Slide 1

National Leasing Conference ALB
October 19th, 2006

Real Estate Leasing in
Romania

Harald Trinkl / Vasile Cristescu
Bucharest, October 19th, 2006

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Slide 2

Possible Objects for Real Estate Leasing

 Office buildings

 Production facilities

 Hotels

 Logistic centers

 Retail spaces

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

Warehouses

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Slide 3

Clients for Real Estate Leasing
 corporate clients:
 services (office buildings)
 commercial (supermarkets / retailers)
 industrial (production facilities, warehouses, logistic centres)

 public sector:
 municipalities (town halls, schools and kindergardens, public
transport and buildings)

 private sector:
 flats and houses
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Slide 4

Approval procedure
 Analysis of project: plot location, expert
valuation report concerning the plot of land
and the building (if existing);
 Analysis of the client’s credit standing;
 Preparation of application to credit committee
approval (either in Romania or with the
shareholders of the leasing company);
 Approval (with or without additional
requirements).

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Slide 5

Different types of Real Estate Leasing
1. Finance leasing:
One of the following criteria must be fulfilled:


all risks and benefits of the project / lease object are transferred to the
lessee;



pursuant to the leasing agreement at the end of the lease term ownership
over the lease object is transferred automatically to the lessee;



the lease term exceeds 75% of the standard useful life of the lease object;

Benefit: long term financing.

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Slide 6

Balance Sheet in case of Finance Leasing
Finance leasing: real estate is in the balance sheet
of Lessee
Lessor:
Lessee:
balance
-refinancing
-receivable
to Lessee
P+L
-interest

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balance
-liabilities
-real estate

P+L
-depreciation
-interest

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Slide 7

Different types of Real Estate Leasing
2. Operate Leasing:
 if no criteria for a finance leasing is met
 the lessee is paying back a part of the total investment cost up
to an agreed residual value

 at the end of the contract the lessee is not obliged to buy the
lease object (risk of the residual value remains with the lessor)
 In case of an operate lease, Lessee has no liabilities in his
books (therefore a better credit rating) – but residual value risk
of Lessor

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Slide 8

Balance Sheet in case of Operate Leasing
Operate leasing: real estate is in the balance of Lessor
Lessor:
balance
-refinancing
-real estate

P&L
-depreciation -lease instalments
-interests

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Lessee: “off balance”
balance

-

-

P&L
-lease
instalment
/ rent

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Slide 9

Balance Sheet in case of Operate Leasing

Depreciation
 In case of operate leasing, the residual value of the
leasing contract is equal to the bookkeeping value of
the lease object.
 for example:





industrial buildings:
office buildings:
production halls:
warehouse / retail:

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40-60 years
40-60 years
16-24 years
24-48 years

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Slide 10

Different types of Real Estate Leasing
3. Sale & Lease back:
Owner of a property sells to a leasing company at
market value. The leasing company leases back the
property to the lessee.
This results in a higher liquidity in the company and the
client can invest in other projects.
At the end of the duration of the lease, the client can
become owner of the property again.

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Slide 11

Legal requirements
Owner of plot
Purchase contract – Superficies/Rent - Concession
Leasing company /
General Contractor
Real estate leasing contract
Sub-contractor agreement

General contractor agreement

Lessee /
General Contractor

Sub-contractor
agreement

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Construction company

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Slide 12

Possible Structures to Secure the Real Estate

 Acquisition of land – asset deal / share deal

 Superficies Agreement / Long Term Rent
 Concession (in case plot is state owned)

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Slide 13

Construction period


General contractor contract between lessor and lessee



Sub-contractor contract between lessee and construction company:
specification of contraction works and costs



Additional Services from the lessor’s side (planning, site control,
architectural services)



Payment by the leasing company to the general contractor according to
progress in construction work



Common construction site visits



Calculation of interim financing

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Slide 14

Completion of construction
 Taking over of the finished building:
 taking over protocol has to be signed by lessor and
lessee;
 operating permits / authorizations have to be obtained
by lessee from the competent authorities.

 Lease period start
 Calculation of Total investment costs

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Slide 15

Administration of lease contract
 Total investment costs – will be defined and shall build
the basis for the calculation for the lease instalments (construction
services, interim financing, all other expenses referring to the
construction like costs for notary, taxes will be added)

 Invoicing of lease instalments
 payment of land taxes to the authorities
 insurance

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Slide 16

Thank you for your attention!

Immorent Romania IFN SA
Str. Stirbei Voda, nr. 104-106, Sec. 1, Bucuresti
Tel.: 021 310 12 04, Fax: 021 310 18 80
[email protected]

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