Real estate developer Atrium Centers will organise a new selection process to choose a construction company for its real estate project in Cluj, after initial bids were 30-50% higher than the price projected by Atrium.
Atrium Centers, which is developing four shopping centres in Romania, together with Britain's Carpathian investment fund, will finish the project in Cluj in mid-2010, approximately 6 months later than initially scheduled.
"We are aware that the prices of steel and other materials have risen, but construction firms have set unrealistic prices, which eat into developers' profits. The bids we received in the first phase were 30-50% higher than we had expected. We've organised a new round of negotiations and we hope to start construction works in October with one of the 3 construction firms with whom we are in talks with," said Michael Israeli, managing director and shareholder of Atrium Centers.
The company is in talks to secure financing for around 80% of the investment value of the Cluj project, a figure that will amount to 120m euros, whilst the loan is likely to come from one of several banks, including MKB, which has granted a loan for the Atrium Center mall in Arad. Apart from issues related to the constructions market, shopping centre developers are also having problems with retailers, which seem less willing to expand outside Bucharest. The firm owns four projects in Romania - in Arad, Cluj, Satu Mare and Baia Mare, which involve overall investments worth around 400m euros and a market value worth around 500m euros, but figures are higher than initial estimates due to certain design and area changes for the shopping centres in Cluj and Baia Mare.
Concerning rental contracts, Atrium Centers has signed a deal with a hypermarket operator and a chain of electronics and electrical home appliance stores for the Baia Mare project, whose lettable area has been expanded to 55,000 square metres for it to stand out against the other projects being developed in the city.
Moreover, the company has signed rental contracts with two IT firms for half of the office building constructed as part of the Atrium Centers project in Cluj, which means the two firms will lease 5,000 square metres of space.
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