For the first time created via a law in the USA in 1960 the special purpose investment companies known there as Real Estate Investment Trusts (REITs) have won their reputation as companies that acquire and manage whole portfolios of investments in commercial buildings.

However, in Bulgaria most of them have started their businesses as developers. The main reason is that they are cornered on one hand – by the shortage of quality assets that could be acquired, on the other – by the limited potential of the capital market to secure larger financing, and finally – by the fierce competition of western investors having budgets of tens to hundreds millions euro for the only available niches are the ones of small to medium projects that would not be interesting for foreign investment companies, or the development of residential, office or retail space.

“It is hard to find suitable project to buy”, says Veselin Genchev, executive director of Benchmark Fund Estates. He adds: “And if we wanted to buy something complete, it would have been very expensive, yielding 10 per cent at the most, while when we carry out the project by ourselves we get about 15 to 20 per cent”.

The yield represents yearly revenues from a property or a project as the percentage of the investment volume.
“The main reason is the shortage of investment property in Bulgaria to be purchased directly. At the same time, there is a boom in real estate development that attracts REITs to participate too. But the trend will be mainly investment property to remain in their portfolios”, comments the executive director of Fairplay Properties REIT Manyu Moravenov.


Source: THE BULGARIAN PROPERTY INDEX MAGAZINE