Developer Hristo Chepishev on how to read and make use of the future of Sofia's property market
Sofia's real estate market is booming, but the names of Hristo Chepishev and Europroperty stand out among the competition thanks to the consistent, proven quality of their projects. Hristo Chepishev has been into construction development for 15 years. In the past 11 years, Europroperty has invested over $500 million in land, development and sale of luxury properties as well as logistic and industrial centres in Bulgaria and abroad.
While Hristo Chepishev welcomes us for the interview in his stylish office in the luxury residential complex Edelweiss 2, in Boyana, he is busy finishing the newest part of the development, Edelweiss 3, nearby. Currently, Europroperty is engaged in some more projects, including the Sofia Office Center on Tsarigradsko Shose Boulevard and new industrial buildings. We talk with Hristo Chepishev about Europroperty's business philosophy and the future of Bulgaria's property market.
Why did you broaden the company's portfolio with office and industrial buildings?
We invest only where we have recognised an opportunity for development. We decided to work on and to invest in almost all types of real estate – residential, office, industrial. After a serious analysis of the market, we decided that the commercial property market is saturated, so we stay outside of it for the time being. Everyone knows the residential property market because as customers they are interested in it. At the moment, Bulgaria's residential property market is doing well. Construction of office properties is also on the rise, but slowly. Industrial property is important, yet undeservedly overlooked. At the moment, we put a lot of effort in it, aiming to take a good share. In other words, we split our investments in three types of properties.
Can you elaborate on the trends of the real estate market?
Presently, there is strong development of industrial construction and a steady one in residential construction, with the office real estate market almost ending. Today there is a huge hunger for office spaces, but as a lot of projects are under construction, within the following two or two-and-a-half years the market will be saturated. The residential property market will hardly change within the following two to four years, if the developers remember to follow the three important principles: location, location, location, complemented with quality of construction and a wisely chosen price segment. I see the most significant development in industrial real estate. In this respect, Bulgaria still lags behind other former Communist states. Soon this will change. I expect a boom on the Bulgarian market.
Tourist property construction is more or less over. The potential of real estate for golfing, however, is understated. With only six good golf courses, Bulgaria has a long way to go. For comparison, in Czechia there are 100 golf courses. In this respect Bulgaria has a lot of potential for development, but as this type of construction is expensive, high-level investment, the help of the state will be needed.
What distinguishes Europroperty from the rest on the market?
We don't invest in one type of property. We have a broad portfolio in industrial, office and residential property. Our strategy is based on diversification. At the moment, for example, we are developing residential properties in the luxury price range (over 1,200-1,300 euro/sq.m), mid-price ones (around 950 euro/sq.m) and low-priced (500-600 euro/sq.m). We spread the risk and we try not to compete with ourselves. Our projects are diverse as we aim to meet the diverse demands of Sofia's residential property market.
How do you finance your projects?
We partner with a big international investor and with Bulgarian banks.
I respect our partnership with the banks. The bank is a professional and very well organised partner who has a serious controlling function on the developer. It tracks all of your actions, safeguarding you not to stray from the right direction. Of course, the bank takes care for its own interest, but this also helps you, as an investor.
The international partner gives our clients the security that our investments are guaranteed. My partners are people with significant finance potential, high level of professionalism and experience. Thanks to them we have the opportunity to work on several projects simultaneously. For a Bulgarian investor, a budget of 10 million euros is large. Thanks to my partners, my annual budget for investment in Bulgaria, if I find good projects, is 50-100 million euros. As you see, the scale is quite different. This allows us and our team to unleash and show our potential. We know a lot, we can a lot, but without proper funding we cannot materialise anything. Before I go to the bank and negotiate the funding of a certain project, I first should have bought the land, should have prepared the project and all the initial surveys, meaning that I should have made in advance 25-30 percent of the investment.
So far, not a bank has declined us funding. For each project, different banks offer us different terms and conditions, then we decide with which will we partner. We then choose the quality and the materials for the project in accordance with in which price range it is positioned: luxury, middle, low.
For what kind of people is Edelweiss 3 residential complex?
Edelweiss 3 is a complex located in a very well urbanised plot of land in Boyana. Very few projects in Sofia, regardless of where in the city they are, have all the infrastructure – electricity, water, gas, road, – built and ready, reaching the plot's boundaries. In Edelweiss 3, all the infrastructure is already here.
Moreover, our architects have created an excellent project and product in the high segment of residential property, one of the best on the market at the moment. The complex is very luxurious, with large flats, 3-metre ceilings and spacious rooms; a bedroom here is 20 sq.m. Edelweiss 3 is a place where a well-to-do person would be happy to live. First, because the complex is at the foot of the Vitosha and has wonderful vistas towards the city and the mountain. Second, because the air here is clean and far from Sofia's smog. Third, because the infrastructure is provided. Fourth, because the project is really great.
When prospective buyers come to see Edelweiss 3, they always say that they don't find any imperfection. Hearing such a thing from someone with high demands, who is ready to pay a lot of money for a home, is the biggest reward for me, a recognition of the good job I have done.
What is the concept behind Sofia Office Center?
Sofia Office Center is an office building with an area of 25,000 sq.m. Its location is excellent on a major road, the Tsarigradsko Shose Boulevard, near Sofia Expo Center, opposite the Metro store, about 30 m from an underground station. Enough parking spaces are planned. Sofia Office Center is a Class A building, certified in accordance with the highest level of BREEAM. It is for large companies who value location and good quality. Underground construction is already over, and the building will be finished in the first half of 2019. The spaces are not for sale, but for rent.
What are your plans for 2018?
In Boyana, on a plot of 11 acres, we are preparing for the construction of the Fohar residential complex. When finished, it will have great views of Sofia and the mountain. We plan to position it in the mid-range price segment. Construction is planned to begin in the middle of 2018; the first part of the complex should be ready an year-and-a-half later.
We are also preparing another large project, on the scale of several thousand flats, in the low price segment, where a square meter will be less than 600 euro. Construction should start at the end of 2018.