Bankrupt residential compounds in fire sale

February 2013 - From the Print Edition

Luxury residential projects that went bankrupt after the local property market collapsed have been going up for sale for rock bottom prices.
Cortina Residence, the compound that was to be developed by Cefin in North Bucharest, was on offer for only EUR five million, after the developer ran up debts of EUR 26 million back in 2010 when the project was declared insolvent.
"If we take into consideration the value of the 7,550 sqm plot and the costs of the existing structure, we will surely obtain at least double the price being asked," Marius Grigorica, Senior Business Analyst at DTZ Echinox, told The Diplomat. "I think it is an interesting price for a residential investor, but given the existing financing conditions, the project still remains difficult to sell."
Grigorica said one possible solution would be the reconversion of space within the project into smaller apartments that can be sold with five percent VAT and financed through the government′s First Home program. This solution could be implemented due to the project′s incipient construction stage.
However, reconversion would not be viable for Laguna Residence, another bankrupt project, where construction works are at a much more advanced than in the case of Cortina. Its biggest creditors are 80 buyers who had paid installments, as well as La Caixa bank, which financed the project in 2010.