The Executive Master in Finance, Banking & Real Estate (EMFBRE) is a joint venture program of SDA Bocconi and the American University in Bulgaria. The Program prepares top-level professionals to offer high-quality solutions to ﬁnancial, banking, and real estate problems both operationally and strategically.
Martin Yanev, one of the program’s current students, shared his thoughts on today’s crucial trends in real estate. Martin is a Founding Partner of ACME and is involved in operating, structuring and monitoring investment projects. He is also a Founding Partner of Smart Brokers and a Board Member of National Cluster for Intelligent Transport and Energy Systems. He and his brother Chavdar were Co-Founders and Partners of the UK Real Estate Development Company “Barrasford and Bird worldwide UK”, where they developed its Bulgarian operations in 2004. Martin previously worked in the Credit Risk Management Department of HVB Bank (Bank Austria) in Sofia and BNP Paribas (Sofia branch). He is a Certified Property Manager (CPM) from IREM, holds an MSc in Economics – International Economic Relations from UWNE in Sofia and is currently attending the EMFBRE Program (expected graduation February 2020).
Recently Professor Federico Chiavazza from SDA Bocconi held an open class on real estate trends at AUBG. What do you believe were the most important takeaways?
In the world of real estate investments, the continual challenge is to understand new trends and capitalize on new market opportunities. If anything, future real estate markets become more globalized and interconnected, with capital coursing across regions and through different channels.
Nowadays the focus of global real estate institutional investors is on cities and not on countries. The success of a city to attract investments is dependent on a number of factors and combinations, as what determines success for each city could be very different. Every city has a very unique DNA and it is important to not simply compare one to another (in terms of how successful they are or might be in the future). By understanding a city’s DNA, where its success comes from and what the potential for future success is, it informs your ‘ground up’ strategy for investing (i.e. appropriate sectors or locations). Those cities that score very well among factors like quality of life, sustainability, infrastructure, and connectivity are the ones that are going to gain regional dominance over the coming decades.
The relationship between infrastructure and real estate is very important. Some of the best pieces of real estate are sitting on top of railway stations, for example, and improving a location in a city is often determined by improved infrastructure. The boundaries between the two areas are blurred, and we do need to stop thinking about real estate as just a single building and rather as a broader environment. We should consider how it all works together. The relationship is very important, and drawing the line is a challenge, but the successful interaction between the two is critical.
Yet the philosophy of ‘build it and they will come’ won’t prove successful anymore. Some cities will grow and become creative hubs, generators of economic growth. Others will destroy wealth because of poor infrastructure. And as successful cities will attract more and more people, the cost of prime urban real estate per square meter will continue to rise. Affordability will fall, leading to greater urban density and smaller apartments. Developers will become more innovative about how they design and build commercial and residential real estate, seeking to use space more efficiently. And construction techniques such as prefab and possibly even 3D copying offer potential for fast, cheap and eco-friendly development.
You have over 15 years of professional experience in real estate. What are your observations on today’s biggest opportunities and challenges in the field in Bulgaria?
According to me, the main challenges in the real estate field in Bulgaria are
– Developing sustainable Infrastructure: Connections to road, rail and public transport are proving vital for the success of both urban and real estate development.
– Improving transparency and legal framework in the field: Тhe leading “highly transparent” cities are the preferred destinations of real estate investors, drawn by favorable operating conditions, transparent market practices, low transaction costs, readily available data and performance benchmarks. Bulgaria still needs effective corporate governance to market data availability and robust legal and regulatory frameworks. Improvements have been patchy and our government must continue to raise standards and ensure that new legal frameworks and regulations are properly enforced: through tougher regulation, increasing accountability among developers, improving data availability and helping to protect buyers.
– Globally, the property industry is enjoying a technological leap, with more than $6 billion raised in funding by proptech start-ups in the last two years. Proptech will be an important future challenge and driver of real estate transparency improvements and has the potential to accelerate change in emerging cities. The property sector will continue to play a key role in transforming the future of cities.
Another vital challenge is attracting a skilled workforce. If we look at the global talent base, it is increasingly mobile and discerning, so people are focusing on a smaller number of locations in terms of where they might want to live. Cities which are progressive in their thinking (e.g. towards infrastructure and sustainability) are of interest, as they can successfully absorb all of the people who want to live and work there. Therefore, our challenge today is to create an environment for talents.
