BNP PARIBAS REAL ESTATE GUIDE TO In collaboration with INVESTING IN 2019

Real Estate for a changing world DO YOU KNOW... CONTENTS

INTRODUCTION ROMANIA BY NUMBERS 4 FOREWORD BY OLGA MELIHOV 5 GUIDE TO ROMANIA ECONOMIC OVERVIEW 6 ROMANIA IS EUROPE’S RICHEST ROMANIA HAS THE BEST TOP 5 REASONS TO INVEST IN ROMANIA 8 COUNTRY IN GOLD RESOURCES PRESERVED DELTA IN EUROPE COST AND TERMS 9 Roșia Montana sits atop Europe’s largest- The waters of the Danube, which flow ROMANIA: BIG FIVE 10 known gold deposits – an estimated into the Black Sea, form the largest and TOP COMPANIES YOU KNOW 16 314 tonnes of gold as well as best preserved deltas of Europe. The INVESTMENT MARKET OVERVIEW 18 1,500 tonnes of silver. Danube delta hosts over 300 species OFFICE MARKET OVERVIEW 20 of birds as well as 45 freshwater RETAIL MARKET OVERVIEW 21 fish species in its numerous lakes and marshes. INDUSTRIAL MARKET OVERVIEW 22 INVESTOR TOOLKIT KEY LEGAL TERMS 24 1 Mbps 6 Mbps TAX CLINIC 26 INVESTORS’ QUESTIONS & ANSWERS 28

OUR TEAM 32

lobal ara oania ara ROMANIA’S BIGĂR WATERFALL ROMANIA RANKS 5TH IN THE WORLD The small Bigăr Waterfall was rapidly shifted IN WORLDWIDE BROADBAND from its off the beaten track isolation in 2013 SPEED when The World Geography ranked it in first position of its 8 Unique Waterfalls Around After Singapore, Sweden, Denmark and BNP Paribas Real Estate Advisory SA the World guide1. Norway with an average of download Registry of Trade Office under no. J40/3890/10.05.2002 speed of 38.60 Mbps compared with Fiscal Code RO 14625999

a worldwide average of 9.1 Mbps Headquarters: (measured between June 2017 40-44 Banul Antonache Street, 1st Floor, 011665 Bucuresti, Romania and May 2018). Tel.: +40 (0)21 312 70 00, www.realestate.bnpparibas.com.ro BNP Paribas Real Estate is part of the BNP Paribas Banking Group

All rights reserved. This Guide is protected in its entirety by copyright. No part of this publication may be reproduced, translated, transmitted, or stored in a retrieval system in any form or by any means, without the prior permission in writing of BNP Paribas Real Estate Romania.

Source: 1. https://www.atlasobscura.com/places/bigar-waterfall 4 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 5 ROMANIA FOREWORD BY NUMBERS POPULATION REAL ESTATE MARKET2 2 22.2m 4.4m m OFFICE Romania 2 EU FUNDS The second largest 3.5m m RETAIL THE RISING STAR OF THE CEE (2014–2020 BUDGET)4 population across the CEE markets and 2 INDUSTRIAL sixth largest in the 3.7m m We are delighted to present this Brasov’s winter resort reputation has €3.65bn EU after Germany, report, which is intended to draw been overtaken by the recent real estate France, Italy, Spain your attention to interesting facts developments/projects. and Poland.2 INFLOW OF FDI1 about Romania. In it, we have Furthermore, an insightful legal and highlighted a number of reasons for tax framework is included in order tapping into Romania’s tremendous to make it easier to select Romania $ 6.3bn investment potential. as a future investment destination. (2017 estimates) The country has a large population in the There is fierce competition for prime IAȘI ORADEA CEE context, it enjoys a stable political institutional products, as we recently and economic climate, overperforming witnessed local capital competing for the CLUJ-NAPOCA in the EU through its GDP growth, and exceptional assets located in INVESTMENT and aforementioned regional cities. 6 frequently surprises with its real estate GRADE growth potential. But there is plenty of development and Fitch: BBB- investment potential in Romania. Romania (stable for both BRAȘOV While in the recent past the focus TIMIȘOARA can surprise you with its opportunities, foreign and local GALAŢI was on Bucharest, the capital city whether you are looking on the currency) with a population exceeding 2 million commercial side, hospitality or BRĂILA inhabitants but undersupplied on all residential sectors, or into its PLOIEȘTI real estate sectors, in the last 3-5 years 3 infrastructure development potential. 2018 GDP GROWTH developers and investors alike have been CRAIOVA CONSTANŢA closely scrutinising its top regional cities. We will be happy to 4% BUCHAREST The opportunities identified here are share more on our diverse and comparable with those traded country’s potential (forecast); among fastest growth in the capital city. and discuss real estate investment rates in the EU PREFERRED Other institutions have caught up with opportunities OUTSOURCING this trend and, as real estate consultants, in Romania. LOCATION RISING CITIES OF ROMANIA we are also putting emphasis on specific POPULATION ABOVE 200,000 patterns in each of Romania’s investment INHABITANTS3 11 hubs. Bucharest is one of European cities Bucharest, Iasi, Timisoara, Cluj 300,000 with large population, Timisoara is an (forecast) Napoca, Constanta, Craiova, Galati, employees industry5 Brasov, Ploiesti, Oradea, Braila established automotive hub, Cluj Napoca is gaining in importance because of its OLGA MELIHOV qualified workforce, Iasi is one of the Country Head Romania 1. Oxford Economics Dec 2018 / 2. BNP Paribas Real Estate / 3. Eurostat / 4. Ministry of European Funds / 5. ABSL Romania / BNP Paribas Real Estate 6. Oxford Economic Country Economic Forecast Romania Report, Date of issuance: 18.12 2018 oldest Romanian academic centres, while 6 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 7

