Dennis Selinas, CEO of Globalworth for Romania and Poland // Interview published on ZF.ro

♦ Dennis Selinas, Globalworth’s new CEO for Romania and Poland, expects an increase in investment returns due to the appreciation of interest rates

♦ Globalworth has authorization for two new office buildings in Bucharest, but this year it is also betting on the industrial field.

Dennis Selinas, the new CEO of Globalworth Group, is preparing for new acquisitions in Romania as he estimates that the increase in the cost of financing will cause investors to sell assets.

“In the next 12-24 months, it will make more sense to buy than to build. Acquisitions of office buildings included, as part of the demand from tenants looking for the best possible projects. There are not many new projects, but there will be certain single asset developments with expensive financing that have not achieved a high occupancy rate due to other trends in the market and that will sell at a higher yieldˮ, said Dennis Selinas in an interview for ZF.

Dennis Selinas is Globalworth’s first CEO in the post-Ioannis Papalekas era. Ioannis Papalekas founded Globalworth in February 2013 and transformed the company into the largest office owner in Romania and Poland in just a few years. He stepped down as a shareholder in 2020, but his right-hand man, Dimitris Raptis, remained CEO of Globalworth until the end of last year.

This year, Dennis Selinas also took over the position of president of the Association of Foreign Real Estate Investors (AREI) and is betting on the unblocking of building authorizations in Bucharest, where several investors are waiting to start new real estate projects.

“Globalworth already has two projects in Bucharest that have an authorization, so the current situation does not raise problems in the short term, in the next 6-12 months. We are more selective when it comes to developments. On the other hand, in the long term, for the next 3-4 years yes, it is a problem that needs to be solved. Through AREI we are trying to discuss with the general mayor, with PMB, to unlock the current situation because it is a negative one for development, employees, economy, tax revenues. Although it has an argument when it comes to many developments, it also needs to come up with a solution and there should be more transparent communication about what the new developments should look like, what features they should have, but all this should have already been communicated to the developers. This situation also affects customers because prices go up, interest rates increase and real estate becomes more expensiveˮ, said Dennis Selinas.

Dennis Selinas explained that Globalworth is currently focusing on industrial developments, where it has a partnership with Global Vision.

“In the next two years we will invest more in the industrial field because the demand is high, and the offer does not keep up. At the moment, we are putting a lot of emphasis on logistics, we are betting on the area near Bucharest, Constanţa and Timișoara. When the collaboration with Global Vision began, logistics and industrial fields did not have the weight they have now. Thus, the collaboration is stricter and more sophisticated because the importance is different. Now the collaboration is much more important because it represents an even bigger share of our portfolio. We are looking at the development of the Green Court D office building which is already authorized and Lutheran, where we analyze what would be the best solution for that areaˮ, said the new CEO.

He believes that there is a period of acquisitions of new real estate projects, at slightly increased yields – which means a lower price – and not developments – which usually came with construction investment yields of 10-12%.

“In the next 12-24 months, it makes more sense to buy than to build. Acquisitions of office buildings included, as part of the demand from tenants looking for the best possible projects. We are investors and we always look at the market for projects, we evaluate them according to strict criteria – on the one hand you can have higher returns but also more expensive financing. But now we see that more and more opportunities are emerging and their number will increase in the next 12-24 monthsˮ, explained Dennis Selinas.

The evolution of key interest rates in the USA and Europe will also strongly influence the course of the economy.

“If there is an outcome in which interest rates remain within limits – the market expects the Fed to be at 5 – 5.25%, the ECB at 4% – these mean a softer landing, a control on inflation – this is the good scenario. If it takes place, Romania will have growth over Western Europe as usual. If the central banks do not keep inflation under control and raise interest rates to unexpected values like the Fed to 6% or even above, maybe 7% and the Euro Zone to 5-6%, then Romania too enters recession. Romania now has a solid economy, but yes, the deficit is large, but compared to Western Europe where the debt is over 100% of GDP, it is still betterˮ, said Dennis Selinas.