Bulgaria is a relatively small market for large-scale institutional investors, but we outperform most of the European markets in terms of returns/yields. We are an emerging market with low correlation between risk and returns. Cap rates/yields in the office sector are between 7,5% and 8% for prime class A office buildings, compared to 6% in Bucharest, 4.5% in Prague and between 3% – 4% in the most developed property markets like Paris, London, Milan, Madrid, Berlin. In the residential market, the rental returns are between 5.5% – 6%, compared to 2.5% in the most developed cities.
Tell us a bit about yourself and your career path. What do you consider to be some of the milestones in your professional development?
My first practical touch with the world of international finance was during my career in banking. My university degree in international trade and economics and my past corporate banking career in top tier international banks, such as BNP Paribas and HVB Bank (Bank Austria) allowed me to get first-hand knowledge and successful strategies on risk-management portfolio maintenance, corporate clients services, problem-solving, credit risk evaluation and consultations on specific customer-related issues. In 2004, I decided to make a significant move in my professional life, as I switched the corporate banking career to an entrepreneur in the real estate field. I set up a company from scratch and turned it into a leader in the field. I am a co-founder and managing director of two successful companies in the field of real estate. I have gained practical experience in all required team-building and team-leading functions, with a specific focus on team-motivation, result-oriented strategies, and developing the potential of each employee in order to maintain optimal realization of business plan schedules. Furthermore, my corporate banking background and knowledge of the risk assessment has helped me a lot in the negotiations with banks while structuring investment loans for our development projects and business. My opinion is that if you want to handle any difficult situation or be successful in a particular field or endeavor, you have to find something that you love enough to be able to take risks, jump over hurdles, and break through the brick walls that are always going to be placed in front of you.
Why did you decide to enroll in the Executive Master in Finance, Banking & Real Estate (EMFBRE)?
In the increasingly globalized and complex economy, the EMFBRE degree can provide an additional level of credibility to me as a business owner and property developer. This could potentially lead to more easy access to financing or investment from banks, institutional or private investors and venture capitalists.
Another reason that led me to enroll in the program is that it reveals networking opportunities with like-minded business professionals and professors. This can open up new possibilities for partnerships and mentoring. I am keen to be part of this prestigious environment that prepares future leaders to take on the challenges of this changing world and global society.
Understanding strategy, finance and marketing can be very helpful. But it’s also important to possess self-confidence, energy and passion, curiosity, and an ability to communicate ideas. So, I believe the EMFBRE program will give me valuable theoretical and practical knowledge, critical and analytical thinking, and problem-solving skills. I am keen to be part of a well-established business school community where I could broaden my personal knowledge and business horizon. The program would allow me to establish valuable network of professional contacts with talented individuals where I could develop new business opportunities and ventures in the future. In addition, I consider the business school degree invaluable. I see it as an investment in a personal brand that would have a great return on investment.
The joint venture program of SDA Bocconi and the American University in Bulgaria commands more respect than any other business school, especially in the areas that I am most interested in — finance, banking, project management and real estate. Finally, I am confident that as an alumnus, I will be a model carrier of the values of AUBG in Bulgaria. I have been fortunate to accomplish the milestones I set for myself in my career, and this program will help me to continue meeting my career goals.
What is your favorite study topic?
My favorite study topics are: project and infrastructure finance, international real estate investments, M&A, investment banking and private equity. The Global Financial Crisis has confirmed the importance for proper and accurate finance models in the property market. Private capital will play a critical role in funding the growing and changing need for real estate and its supporting infrastructure. Just as asset managers, real estate funds and Sovereign Wealth Funds find the assets under their control swell, so Governments will have increasing needs for capital to finance urbanization. Private real estate capital will become an important partner of governments. Private capital will step in to fill the gap left by banks and insurers as a result of regulations that require reduction in their exposure to real assets. The international Basel III bank capital guidelines and U.S. Dodd-Frank regulations have increased the size the capital buffer lenders have to hold as protection against possible future losses and require that banks better match the duration of their own funding to their loans. So while banks’ willingness to fund prime real estate may be strong, their appetite could diminish if lending becomes higher risk or longer term. Meanwhile, the EU Solvency II Directive has reduced the ability of European insurers to invest, and Asian insurers are likely to remain highly active. The above mentioned challenges are really of interest for me and I would like to further develop my expertise on international level.
What are your long-term professional goals?
My long-term goal is to work in an area of community development with focus on sustainable practices. We need political institutions focus on sustainable development. Governments are focused on short-term issues instead of long-term solutions and strategies. Elected officials are driven by the desire to be reelected and the negative effect is that they seek to find favor with the public by making decisions that produce rewards in the short term, but are in some cases damaging the long-term health of our communities. I would like to be useful in the area of community development, improving the overall political, social and economic environment in Bulgaria.