GUIDE TO ROMANIA

ROMANIA ness remains limited to below 40% of GDP for Consequently, the share of government revenues ECONOMIC RE-BALANCING public debt and to below 30% of GDP for private in GDP fell to about 31-32% in 2017-18 from debt, mainly in local currency. around 35% in 2014-15. Restoring the fiscal bal- TO CONTINUE ance is likely to require a rise in the tax burden The main policy challenge, though, is not on the in the period ahead, it seems. While tighter fiscal monetary side, but it is to bring back the coun- stance could provide for additional headwinds to try’s fiscal deficit below the EU-prescribed 3% the economy in the near-term, it seems neces- of GDP mark. The widening budget gap over the sary to ensure robust prospects for Romania’s MICHAŁ DYBUŁA past few years has not been driven by higher growth over a longer-run perspective. Chief Economist spending, but was a consequence of lower taxes. BNP Paribas Poland Chief Economist Central and Eastern Europe

Economic overview

ery strong growth of the Romanian econ- becoming more challenging, given softer growth omy in 2015-17 has been accompanied by in Europe and higher volatility on global finan- V rising economic imbalances, reflected in cial markets. As a result, the pace of Romania’s widening budget and current account deficits, GDP expansion is likely to moderate further to and – once the impact of sizeable indirect tax a 3% handle over the coming quarters. Softer cuts faded last year – in accelerating inflation. growth will, however, not be necessarily only The re-balancing process of the Romanian econ- bad news – especially since it should remain omy started in 2018, at least on the monetary well above the pace of Western European coun- RICHARD SENTKAR policy side. The central bank delivered a robust tries, and thus support Romania’s further real Head of Territory Romania tightening cycle, raising interest rates by 75bp convergence towards the income levels in the BNP Paribas Group in total. Meanwhile, fiscal policy, while still ac- developed economies. commodative, has not been softened further to a large extent. Assuming further re-balancing efforts of Roma- nia’s policymakers, a moderation in the pace of BNP Paribas Group in Romania Unsurprisingly, a more restrictive economic pol- economic growth this year should help to fend- icy mix in 2018 triggered a weakening of GDP off the threat of inflation rearing its head once n Romania, the BNP Paribas Group has 6 en- bas Leasing Solutions offering financial solutions growth to about 4% from nearly 7% in 2017. In- again, which eventually would increase the risk tities employing 1,000 professionals in Cor- for professional equipment. Romania is fully vestment spending is likely to have stagnated of a wage-inflation spiral materialising. The lat- I porate & Institutional Banking, BNP Paribas joining the One Bank strategy of the BNP Pari- on average last year, while consumption growth est forecasts of the Romanian central bank sug- Personal Finance (commercial brand CETELEM) bas Group, which has a presence in 73 countries, decelerated from 10% to around 5%. gest inflation slowing down towards the 2.5% as market leader in consumer credit, Arval cov- with 200,000 employees in all activities of the target over the course of the year, which is likely ering fleet management and operational leasing group, offering to our customers a set of solu- This year is likely to bring a further slowdown in to reduce, or even remove the need for addition- of motor vehicles, Cardif providing insurance tions with a growing share of digital support, terms of economic activity. On top of domestic al tightening of the monetary stance. Indebted- services, BNP Paribas Real Estate covering the fintech, contributing to sustainable development economic policies, the external environment is entire real estate advisory sector and BNP Pari- and social responsibility. 8 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 9

GUIDE TO ROMANIA TOP 5 REASONS COST AND TERMS TO INVEST IN ROMANIA OVERVIEW OF CONSTRUCTION, LETTING AND INVESTMENT COSTS AND TERMS The country benefits from a strategic location in South-Eastern Europe. Romania still preserves its competitiveness in relation to its CEE peers, offering a plethora of investment opportunities at more LAND ACQUISITION Office €1,000-1,800 1 attractive yields in Bucharest and top regional cities. COSTS (PER SQ M) Retail €400-600 Warehouse €25-45 CONSTRUCTION COSTS Office €750-900 2 (PER SQ M) Retail €900-1,100 Warehouse €350-425 BANK MARGINS 3.25–4.25% 1 2 3 CONSTRUCTION LTC RATIO 55-60% STRONG ECONOMIC EXCELLENT TECHNICAL MATURITY OF THE PERFORMANCE SKILLS AND LANGUAGE PROPERTY MARKET PRIME RENTS3 Office €18.00–19.00 Retail SC €55–70 driven by private consumption CAPABILITIES Newly completed or proposed due to increase in wages in Retail HS €35–55 of the Romanian workforce. projects are being developed

