylvania approximately students

Zilele Biz - Cluj-Napoca – The development of Cluj real estate market Residential: -increase in the number of constructions starting in 2005 were launched approx new units (400% increase from 2001) -in 2006 were issued 1456 building permits for new housing units -in 2007 were issued 3359 building permits for new housing units -in 2008 it is said that ~25000 housing units “exist” on the market in a project faze or in different fazes of construction

Zilele Biz - Cluj-Napoca – Offices : - Starting 2006 we can say there is a real offices market in Cluj - 2 class A offices buildings in Cluj: Power Business Center and Maestro Business Center (according to BOMA standards) sq meters office space existing in 2008 The development of Cluj real estate market

Zilele Biz - Cluj-Napoca – The development of Cluj real estate market Commercial: -Clujul is the most developed city in Romania regarding commercial spaces sq meters of commercial space to 1000 inhabitants - 2 malls existing -(Polus Shopping Center and Iulius Mall) - 2 malls in construction stages (Atrium Center and Akademia) - Other projects with notable surfaces (Central, Sigma and Hotel Continental)

Zilele Biz - Cluj-Napoca – The development of Cluj real estate market Industrial: - Approx sq meters industrial spaces of which only 40% new or modernized spaces -Tetarom: “success stories ”, a model copied by other cities - Nokia -We expect positive evolution of the logistic sub segment

Zilele Biz - Cluj-Napoca – To whom? Target audience Private persons: - Higher risks corroborated with higher yields and a high level of demand Juridical persons: -Increased stability but a more specialized audience The structure of demand : - depends on a series of factors: offer, substitute demand, buying power

Zilele Biz - Cluj-Napoca –

Where? Choosing the location Depends on various factors out of which : -the migration of population towards and inside the city -infrastructure; PUG Transport and utilities -the potential of the area Dorobantilor, Calea Turzii… -commercial potential Napoca, Eroilor, Ferdinand…

Zilele Biz - Cluj-Napoca – How do I do it? Financial mix: -financing sources, price policies construction budgets Product mix: -surfaces, finishing, facilities Distribution mix: -own sales force vs. real estate agency Promotional mix: -promotional channels, budgets allocated to promotions

Zilele Biz - Cluj-Napoca – Contents The need for strategy on the real estate market Relevant questions for an optimal strategy Rates of yields and risks The development of Cluj real estate market Target audience Choosing the location The mixes involved

Zilele Biz - Cluj-Napoca – Instead of conclusions Tactics for the current situation : -There is no generally applicable recipe The information is important and it has to be integrated in an optimal strategy tailored for everyone’s needs -From forced awaiting to a planned action The re-evaluation of the costs involved in maintaining the investment and the desired exit point from the market -Differentiation through price, quality or adjacent services Accent on pricing seems a simple solution but not necessary efficient -Analyzing all options, including those less attractive Renegotiation of the contracts, bankruptcy, sale to other investors within the margin of recuperating the initial investment

Zilele Biz - Cluj-Napoca – Thank you! All rights reserved. Full or partial reproduction of the texts or illustrations is posible only with the written permission from Fix Up Marketing.