In Romania, he estimates an appreciation of investment returns precisely for this reason.

“Yields must keep up, especially in Romania. The difference between here and Poland is not justified. If you buy an office in Berlin at a 3% yield and the financing costs from 1 to 2% and you have a one percentage point difference, and in Romania you have a financing at 3% and a 7% yield. If the best-case scenario materializes, the Fed at 5%, the ECB at 4% and they don’t go any higher, then we won’t see much of a rise in yields. But we expect an increase in yields of 25 basis pointsˮ, concluded the new CEO of Globalworth.

What else Dennis Selinas, CEO of Globalworth Group said

► The real occupancy rate of buildings is constantly increasing. Now we are at about 50% average across all buildings, but that depends on the tenants – those from outsourcing are the least present. Those in banking, finance, insurance or legal have returned to the office and work at least four days a week from the office. On average we are at 3 and a half days.

► We now have four important shareholders who own about 95% of the shares and the daily traded volumes are very small, 25-35,000 euros, very small for a company that owns assets of 3.2 billion euros, so the price is not so important.

► Romania’s economy is influenced by the global one – Europe, USA and China. If there is an outcome in which interest rates remain within limits – the market expects the Fed to keep interest rates at 5 – 5.25%, the ECB at 4% – these mean a smoother landing, control over inflation – this is the good scenario. If it happens, Romania will have growth over Western Europe as usual. If the central banks do not keep inflation under control and raise interest rates to unexpected values like the Fed to 6% or even above, maybe 7% and the Eurozone to 5-6%, then Romania too enters recession.

► Layoffs from USA tech giants will bring jobs here. We already have tenants who have reduced the number of jobs in their countries of origin such as the USA or the UK and are growing here or in other CEE countries.

► Lease agreements have an average expiration period of 4.8 years, and we have no bonds maturing in the immediate future.

► We invest in the modernization of offices to have buildings that comply with ESG norms and are sustainable.

► The situation of ZUPs (zonal urban plans) in Bucharest raises problems for the next 3-4 years. The problem is that the City Hall of the Capital does not come out to say exactly what rules it wants so that the developers can move forward.

► In the next 12-24 months, it makes more sense to buy than to build. Acquisitions of office buildings included, as part of the demand from tenants looking for the best possible projects.

► When the collaboration with Global Vision began, logistics and industrial fields did not have the weight they have now. Thus, the collaboration is stricter and more sophisticated because the importance is different.

► We expect an increase in investment returns by 25 basis points in Bucharest.

Who is Dennis Selinas?

The Greek Dennis Selinas, who previously managed the real estate portfolio of Argo Capital Management Limited, joined Globalworth as executive manager, starting on November 21, 2022, and took over the position of CEO of Globalworth Group from January 2023.

The appointment comes in the context in which the company’s Board of Directors and Dimitris Raptis have agreed that he will retire from the management of the company and from that of a member of the Board of Directors as of December 31, 2022, but he will continue to retain an advisory role.

Dennis Selinas has nearly 20 years of real estate experience in Central and Eastern Europe and currently manages the real estate portfolio of Argo Capital Management Limited, an AIM listed fund management company, comprising retail facilities in five EEA shopping centers (approx. 275,000 sqm GLA/Romania, Ukraine) worth 500 million euros.

Selinas has multidisciplinary skills (Executive Management, Operational and Financial Restructuring, M&A Consulting, Private Capital, Transactions, Structuring of Derivative Instruments) in several asset classes (Property, Bad Debts, Fixed Income, Precious Metals) in different institutions (Real Estate Companies listed on the stock exchange, Private Equity Funds, Investment Banks, Speculative Funds), in several different jurisdictions (Southeastern Europe, China, Brazil, the Middle East and Western Europe).

He began his career trading fixed income derivatives at the Bank of Montreal and moved to Lazard London M&A department after graduating from London Business School. He has held senior positions at Charlemagne Capital and Argo Capital Management and has been involved in all aspects of real estate, including acquisition, development, portfolio disposals, financing, asset management and restructuring in the retail, office and residential sectors.