LETTING Warehouse €3.50–4.25 both private and state-owned in phases, meeting all the The Romanian higher education STANDARD Office 3-5 yrs sectors. 2018 GDP growth highest market standards. The system consists of about 90 LEASE TERMS Retail SC 3-7 yrs reached 4% compared with office projects completed in universities, both private and Retail HS 3-5 yrs 2.1% recorded in the Euro Area. 2017-2018 were transacted state-owned, enrolling over Warehouse 3-5 yrs soon after completion and 500,000 students. Despite the AGENT FEES Office 16.66–25.00% accordingly increased the competition of the multi-national Retail SC 16.66-25.00% investment volume of 2018 to companies for the specialized Retail HS 12.50-16.66% close to 1 billion Euro. workforce, Romania still offers Warehouse 16.66-25.00% space for the opening of new operations or expanding of PRIME YIELDS4 Office 7.00–7.25% existing ones. Retail 6.75–7.00% 4 5 Warehouse 8.25–8.50% PRIME ASSET VALUES Office €2,300–2,800 (PER SQ M) THE RETURN OF THE AGRICULTURE LONG TRADITION IN AUTOMOTIVE Retail €3,500–4,000 Among the opportunities and potential of the INDUSTRY INVESTMENT Warehouse €400-475 Romanian rural areas are the recent trends The country has a long tradition for STAMP DUTY Asset/Shares 0% in export growth, high quality of the land offering a qualified workforce in car BANK MARGINS 3.50-4.00% 1. Prime location in capital cities. conducive to increasing agricultural production, 2. For modern schemes. manufacturing. LTV RATIO 55-60% 3. Best-in-class schemes in prime rich cultural heritage and biodiversity, closely STANDARD SALE FEES 1.0-2.0% location within capital city. associated with use of traditional extensive land 4. Prime assets in the capital city. management practices. 10 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 11

GUIDE TO ROMANIA

growth recorded in the last couple of years was The industrial market is witnessing a massive ROMANIA reflected in the office take-up which was close to speculative development in addition to BTS pro- 300,000 sq m each year. jects. There is an obvious clustering in existing B I G F I V E industrial hubs, but medium to long term we may The recently announced infrastructure upgrade see the rise of new industrial hubs in Bucharest in the North of Bucharest has shifted the inter- fuelled by the availability of large vacant land est of real estate developers in these locations, suitable for industrial related activities. already generating a new office hub in the- Ex pozitiei area. Currently, there is an office pipeline As retail is shifting from brick and mortar to- of over 200,000 sq m and several residential pro- wards e-commerce, the positive influence of the jects in various stages of execution. In addition, on-line retail trading on all real estate sectors BUCHAREST large plots of land were secured for further de- can be noticed. On the office sector, e-retailers velopment by established real estate developers. are securing modern spaces as their business re- One of these major upgrades is represented by cords a two digit increase, which is coupled with WITH A POPULATION OF OVER 2 MILLION, the extension of the Bucharest’s metro network, their need for larger and modern warehousing THE CAPITAL CITY REMAINS THE MOST adding an extra 14 km with 14 stops which will facilities. While for office spaces the lease is the ATTRACTIVE ROMANIAN CITY FOR BUSINESS link the city centre with the international Henri preferred solution, for industrial spaces there is AND REAL ESTATE PLAYERS. Coanda Airport. a split between owner-occupied and leased fa- cilities. On the other hand, the traditional retail Bucharest is considered the main administra- market is increasing because of the completion tive and financial hub of the country, contribut- of new retail projects, as well as the extension ing strongly to the country’s GDP with over 20% 2,112,483 of existing retail schemes. This trend is expected driven by services, IT&C, and financial sectors. 1 Population to continue in the next 12-18 months, with the Companies investing in Romania usually choose opening of a new IKEA store being the most nota- Bucharest as the first location and follow with ble activity on Bucharest’s retail market. smaller or medium scale operations in the top 1.4% regional Romanian cities. Accordingly, the mod- Unemployment rate2 After a few years with investors interest shifting ern office market in Bucharest accounts for over to hotel and industrial products, 2018 witnessed 80% of the country’s modern office stock, while a return of the investors’ appetite for office pro- on the retail side Bucharest embraces up to 40% jects, proven by the weight of the office segment on of the total stock. The flourishing y-o-y GDP 176,199 Students3 total annual investment volume. With few prime America House, Bucharest. products available in Bucharest, and another few announced to be completed, the Romanian invest- KEY FACTS €1,245 ment market recorded a slight yield compression OFFICE RETAIL WAREHOUSE (RON 5,809) across all commercial sectors, a trend which we Total modern stock (sq m) 3,350,000 1,200,000 1,600,000 Average gross salary2 expect to continue in the next 12-18 months. Prime headline rents (€/sq m/mth) 18–19 55–70 3.50–4.25 Prime yield (%) (as of Q4 2018) 7,00–7,25 6.75–7.00 8,25–8,50

