Domo founders, Lorand Szarvadi and Ferenc Hegedus, have invested the capital from the sale of about 50% in the home appliances retailer in a plot of land in northwest Bucharest, 15 kilometres away from the city centre.
They plan to develop a residential complex comprising 1,000 apartments and 1,000 houses, on land that could be worth 20 to 30 million euros depending on location.
"We paid for the land with our own resources, and will take out a bank loan to develop the complex. We are now in the process of selecting a developer that should also bring capital into this business. The project, which will take about six years to complete, is worth some 350-400 million euros," said Lorand Szarvadi, chief executive officer of Domo. Szarvadi, who together with his partner Ferenc Hegedus owned 74.43% in Domo, through the company registered in Cyprus, Dominuse Management, now retains 25%.
This summer, British investment fund Equest Investments Balkans (EIB) took over 75% in Domo through its Lynx Property subsidiary, in a transaction worth 62.5 million euros.
"We got 80-85% of the value of the deals; the rest will be collected based on the audited results of this year," Szarvadi said, who found himself over 20 million euros richer after this transaction.
Szarvadi wants to sell the rest of the stake he owns, saying it might happen as soon as next year, even though he will remain at the helm of Domo for about two years.
"The exit may happen sooner than two years. The company is considering floatation, but we could sell the stake to a strategic investor," Szarvadi said.
Szarvadi's target is to have Domo reach 200 million-euro business by the end of the year, with its main competitors being Altex and Flamingo.
Domo founders also own the construction supplies distributor Eurocolor, which specialises in paint, which will see a turnover volume of eight or nine million euros this year compared with five million euros in 2006. At the same time, the two partners bought Best Western Balvanyos, in Covasna County, for which they paid more than two million euros.
"We will invest another five million euros in this hotel," Szarvadi said, adding the hotel would be reopened next year and ranked four stars.
The most important investment of Domo's owners until now, however, remains the residential project they announced, which will be positioned on the market as a project aimed at medium to upper income individuals.
More and more people in Bucharest prefer to buy a home outside the city, as a result of the overcrowding of the centre and skyrocketing prices. Under the circumstances, residential projects remain one of the main investment avenues of business people in Romania, generating 20% to 40% profit margins.
Dan Pascariu, chairman of UniCredit Tiriac board has recently announced he will develop, through Romfelt Real Estate, a residential project in Bucharest worth 60 million euros. The big names in this project also include Ion Tiriac, the Cristescu brothers and George Copos.
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