Marfin shops in Serbia

Marfin Investment Group likes to do things in big steps.

In July, the Greek investment powerhouse was spun out by Marfin Popular Bank and promptly raised a jumbo €5.2 billion ($7.6 billion) listed private equity fund to invest in Southeastern Europe. At the time it said some of the capital would be deployed in companies with strong real estate exposure.

True to this stated strategy, the spinout has invested €360 million in Serbian real estate by gaining control of the country's leading department store chain, Robne Kuce Beograd. Robne Kuce Beograd is (or was) a national institution in more ways than one: not only was it the most recognized department store chain in the country with 32 stores in prime retail locations, but it was owned by the Serbian government.

But despite its size, it seems all was not well with the financial health of the national company. Falling out of favor with young Serbs, the properties had become more like flea markets with an array of different enterprises selling their wares inside. Earlier this year, Serbia decided enough was enough and appointed the Serbian Privatization Agency as the company's administrator. In the public auction that followed (which was broadcast live on television according to media reports), the highest bidder was Verano Motors d.o.o. Belgrade, a member of Serbia's Verano Group. Verano is run by patriotic entrepreneur, Radomira Živanica, who wanted to own a piece of his home city. One of the 25 entities his holding company owns is a real estate development firm which owns of a number of shopping centers and department stores in Belgrade.

Prior to the auction, though, Marfin agreed that it would partner with Verano in the investment should Verano's bid be successful. Marfin bought a 66.67 percent stake in the chain immediately after Verano won, leaving Verano to retain the remaining 33.33 percent stake.

Matteo Stefanel, head of origination at MIG and head of investment banking at Marfin Popular Bank, told PERE the stores are located in ideal locations in major cities. Nine of the stores are in Belgrade. Within the group, there are also four department stores and a warehouse facility in Montenegro, and one logistics and one business center in Belgrade.

Marfin and partner Verano will adopt a value-added strategy with the investment. “We are going to aggressively manage the retail space,” said Stefanel, who believes Robne Kuce's 232,000 square meters of trading space can be better utilised by splitting the properties up and leasing out space to a number of operators. “Lots of tenants want to enter. There is a real desire for consumption.” He added he believed the true value of RKB's real estate was closer to €600 million than €360 million.

Dennis Malamatinas, the former chief executive officer of Burger King who now heads up Marfin, added the acquisition provided synergies with other MIG portfolio companies. For example, Goody's, a fast food company in Greece, could become the main fast food restaurant in Robne Kuce stores, while Flocafé could provide coffee shop services along the same lines. Both companies are part of Vivartia, the largest food company in Southeast Europe in which Marfin owns an 80 percent stake.

While the most important to date, the deal is not Marfin's first foray into the real estate market. Earlier this year it acquired 50 percent of Greek property company Attica Akinita (Attica Properties), a REIT listed on the Athens Stock Exchange. Attica, founded in 1999, owned seven corporate real estate assets at the time of MIG's investment in the southern Attica area of Greece. The assets are leased to mainly banking groups. This platform is Marfin's main investment arm for real estate. In addition, Marfin estimates that portfolio company Hellenic Telecommunications Organization, owns more than €1 billion of property. With €5 billion to invest, expect to hear more from Marfin soon.