Source: BNP Paribas Real Estate Source: 1. Tempo online database / 2. INS, October 2018 / 3. Tempo online database, 2017 12 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 13

GUIDE TO ROMANIA

323,484 Population1 TIMISOARA

THE OFFICE MARKET IS SET TO ACCELERATE cently completed office projects, such as ISHO 1.3% DUE TO OCCUPIER INTEREST IN MODERN and Openville. The retail market is estimated Unemployment rate2 OFFICE ACCOMMODATION. The city centre at 150,000 sq m to which will soon be added locations are in high demand with two larger the Openville shopping gallery of approximately 67,495 projects polarising the interest of internation- 47,000 sq m. Investors are closely assessing the Students1 al companies. The demand is driven by IT&C market with office and industrial assets remain- and automotive industries, but the market has ing on their investment radar. witnessed a surge of existing occupiers for re- €1,111 (RON 5,184) Average gross salary2 Hexagon Offices, Cluj-Napoca, date of delivery: June 2019. KEY FACTS OFFICE RETAIL WAREHOUSE Total modern stock (sq m) 200,000 151,000 510,000 CLUJ-NAPOCA Prime headline rents (€/sq m/mth) 12-14 30–50 3,00–4,00 Prime yield (%) (as of Q4 2018) 8.25–8.75 7.50–8.00 8.75–9.00

AFTER MANY YEARS IN THE SHADOW OF considered an important leader of high–tech Source: BNP Paribas Real Estate 1. Tempo online database / 2. INS, October 2018 OTHER BOOMING CITIES, Cluj Napoca has services alongside Bucharest. emerged in the recent years as the second larg- est office market in the country. Medium to large New office locations are emerging in the city, as office projects have been developed, with a few in the case of newly developed Hexagon Offices, others in the pipeline, set to be completed in the a Class A office development located in the Cent- 330,014 next 12–18 months. An important feature worth er South part of the city. In the near future Cluj Population1 mentioning is that some of the office projects are Napoca will be very well connected with West- part of mixed use projects, with an even split of ern Europe via the A1 and A3 motorways, once GLA between offices and residential units. The the connection between the two motorways will 0.8% Unemployment rate2 pool of occupiers is diverse, as Cluj Napoca is be ensured by the A10 motorway (partially com- pleted). KEY FACTS 41,065 OFFICE RETAIL WAREHOUSE Students1 Total modern stock (sq m) 300,000 185,000 250,000 Prime headline rents (€/sq m/mth) 12–15 30–50 3.25–4.00 Prime yield (%) (as of Q4 2018) 8.25–8.75 7.50–8.00 8.75–9.00 €1,021 (RON 4,765) Source: BNP Paribas Real Estate Average gross salary2 1. Tempo online database / 2. INS, October 2018 Unirii Building, Timisoara. 14 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 15

GUIDE TO ROMANIA

289,878 IASI Population1

THE MAIN COMPETITIVE ADVANTAGE OF University which integrates eleven faculties with IASI IS THE QUALIFIED WORK FORCE as the a focus on IT&C and Computer Engineering. In 2.3% city has a long tradition in academic education. addition to the office market, two new industrial Unemployment rate2 There is a pool of highly talented students with parks located in Miroslava and Letcani are attrac- diverse qualifications, but it is most well known tive for new businesses, especially in the produc- for its century old “Gheorghe Asachi” Technical tion field as well as for agricultural enterprises. 21,516 Students1 €925 KEY FACTS (RON 5,184) OFFICE RETAIL WAREHOUSE Average gross salary2 Total modern stock (sq m) 200,000 1,170,000 70,000 Coresi Business Park, Brasov; ongoing phased development. Prime headline rents (€/sq m/mth) 12–15 30–50 3.25–4.00 Prime yield (%) (as of Q4 2018) 8.50–8.75 7.75–8.00 8.75–9.00

Source: BNP Paribas Real Estate 1. Tempo online database / 2. INS, October 2018 BRASOV

WELL KNOWN AS A WINTER RESORT DESTI- 100 ha are expected to be completed within the NATION, Brasov has been gaining importance next 10 years and include three main compo- in the eyes of the real estate developers. Rede- nents: shopping centre – Coresi Shopping Resort, 373,507 velopment of a former industrial platform into residential compound – Coresi Avantgarden and Population1 Coresi District, a mixed use urban regeneration an office complex – Coresi Business Park. Once scheme, has placed the city of Brasov on the in- completed, the office component will add to the 3.2% vestors’ eyes. The project developed on approx. city’s stock nearly 150,000 sq m. Unemployment rate2 53,174 Students1 KEY FACTS OFFICE RETAIL WAREHOUSE Total modern stock (sq m) 120,000 86,500 270,000 €965 Prime headline rents (€/sq m/mth) 12–14 30–50 3.25–4.00 (RON 5,184) Prime yield (%) (as of Q4 2018) 8.50–8.75 7.75–8.00 8.75–9.00 Average gross salary2 Source: BNP Paribas Real Estate Palas Iasi, Iasi. 1. Tempo online database / 2. INS, October 2018 16 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 17

