The valuation story of a unique historical building

BCR Palace, the historical building located in the heart of Bucharest, has a truly impressive story. And the story of its valuation is one to be told, as it becomes part of its heritage and will shape its future. 

The landmark property located in University Square, at the northern edge of the old city center, is part of Bucharest’s architectural heritage. Finalised in 1906, based on Oscar Maughsch’s architectural plans inspired by palaces on Haussmann Boulevard in Paris, the building was the headquarters of “Generala” Insurance Society for many years, before becoming property of BCR. Today, BCR Palace occupies 4,000 square meters of land, including the former garden of the Sutu Palace, currently the Bucharest Municipality Museum, and has 12,000 useful square meters distributed in two buildings with five levels each, of which one is underground, and an attic on only one of the buildings.

BCR Palace’s valuation was the most complex and comprehensive appraising process in Colliers International’s portfolio. Not only because it is truly a unique historical landmark, but because the entire valuation process needed to be built on the mission to preserve the property and its heritage as much as possible, while giving it a new economic life that would catch the eye of investors interested in acquiring it from BCR.

The valuation took a total of four months, which is atypical considering that a valuation process for a building, under ANEVAR valuation standards, generally requires no more than two weeks. The first challenge was to assemble a team of specialists with experience is similar properties, including domains as architecture, valuation of the artistical components of the building, engineering and reconstruction cost estimation. Once the team was formed, the next challenge was the collection of all the required data, including history of the construction and renovation works, measurements and cadastral layouts, structure surveys, etc, process which took several weeks. The archive of BCR was very valuable, but when it came to collect data from exterior sources, the things became more difficult.

This comes from an important peculiarity of the real estate market in Romania - the lack of transparency, both in terms of past transactions, as well as in terms of public databases with the transformation history of buildings. A valuation is generally done by comparison with preceding cases, so there is a need to be able to rely on previous valuations of similar properties. When it comes to valuations of historical buildings, it is even more difficult because all old records and completed technical surveys are not collected and made available in a public archive.

The most complex part was to complete the highest and best use analysis of the property, considering the perspectives of a potential investor: physical possibility of transformation, legal limitation from urbanistic point of view and economic feasibility. So, the next step was to understand the limitations of the building in terms of interventions it can support and repartitioning for future economic purposes, because a historical building generally comes with significant such limitations for future reconversion and construction. The team of architects did a beautiful job, working with two scenarios for the building’s reconversion, either into office spaces or a hotel. The reconversion of the property into other type of properties was also possible but was excluded from real estate market point of view. So, in this part of the study, the mission was to ensure that the best technical solutions were found. Then, the technical solutions were mapped over the limitations given by the law, from urbanistic and cultural point of view. The specialist selected by Colliers completed special layouts including the intervention limitations for each part of the building. Only after this step the architects and engineers were able to come with the final solutions.

Filling in the gap between the current status of the building and the proposed future projects was another important milestone in the valuation process. The construction work timeline and budget were designed, with the valuation of the required quantities and construction costs being completed by one of the most prestigious appraisers in Romania for such estimates. And it took more than three weeks. It was a mandatory step, so an investor could understand how much time and money it might take to renovate and reconvert the building, anticipating the technical difficulties that might occur, and to make an accurate and well-founded investment decision.

But only at this point we, at Colliers, gained full visibility on the historical building and its potential from economical point of view. Turning the BCR Palace into office space would mean bringing a unique format to the market - office spaces dedicated to companies with small teams that need a premium location and are willing to share common areas. However, the Romanian office space market is not really ready to meet the supply for this scenario, considering that the demand for such spaces dedicated to startups and companies with few employees is already met by co-working spaces and hubs.

So, the analysis of the potential income, occupancy and exit value lead us to the conclusion that transforming the building into a luxury hotel is more feasible, with final calculations showing that this scenario would be 15% more profitable for an investor comparing with the office scenario. In order to accommodate an international chain affiliated luxury hotel, a building must offer at least 100 keys. Once the architects confirmed that around 150 rooms might be accommodated in the existing premises and several international operators confirmed their interested in the branding the project, our mission became easier.

The investment is, however, significant, as can be expected for a historical building with such unique heritage like BCR Palace. But the market shows that it can absorb an offer for a hotel of this kind. Generally, buildings with a solid structure that can be preserved, but with renovations needed in all other areas in order for them to be reconverted, require an investment of about 900 euro per square meter, without considering the investment for furniture and all other specific equipment needed. An upper medium hotel adds another 10,000 - 15,000 euro per room for FF&E, while a luxury hotel can invest even double per room. Considering a potential exit value of over 250,000 euro per room, a price sustained by the transactions closed in our market or similar markets in the CEE region, the project becomes feasible.

As a conclusion, the historical buildings in Bucharest may offer a very interesting investment possibility, which comes across with their inheritance of beauty, incorporated vivid stories and unique locations. It would be a great outcome of the real estate market if the city will grow in harmony, accommodating new, modern steel and glass buildings, as well as rejuvenated historical properties.

BCR Palace is not the first historical building valuated by Colliers International. The real estate consultancy company has been involved in the valuation of buildings such as the one now hosting the Hilton Garden Inn hotel in Bucharest’s city center, the old Marmorosch Blank building, which is currently being reconverted in the Autograph by Marriott hotel or Unirea Hotel from Iasi. All valuations were conducted strictly for determining the economic potential of those buildings.

Overall, Colliers International has valuated a total of 500,000 properties worth 40 billion euro in the past five years, generating about 15% of the company’s turnover. Colliers International’s valuation and hospitality advisory department has a dynamic team of 13 professionals, out of which 10 are accredited valuation professionals, with an average experience of 8 years in valuation services. The team can provide services for all real estate segments - retail, offices, residential, hospitality or industrial buildings. 


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Raluca Buciuc

Director | Partner | Romania

Bucharest

The 15 years in Colliers Bucharest Office offered me the chance to work in several departments as Office, Industrial and Valuation as assistant, junior or senior consultant and have a general look over the business. Since 2004 I have been working within the Valuation Department as specialist in residential mortgage valuation, development land and, in the last few years, in commercial properties. I have also get specialized in accommodation and leisure assets, as hotels, restaurants and spa centers. Today, as associate director I also coordonate the internal team in different projects as training, portfolio valuations or new business lines.

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Mihai Pana

Associate Director | Romania

Bucharest

I have joined Colliers International in 2007 as a Junior Real Estate Appraiser. During my first assignment, I performed valuations for various type of properties: retail, industrial, office, industrial, residential, vacant land plots, land plots with projects, as well as for different purposes: financing, financial reporting, acquisitions, portfolio optimization, highest and best use analysis.

Currently, I get specialized in valuing large real estate portfolios especially owned by banks as well as in valuation for financial reporting.

I'm also coordinating a team who is in charge of the re-valuation of the residential mortgages portfolios, held by financial institutions. 

Prior to joining Colliers International, I worked  over ten years for British American Tobacco Romania , managing different teams in Sales and Marketing Divisions

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