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Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.

He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.

In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.

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"Think Big And Offer At Least 15% Yield,"
Western Investors Tell Baltic Countries

If you want to get your real estate development project (residential or commercial) to be received as something serious within the western investments' circles, it has to match at least two financial criteria - to start from $20-30 million and to offer no less than 15% yield (i.e. to start bringing profits after 5 years). Of course you shouldn't forget to set up a strong local commitments toward the western investors, attracting their money by creating better conditions than your neighbor-competitors do. And last but not least, if you want to attract any money, you have not only to pave the way in for the investors, but also you have to prepare the way out for them because the second thing they think about is how to get involved but the first thing for them is how to escape far away if the things turn into a worse scenario*.

These were some of the advises presented to the participants of the International conference "Baltic Real Estate 2001", organized on 27 April in Riga (Latvia) by the Riga Managers School (RMS) and the local Hipoteku Bank. At the conference there were presented people from the western-funded financial organizations working in the Baltic region like the Baltic-American Enterprise Fund, the consulting companies with international presence like DTZ Zadelhoff Tie Leung Central and Eastern Europe, and the local financial, real estate companies and public authorities. Myself as a representative of International Real Estate Digest was among the main speakers at the plenary session focusing my presentation on some aspects of the real estate market in Central and Eastern Europe and on the activity of IRED in general and with respect to the local market.

Some of the western representatives at the meeting pointed out the fact that the market in Western Europe in this particular moment are of little interest because of the meager yields on the office market (varying from 1% in Sweden to 6% in some parts of Germany). So they turn their eyes to the East expecting similar conditions for their capitals with much quicker capital returns. In the last 3-4 years the rising starts were the countries in Central Europe such as Poland, Hungary and Czech republic. In the middle of 90s they have offered yields for the new development office projects going up to 14-15%. Now all these countries have experienced rapid drop in the yields which are expected to reach 8% by the end of the year. At the same time as the yields are falling the vacancy rates are soaring. Risks are going down too but the investors need profits most of all.

So the investors are turning their eyes from Central Europe to the Baltic republics - Estonia, Latvia and Lithuania and the South-Eastern Europe - Bulgaria and Romania**.

Another interesting point at the conference was the conflict of opinions on whether or not the countries in Central and Eastern Europe may develop by their own the real estate markets based on the mortgage-funded new residential developments considered to be the main economic engine in the West. Western experts as Mr. Chris Bennett from DTZ insisted that it is possible and that the western capitals should be considered only as a secondary force in the local market. Given the real market situation in the region even in the most advanced countries I opposed such way of thinking and pointed out that for the limited period the western capitals should play not a secondary but main role in the market, pushing up the local average salaries and thus setting up the more favorable conditions for mortgage-based residential projects.

If we get the local statistics in none of the countries in the region the average family can get the mortgage loan to buy an average house because of the low incomes. So the only way of increasing these incomes is by attracting more foreign investments. This though will probably take many years to come.

* - from the speech of Mr. Mark K. Beesley - "Investing in European Real Estate From The American Perspective".

** - In Bulgaria these days began the construction works of "Business Park Sofia", a complex of office buildings, hotel and hypermarket on 1,8 million sq.feet (180 000 sq.meters).

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See also the directory of companies providing real estate services in, and general real estate information of Latvia, Lithuania and Estonia.