GUIDE TO ROMANIA

TOP COMPANIES GALATI Population 303,069 Unemployment rate 6.7% YOU KNOW Number of students 14,980 Net monthly average salary €527 IN LOCATIONS ORADEA RON 2,457 Y O U M AY Population 221,796 MAJOR COMPANIES / INVESTORS: NEVER HAVE Unemployment rate 1.6% ARCELORMITTAL, Damen, Arabesque, NEXIAL RESEARCH, NEPI&Rockcastle H E A R D Number of students 15,975 ABOUT Net monthly average salary €478 RON 2,230

MAJOR COMPANIES / INVESTORS: WDP Development, Lotus Center, BRĂILA RCS&RDS, Faist Mekatronic, Emerson, IAȘI ORADEA Zacaria Population 205,172 Unemployment rate 4.0% Number of students 770 Net monthly average salary €473 CLUJ-NAPOCA RON 2,206 PLOIEȘTI MAJOR COMPANIES / INVESTORS: Yazaki, Vard, Al Dahra, Gieff Fashion, Population 229,641 Braiconf, WDP Unemployment rate 2.7% Number of students 6,289 BRAȘOV TIMIȘOARA Net monthly average salary €536 RON 2,499

MAJOR COMPANIES / INVESTORS: CONSTANȚA GALAŢI Timken, Rockwool, Calsonic Kansei, Yazaki, Cameron, Petrotel-Lukoil, Population 314,816 Unilever, British American Tobacco, Coca BRĂILA Unemployment rate 2.3% Cola HBC, Cameron, AFI Europe, Number of students 22,374 CRAIOVA PLOIEȘTI Net monthly average salary €502 RON 2,341 Population 302,783 MAJOR COMPANIES / INVESTORS: Unemployment rate 7.4% Rompetrol Refinery, Ameropa Grains, CRAIOVA Number of students 22,339 BUCHAREST Daewoo-Mangalia Heavy Industries, Net monthly average salary €528 Argus, Constanta Shipyard, Constanta RON 2,460 South Container Terminal, Immofinanz, CONSTANŢA NEPI&Rockcastle MAJOR COMPANIES / INVESTORS: FORD Romania, Cummins Generator Technologies, Magna Exteriors, Kirchhoff Automotive , Syncro Soft, Catinvest Source: National Institute of Statistics, TEMPO online database (wages, as of October 2018) 18 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 19

GUIDE TO ROMANIA INVESTMENT MARKET OVERVIEW

2018 saw renewed interest in office assets, with PRIME OFFICE: RENTS & YIELDS deals recorded on this particular market account- rie ret rie iel ing for approx. 50% of the total annual invest- s ear ment volume, followed by the retail sector and, to 20 11 a lower degree, by the industrial sector. Investor 20 appetite continues to be strong in Bucharest, but 20 investors are also looking at Romania’s leading 10 220 -25bps ~€1bn €599m 21% regional cities. 210 Prime yields Investment volume Office assets Emergence of the compression in demand local capital The investment market recorded a yield compres- 200 9 sion, with prime office yields compressed by 25 190 10 bps to 7.25%, while prime retail yields are esti- mated at 6.75-7.00%. In the course of 2018, yields 10 On the basis of a strong economic growth, there was an for prime industrial and logistics parks have com- 10 improvement in the investor sentiment, which translated into pressed similarly and at the end of 2018 they 10 2012 201 201 201 201 201 201 high investment volume in Romania of nearly 1 billion euro. ranged between 8.25% and 8.50%.

Source: BNP Paribas Real Estate

he most significant transactions were the two OFFICE INVESTMENT (€ MILLION) large office deals completed in Bucharest, i.e. TThe Bridge sold by the Romanian developer Forte Partners to the owners of the DYI retailer 00 Dedeman and Oregon Park sold by the Portland 00 Trust/Ares Management joint venture to Lion’s Head Investments. The Bridge transaction was a 00 true milestone for the Romanian market as it in- volved domestic capital, while at the same time 00 being the largest investment transaction recorded 00 in Romania to date. 200 In the retail sector, the most notable transactions were the acquisition of Militari Shopping Center 100 by MAS Real Estate from Atrium European Real 0 Estate and the purchase by Sonae Sierra of a 50% 201 201 201 201 stake in the ParkLake shopping center from its for- mer joint venture partner Caelum Development. Source: BNP Paribas Real Estate Bucharest 20 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 21

GUIDE TO ROMANIA OFFICE MARKET RETAIL MARKET OVERVIEW OVERVIEW

In 2018 a slight decrease of the weight of Bucharest in Polarised construction activity of new the country’s overall modern office stock was noticed. shopping centres in Romania.

