Yitzhak Hagag is co-founder and shareholder of Hagag Development Europe, as well as the Chairman and Co-founder of Israeli based Hagag Group, both companies listed on the Tel Aviv Stock Exchange. His academic background, together with the almost 20 years’ worth of experience on the real estate and purchasing groups markets help him identify investment opportunities even in emerging economies. The executive holds a Bachelor of Arts (B.A.) in Law & Administration and a Master of Arts (M.A.) in Law, and has an exceptional flair for niche real estate developments, attributes that drove his attention towards Romania - a market he considers particularly interesting, with extraordinary premises for growth and development, especially when talking about high-end projects.
You opened the Romanian office in 2017. What are the main arguments behind the decision to enter the Romanian market? How much has the local real estate sector evolved over these 5 years?
The decision to access the Romanian market came, for us, in a moment when we were genuinely looking for new opportunities outside Israel. Therefore, we started prospecting the European markets and in Bucharest we have identified an authentic potential for growth and development, as well as a very little explored area - the urban renewal segment. In particular, urban renewal through the renovation and reconversion of old buildings was something that the local market was even less familiar with. Bucharest’s Central and Northern districts have been the most attractive for us so far, and we felt that we could really bring them added value through our international experience and industry know-how. However, although the local real estate sector has visibly evolved over the past five years, Romania continues to show the features of an emerging market. With much to offer, nonetheless. Because if we take a closer look at how Calea Victoriei and the city centre as a whole have changed in the past couple of years, we can’t help but think about how downtown Bucharest could look like in the future, let’s say on a 10-15 years horizon, if more of the city’s old buildings would be refurbished and brought back to their former beauty. Moreover, in more recent times, we have started to look with increased interest to the Eastern part of the city – an area we believe has a considerable development potential given the fact that the residential stock in the
perimeter is old and obsolete, and there are quite a few abandoned industrial platforms that would be a shame not to be repurposed and transformed into new residential projects for the inhabitants of an overcrowded city to enjoy.
Now, taking a look back, I must say that when we chose to invest in Romania, the dynamics between demand and supply, which is without a doubt quite interesting, was, for us, a major catalyst for our long-term investments. And I’m not just referring to the demand for residential properties, but also to the demand for modern office spaces, retail or logistics. When it comes to the residential segment, for example, the demand is long exceeding the offer. Especially for medium-high projects with privileged positioning, but mainly for the premium and upper-premium developments. And I am very happy to see that, after about one and a half year since the leasing activity was on either a negative growth path or temporarily frozen due to the COVID-19 pandemic, the office market has, too, re-entered on an upward trend. We have been noticing, since Q1 2022, a visibly animated leasing dynamic with an increasing demand volume, mainly for the central areas. We, ourselves, can validate tenants’ interest in this area, hence Hagag Development Europe owns three office buildings, all located in the city centre, of which H Victoriei 109, our first office project, reached a 100% occupancy rate this summer.
However, as I see it, what has not changed much in recent years - or at least not for the better - is the excessive bureaucracy and the lack of predictability. Likewise, in Bucharest, there are also the eternal town planning and building permits issues, to which the indifference of local authorities towards investors who submit ambitious projects and optimum solutions for a sustainable development of the city are added. This approach is not only discouraging further investments, but is actually negatively impacting the economy and the entire urban ecosystem.
In an increasingly effervescent real estate market, what is your company’s vision and what key elements differentiate you from other high-profile investors?
Just recently I found myself in the situation of answering this exact question, and I am delighted to reprise the answer now, and whenever will be needed: the vision of our company is based on the philosophy of perfection. Perfection is what elevates and distinguishes each of our developments. So are the locations we choose. Our group of companies owns and operates a national portfolio of assets with an estimated market value, as completed, of over 300 million euros. We are involved in the acquisition, renovation and development of several properties with excellent positioning across Bucharest and other major cities in Romania. Our local portfolio encompasses unique projects serving multiple industry segments, from new and innovative, architecturally significant developments to buildings of historical value that we refurbish with care and passion and that redefine the overall image of Bucharest. Moreover, we are currently the only developer on the local market that places significant investments into the development and growth of the niche segment of urban renewal through the reconversion of old buildings, with unique architectural presence and heritage value. We own five such properties - one being the historical monument Stirbei Palace, and we aim to add further investments of this kind to our local portfolio. Thus, through our efforts, we are actively contributing to the evolution and sustained growth of the real estate sector, while our projects are representative for the historical and cultural identity of the city.
More than this, we are paying very much attention to the after-sales segment. Therefore, we are not only developing, but also managing our properties. For our residential projects, for instance, we offer property and facility management services, as well as a dedicated 24/7 concierge service, and we are planning on soon launching a business concierge, dedicated exclusively to the tenants of our office buildings.
In our opinion, in the current paradigm, where the client - regardless of whether we are talking about residents, investors or tenants - is paying increased attention to the location, the project’s facilities, the quality of construction and finishes, the energy efficiency of the building, the impact that new developments have on the environment, on services and on the security of the transaction itself, developers who have a long-term vision and a well-articulated investment policy are the ones who will prevail, contributing to the evolution of the local real estate industry.
Hagag Development Europe a well-positioned player on the Bucharest market, both on the residential and office segments. What is the real estate potential and what opportunities does Bucharest currently offer, compared to other European capitals?
I was saying earlier that Bucharest has, from our point of view, a huge potential. And hence we already touched the aspect of supply and demand, I would now mention the old buildings downtown that are practically left to crumble. Underneath all the dust and forlorn appearance, these properties hide a unique and elegant architecture and it would be such a shame not to be capitalized on. Moreover, the fact that so many international companies are present on the local market automatically generates new business and growth opportunities. We are talking about strong brands whose contribution is representative for the development of the entire city, which create new jobs and bring tangible benefits to the community. For us, as an investor and developer of real estate properties, all of this favours new investments, and implicitly the development of new projects, regardless of whether we are talking about residential, office, retail or hotels.
At the end of last year you announced the acquisition of the Susai Hotel in Predeal. Are you planning to expand your operations in the hotel segment in the future? Can you provide details on this?
Yes, our long-term plan covers the expansion of our operations on the hotel segment. In this context, we are actively prospecting the market and looking into both existing buildings and land plots located in areas with a high tourist potential. In parallel, we are working on the development of our H Susai concept, which we can promise will be an extremely complex and at the same time unique project in Romania.
What are Hagag Development Europe’s objectives and long-term development plans for the Romanian market?
We stay true to our growth and development objectives and aim to strengthen our presence on the local market, both on the residential and office segments, as well as on the commercial one. In addition, we are currently working on marketing a new product that will be dedicated to the office market and that is primarily addressing entrepreneurs, expats, companies or individuals who run fixed-term projects in Romania, companies present on, or who wish to access the local market, and companies who are looking for a modern and inspirational office space with ultra-central positioning, but who would also like to quickly access those extra services needed to secure a smooth functioning of their business. We are talking about a product designed to function as a „one-stop-shop for business”, where clients can enjoy multiple facilities. Much more than a modern and „all inclusive” work space, our tenants will have 24/7 access to a complex catalogue of business services and top providers, and this something that will definitely have a significant contribution when it comes to operational costs and efficiency as a whole.
Interview by Ioan Dornescu
