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A salute to Britain UK-linked funds invest in Bulgaria

Bulgaria has become a favoured destination for international holiday home investors. It seems that so far they have not even been bothered by the dark forecasts of damages to this country’s environment through excessive construction.
This is one of the reasons why one would find not only one but already four (and as we print this, maybe more!) big UK property funds operating in this country.

The largest among them is Equest Investments Bulgaria Ltd. Equest’s shares were listed in Ireland, where a part of the 32 million euro capital was collected. Almost 90 per cent of the funds belong to institutional investors from the UK, the United States, and other European countries. Among the investors are Deutsche Bank, Commerzbank, Bank Austria, and Griffin. The first time Equest was mentioned in Bulgaria was when it applied to manage the venture capital fund that the Ministry of Economy wanted to establish in 2002, although the ministry later abandoned the idea.

Four months after its establishment in May 2004, Equest invested a part of the initially attracted 32 million euro in three Bulgarian companies. The money was put into buying three vehicle import firms, a rent-a-car firm, four Sofia-based cinema theatres, and land.
The fund bought the importer of Mazda in Bulgaria, Star Motors, Auto Italia (importer of Alfa Romeo, FIAT and Lancia) and Bulvaria Holding (one of the main Opel and Chevrolet dealers), as well as a representative of car rental company Avis. Equest plans to build “automobile cities”, where all car makes will be sold.

Georgi Krumov, managing partner at Equest, said the fund’s entire capital would be invested in different operations in this country, with the emphasis on real estate. Equest is also well advanced in talks for buying an alternative telecommunication operator.
“We want to bolster the Bulgarian stock market. We will use the Bulgarian Stock Exchange, and will carry out IPOs of some of the shares of the companies we own,” Petri Karjalainen, another managing partner, said.

In late March 2005, Equest raised its capital to 117 million euro. The further 85 million euro was raised through issuing new shares on the Irish Stock Exchange. One-year options were also offered on the Vienna Stock Exchange.
The funds raised will be invested in the banking and insurance business, construction of trade centres and hypermarkets, car and real estate sales. Equest is carrying out due diligence of several companies, including banks and insurance companies, and purchases may be expected by the end of this year.

Other UK-linked funds emphasise real estate, which they believe is currently the most profitable business in Bulgaria.

Black Sea Property Fund Ltd. said on May 31 that it would make a 43 million euro investment in a yet to be built seaside apartment complex on Bulgaria’s Black Sea coast.
The fund said in a statement to the London Stock Exchange that it had acquired a 15 million euro option to buy 1200 upmarket holiday apartments in the resort of Byala, close to the port city of Varna.
“The fund is delighted to be able to announce the first substantial investment since its launch,” said fund chairman Melville Trimble. They are ready to pay the 15 million euro when they exercise the option, probably within four months.
The Black Sea Property Fund said it would pay the remaining 28 million euro to the developer after the apartments are completed in September 2006. However, the fund said it intends to sell its portfolio prior to that date.
The fund said it was paying 450 euro a sq m, or well below what it said would be a fair market price of 1000 euro a sq m.
There is significant interest in the shares of another fund listed on the London Stock Exchange - Bulgarian Property Developments.

Bulgarian Property Developments PLC has raised about 4.5 million pounds and intends to undertake property development, trading and investment primarily in Bulgaria. The fund believes that prices in the Bulgarian property market, which have increased in recent years, will continue to increase over the next few years.
The company has purchased six plots of land on the ring road near Sofia Airport. The fund said they were in negotiations to acquire additional strategically situated parcels of land near Sofia.
Other UK investment funds are focusing on Bulgaria, where real estate prices rose more than 20 per cent last year and are expected to increase by an annual average of 10 to 15 per cent for the next few years.
“We want to increase our presence in Bulgaria with the expectation of real estate prices rising to meet those in current EU member countries,” says James Hughes, who left his job as an equity derivatives trader at an investment bank to set up Euro Property Prospects (EPP) in London.
In an interview with the Financial Times earlier this year, he said that the bulk of EPP’s first sub-fund had been invested in Bulgaria and Poland, with smaller slices allocated to Slovenia and Spain.