olid demand for modern office stock in the he modern retail stock in Romania has re- EVOLUTION OF SHOPPING CENTERS COMPLETIONS MODERN OFFICE STOCK DISTRIBUTION PER CITIES (SQ M) IN ROMANIA (THOU. SQ M) main regional cities has fostered construc- corded a slight increase by approximately tion activity which has resulted in both Bras 120000 ter 200000 100,000 sq m, 20% of which are represented 0 S Iasi 200000 T 00 large deliveries of office projects in 2018 as well by extension of existing retail schemes. Although 20 as substantial pipeline for 2019. Take-up remains Tiisara economic growth in recent years was driven by strong in the capital city, with annual gross vol- 200000 private consumption, very few new retail schemes 200 ume reaching 290,000 sq m, out of which pre- lNaa were completed. A couple of retail developers 10 100 leases accounted for about 45%. Top regional 00000 are targeting smaller cities with projects of retail 0 cities, such as Cluj-Napoca, Timisoara, Iasi and parks driven by food chain anchors and shopping 0 Brasov, are starting to witness renewals and re- galleries offering an attractive tenant mix of local 201 201 201 201 2019 locations in addition to new entry operations. and international brands. Source: BNP Paribas Real Estate, f - forecast There is strong competition between Bucharest The retail market will remain stable, with very few Barest and top regional cities, as the occupiers can se- 0000 changes in the next few years. The pipeline will cure good quality space in these cities as well remain unchanged, with various retail parks and as have access to a qualified work force at lower Source: BNP Paribas Real Estate extensions of existing schemes increasing the ex- rates compared with the capital city. isting stock. The shortly to be opened second IKEA store in Bucharest’s Pallady area, towards the to Constantia is very notable. The mid- ANNUAL TAKE-UP EVOLUTION IN BUCHAREST (THOU. SQ M) term plan of the Swedish retailer is to open addi-

lass A lass B tional stores in Timisoara, Brasov and Cluj Napoca. 00 Promenada, Targu Mures. ECOMMERCE GROWTH RATE IN 2017 20

200 0

10 0

100 20

0 10

0 0 200 200 200 2009 2010 2011 2012 201 201 201 201 201 201 Raia Blaria Serbia ar e Re ratia Pla Sleia Slaia

Source: BNP Paribas Real Estate Source: Ecommerce Foundation, 2018 Report 22 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 23

GUIDE TO ROMANIA INDUSTRIAL MARKET OVERVIEW STOCK AND RENTS IN MAJOR

WAREHOUSE AND LOGISTICS olid demand for modern industrial space 2 HOTSPOTS IN ROMANIA has translated into an annual take-up of 3.7 million m 570,000 sq m. In addition to traditional oc- Existing warehouse and S logistics stock in Romania cupiers, the food retailers and e-commerce op- ORADEA erators have contributed significantly to 2018 CL-NAPOCA leasing activity. The revival of the industrial market has changed the routine of developers, who are ready to construct speculatively in addi- €3.50 – 4.25 tion to built-to-suit or pre-leased units. The ac- Prime rents for warehouse tive developers will continue to strengthen their and logistics space (per sq m/month) positions in the local market either through the BRAȘOV development of new units or acquisition of well ARAD leased and well positioned industrial premises. The announced pipeline which has the potential 35% Take-up y-o-y increase PLOIEȘTI to elevate the modern Romanian industrial stock up to 4 million sq m will not put further pressure on the rents, which are expected to remain stable TIMIȘOARA SIBI for more than the forecast 12-month period.

The industrial stock will continue to develop as INDUSTRIAL TAKE-UP IN ROMANIA (THOU. SQ M) BCHAREST a result of owner occupied building types being NORTH 00 put into use, as was the case with the recently completed e-Mag industrial hub and Altex/Media 00 BCHAREST Galaxy distribution centre which is currently un- WEST BCHAREST der construction. 00 SOTH 00 LEGEND

200 Rent

100 Stock

0 MAJOR LANDLORDS: 2010 2011 2012 201 201 201 201 201 201

CTP, WDP, P3, Globalworth, Zacaria Source: BNP Paribas Real Estate 24 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 25

NEED TO KNOW

LAND BOOK REGISTRIES ACQUISITION OF A LEASED PROPERTY Ownership rights are recorded in the land book If a leased property is acquired during the lease KEY LEGAL TERMS in case they are opposed. Once the cadastral term, the purchaser takes over the capacity registration of properties across Romania is as landlord. If the lease agreement was not On the next pages, NNDKP Real Estate Team completed, registrations will be made with registered with the land book, then the lease will provide a general presentation of the key constitutive effect. On request, land books issue agreement is not notable to be opposed by the aspects of Romania’s real estate market. excerpts evidencing the rights and encumbrances new owner. recorded over a certain property.

