AFI Wants To Conquer Ploiesti, A City With A Purchasing Power Of EUR500M/Year

Romanian southern city of Ploiesti is the only one with two malls being built at the same time, namely Ploiesti Shopping City project and AFI Ploiesti.

Thus, NEPI and Carrefour are close to finishing the Ploiesti Shopping City, while Israel’s AFI Europe has built 70% of the structure of AFI Ploiesti, which it’s scheduled for opening on October 3 2013.

Ploiesti had remained one of the few large Romanian cities without a modern mall, although developers did not bypass the city during the real estate boom, when at least five investors bought land in order to develop shopping centers.

But then the crisis came, companies such as Sierra, Mivan and Westhill put their plans on hold, and one of the major cities of Romania, which accommodates operations of multinationals such as Unilever, Timken, Cameron, Yazaki, Kaufland (logistical center), Lukoil and OMV Petrom, has yet to have a modern shopping center.

But last winter, NEPI and Carrefour started work on a project around Carrefour’s hypermarket located on the outskirts of Ploiesti, at the exit towards Brasov, and in May AFI Europe kicked off construction of AFI Ploiesti, a EUR49 million investment.

Whereas the project next to Carrefour is almost ready, AFI is still working on the concrete structure, which is 70% ready and should be finalized by the end of the year.

AFI’s mall will therefore be the city’s second, scheduled to open next autumn, but almost 70% of the spaces have already been rented out to retailers such as Cora, H&M, Reserved, New Look, Nike and Flanco. In addition, the project’s developers say they have not given incentives to future tenants, a common practice lately on the shopping center segment.

“This was the first project I bought for AFI Europe in 2007, when I was the company’s business development manager. The Flacara factory had gone insolvent, somebody bought it and we took over the four-hectare land from them,” recalls David Hay, who in 2011 took over as CEO of AFI Europe Romania, the company that developed the most expensive shopping mall on the Romanian market – AFI Cotroceni – a EUR300 million investment.

But things are different for the Ploiesti mall. The plot is located somewhere in between the city center and the exit to Buzau and the intention is to build as “clean” a mall as possible, without the “bling bling” of the Cotroceni project in Bucharest, which was built in different times.

“The Cotroceni mall was built during a peak time for the market, (…) at an above-average standard not just for Romania, but at European level. For instance the Cotroceni glass dome was extremely expensive, you will only find something like that in Moscow. The Ploiesti project has been adjusted to the city and to the times,” Hay says.

There are around 350 employees of Israeli Danya Cebus working on the Ploiesti construction site. This is also the company that built the Bucharest mall, with Danya Cebus and AFI Europe having joint shareholders.

The project consists of an underground level, a ground floor and an upper floor and has a 28,500 square-meter lettable area and in the back area a second stage of construction is provided for, with a 3,500 square-meter area allocated for a future multiplex cinema.

On the underground level there are 350 parking spaces, Cora storage facilities, 2,300 square meters of commercial spaces, as well as a 600 square-meter shelter against chemical and biological attacks. The ground floor will accommodate the Cora hypermarket, stores that provide services (banks, drugstores, telephony stores) and the first level of the H&M store, while the company plans to place the rest of the fashion stores on the upper floor.

“We know that many provincial malls have problems – some are located outside the city, others have design problems and most have problems with their upper floors, a problem we have faced ourselves at Cotroceni, until we managed to stabilize our activity. But in Ploiesti we want to take all fashion stores to the upper floor and persuade retailers that this is the right solution,” David Hay says.

The manager says the average mall rent is close to EUR20/sq m/month, the hypermarket excluded.

According to ZF estimates, AFI Europe has so far invested around EUR20 million in this project (the land alone cost EUR9 million) and hopes to sign a financing contract for the mall with an Austrian bank by the end of this year.

What results does he expect? “We have ordered a market survey and the city’s purchasing power is around EUR500 million per year. There are around 180,000 people in Ploiesti and around 250,000 in the surrounding area and we expect a daily traffic of around 20,000 people. A lot of people from Ploiesti go to Baneasa (a mall on the outskirts of Bucharest i.e.) which is a 50 minute ride from Ploiesti. They even come to Cotroceni Mall for shopping and will probably continue to come even after the opening of the Ploiesti malls, because [the Bucharest malls] offer a different variety of stores.”

On the way to Bucharest, the manager is already thinking of future projects, as he believes the Ploiesti mall is “on the right track”. AFI Europe, controlled by billionaire Lev Leviev, has invested around half a billion euros on the Romanian market, where it owns land in Arad, as well as at the intersection of Bucharest’s ring road with the highway to Ploiesti and in Bucurestii Noi (northern Bucharest), where the company paid over EUR70 million for the Laromet platform five years ago.

“This is the project we need to focus on now because it’s been too many years since we bought the land and haven’t built anything yet. We got the town planning permit, we hope to also get the construction permit by the end of the year and then start construction of the commercial area. The Ploiesti project and the offices next to the Cotroceni mall, where we started to work on the second building, are on track.”