RENT REVIEW TYPE OF LEASES Rent may be established in foreign currencies, Two main lease types, commercial and residential, but it is paid in national currency. In commercial WAYS OF HOLDING/USING both based on parties’ agreement and, in principle, leases, it is market standard for the rent to be REAL ESTATE freely negotiable, subject to particular mandatory adjusted according to a previously agreed index. Ownership provisions. the right to fully use, develop, and manage a property CONSTRUCTION PERMITTING FORM OF LEASES Superficies PROCEDURE The simple written form is a widely-accepted the right to erect a construction on a third The construction / demolition works are standard in Romania. In order for them to party’s land consisting in ownership right over performed based on a building permit. If the be opposed, the lease agreement has to be the construction and right of use over the land specifics of the project require derogations from registered with the land book. Concession the general urban plan, the authorities may the right to develop constructions on lands request a zonal urban plan (PUZ) or detailed pertaining to public or private state domain urban plan (PUD) in order to accommodate the AUTHORS in exchange of royalty envisaged urban parameters. SUBLEASE AND ASSIGNMENT The beneficiary of the building permit must hold In practice, subletting and assignment are a real estate right over the target land. Upon permitted only with the landlord’s consent, PROPERTY ACQUISITION completion of construction works, reception except for subletting / assignment to affiliated The transfer of ownership right is usually done minutes is executed inter alia by the contractor, companies where consent is granted through the through sale purchase agreements which must the beneficiary and the relevant authorities. The lease agreement. be concluded in authenticated form in front of a construction is further registered in the relevant IOANA NICULEASA IOANA GRIGORIU public notary. Parties may execute deeds either land book based on the building permit, recep- Partner Managing Associate personally, or through proxies based on an tion minutes upon completion of works (without Head of the Real Estate Real Estate and authenticated power of attorney. and Construction Practice Construction Practice snags), and the final certificate attesting the Real Estate Group Tel.: +40 21 201 12 00 Sale of agricultural and forestry land is subject erection of the building. Tel.: +40 21 201 12 00 [email protected] [email protected] to a mandatory legal pre-emption right. Failure to observe these mandatory legal provi- Nestor Nestor Diculescu Kingston Petersen Strada Barbu Văcărescu nr. 201 sions exposes the transfer to absolute nullity. Clădirea Globalworth Tower Et. 18 București 020276 26 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 27

NEED TO KNOW

CIT – A company that is tax resident in Roma- Favourable treaty provisions may be applied. TAX CLINIC nia is subject to 16% CIT on its worldwide income. Most treaties of Romania give the taxation right CIT base is equal to accounting profits adjusted to the other state; several treaties allocate such NNDKP Tax Advisory Services present general key by non-deductible expenses and non-taxable in- right to the state where the real estate is located tax aspects of Romania’s real estate market come. Losses are carried forward for 7 years; no (i.e. Romania). carry back. Acquisition/Construction costs of a building are ASSET DEAL – Taxable profit is the difference depreciated based on the straight-line method. between the sale price and the net tax value of Land is not subject to depreciation. assets. The VAT treatment depends on whether INVESTMENT able sale of real estate is subject to simplification the transaction is a transfer of a going concern or measures (the buyer accounts for VAT through VAT – Rental of real estate is VAT exempt; taxa- a mere supply of assets. Most common investment vehicle – local limited reverse charge mechanism). tion may be opted for. If property is rented under liability company (LLC). An existing business or VAT exemption, input VAT deducted upon its ac- LIQUIDATION – If the liquidation proceeds of a set of assets is taken over through a share deal OPERATION quisition/construction is adjusted. foreign entity are higher than the paid-in capi- (most frequent) or an asset deal. Negative VAT may be asked for as a refund tal, the exceeding amount is subject to 16% WHT; DIVIDENDS – 5% withholding tax (WHT) on out- through the VAT return. The legal refund term is however, tax treaties would prevail. SHARE DEAL offers a favourable tax regime bound dividends, unless a lower treaty rate ap- of 45 days, but in practice it is exceeded. Liquidation income obtained by a Romanian com- for capital gains, but also certain business ad- plies. Dividends paid to EU companies are WHT pany are CIT exempt if the minimum sharehold- vantages. For the buyer, shares acquired are a exempt if the recipient has held at least 10% in RET is due by the owner. RET on building’s tax- ing conditions (10% share, 1 year) are met. Other- non-depreciable asset, while financing costs are the share capital of the payer for at least 1 con- able value varies from 0.08% and 1.3%, depending wise, 16% CIT applies. non-deductible for CIT. Hence, leveraged buyout tinuous year. on its category of use. RET on land is up to RON involving a merger with the target entity is com- 5% WHT on dividend payments between resident 2.0706/0.01456 per sq.m. if it is located inside/ AUTHORS monly implemented. companies. No WHT if the minimum shareholding outside urban areas. Share deal is VAT exempt. No transfer tax applies. conditions (10% share, 1 year) are met. Dividends are tax exempt in the hands of the recipient. EXIT ASSET DEAL triggers the taxation of seller’s profits. It allows the buyer to deduct the cost of INTEREST – Exceeding borrowing costs are SHARE DEAL – Gains from the sale of Romanian assets acquisition and related financing costs for deductible up to EUR 1,000,000 per year. Costs entity shares, obtained by another local company CIT, but triggers the Land Book fee and notary above this threshold may be deducted up to 30% or an entity resident in a tax treaty country, are fees. A business transfer may result in goodwill of EBITDA. Standalone entities2 may fully deduct CIT exempt if the minimum shareholding quota MARIUS IONESCU ALEXANDRU ONUTA for the buyer, which may not be depreciated. the costs. and duration (10%, 1 year) are met. Otherwise, Tax Partner Tax Director A sale that is a transfer of a going concern is not 16% WHT on interest paid to non-residents, un- 16% CIT applies. Co-head of NNDKP Tax NNDKP Tax Advisory Services Advisory Services Tel.: +40 21 201 12 00 subject to VAT. Otherwise, the regime depends on less a lower treaty rate applies. Interest paid to Tel.: +40 21 201 12 00 [email protected] the type of assets (e.g. buildings are tax exempt, an EU company is WHT exempt if the latter has [email protected] unless they are new; building land is taxable, oth- held at least 25% in the share capital of the payer Nestor Nestor Diculescu Kingston Petersen 1. The law offers the possibility to opt for taxation. Strada Barbu Văcărescu nr. 201 1 2. As defined in the Anti Tax Avoidance Directive. er land is exempt ). Under certain conditions, tax- for at least 2 years continuously. Clădirea Globalworth Tower Et. 18 București 020276

28 INVESTING IN ROMANIA – 2019 BNP Paribas Real Estate BNP Paribas Real Estate 2019 – INVESTING IN ROMANIA 29

NEED TO KNOW

Q & A

How can real estate be held? • Ownership • Superficies • Concession

What rights over real estate • All real estate rights should be registered with the land book so they can be opposed property are required to be • The registration is done based on authenticated documents or court rulings registered? What property documentation do you need to register?

Who usually produces the • It is market practice for legal counsels to prepare drafts of the transaction documents, documentation in real estate subject to negotiations and final approval of the principals transactions? • Public notaries are required to verify the legality of the deed

What are the usual main • Memorandum of Understanding/Letter of Intent documents in real estate • Legal due diligence reports acquisitions? • Sale Purchase Agreements/Promissory Sale Purchase Agreements/Business Transfer Agreements

What different types of real • Commercial and Residential leases estate leases exist?

Is there a maximum term for • Maximum 49 years commercial leases?

How are commercial rents • Commercial rents usually include provisions on annual indexation reviewed?

What are usually the basic • Deliver the premises and ensure a proper and undisturbed use obligations of landlords?

What are usually the basic • Take over the premises obligations of tenants? • Pay the rent • Use the premises in a prudent and diligent manner • Perform the repairs incumbent upon the tenant

Founded in 1990, Nestor Nestor Diculescu Kingston Petersen (NNDKP) is independently recognised as a promoter of business law in Romania and a preeminent provider of integrated legal and tax services across areas of practice and industries.

Coresi Shopping Resort, Brasov; completed in 2015. KEY FIGURES* BNP PARIBAS REAL ESTATE

36 countries 43m m2 including of assets under 21 alliances management 5,400 in Europe employees

More than €191m 3,400 250m m2 profit before tax transactions during valued in Europe +2.3% vs 2017 the year

* As of 31/12/2018

BNP Paribas Real Estate has local expertise on a global scale through its presence in 36 countries with Picture credentials: Cover, P7, P19: Fotolia more than 180 offices and 5,400 employees. BNP Paribas Real Estate is a subsidiary of BNP Paribas. P10: BNP Paribas Real Estate photo library P12: Courtesy of KESZ International Romania P13: Courtesy of In Tech Service As regards Romania, BNP Paribas Real Estate provides services in respect of Capital Markets, Property P14: Courtesy of IULIUS Group Management, Transaction, Consulting and Valuation. Furthermore, all departments are supported by P15: Courtesy of CEETRUS Romania P22: BNP Paribas Real Estate photo library the Research and Consultancy Team, which provides knowledge regarding real estate markets, thus P29: Courtesy of CEETRUS Romania enabling BNP Paribas Real Estate clients to make the most suitable long-term business decisions. CONTACTS ROMANIA CEE Olga Melihov Marcin Klammer Country Head Chief Executive Officer CEE +40 75 408 17 27 +48 22 653 44 00 [email protected] [email protected]

Erik Drukker Costin Nistor Managing Director Agency Head of Property Management & Valuation CEE +40 75 901 40 98 +48 606 676 576 [email protected] [email protected]

Levis Vlad, MRICS Piotr Krawczyński Head of Research & Consultancy Head of Capital Markets CEE +40 75 711 56 59 +48 784 333 932 [email protected] [email protected]

Catalin Maruntelu, MRICS Dr. Piotr Goździewicz, MRICS Senior Valuer Director Capital Markets CEE +40 74 912 06 17 +48 609 795 307 [email protected] [email protected]

Mihaela Oroian, MRICS Mateusz Skubiszewski, MRICS Senior Consultant Office Agency Director Capital Markets CEE +40 74 208 1840 +48 609 795 340 [email protected] [email protected]

Nicolae Ciobanu Igor Roguski Senior Consultant Office Agency Head of Industrial & Logistics CEE +40 75 609 58 21 +48 668 868 097 [email protected] [email protected]

Patrycja Dzikowska Head of Research & Consultancy CEE +48 602 452 549 BNP Paribas Real Estate Advisory S.A. [email protected] 40-44 Banul Antonache Street, 1st Floor, Bucharest 011665, Romania Tel.: +40 21 312 70 00

www.realestate.bnpparibas.com.ro

Real Estate for a changing world