The FINANCIAL — The FINANCIAL interviewed Tinantin Rukhadze, Head of Public Relations and Advertising Department, Center Point, regarding the developer’s further ambition to maintain a competitive niche in the market while construction prices and mortgage rates go up.
Center Point, one of the leading developers in Georgia, is working on a new down payment product. Through Center Point Invest, a constituent unit of the holding, clients will be given the opportunity to enjoy zero down payment services now with a duration of 10 years.
Q. The latest news regarding Center Point is its founder Mrs. Rusudan Kervalishvili being elected Georgian MP. Since her involvement in politics will Mrs. Kervalishvili still run Center Point and be just as intensively involved in the business?
A. No changes are expected at the company in this respect as Mrs. Kervalishvili wasn’t involved in executive management. She’ll remain the founder of Center Point but will keep her distance from direct management.
Q. Center Point has ongoing projects in the Samgori district, where Mrs. Rcheulishvili was elected MP. Will the company set more intensified priorities on this region?
A. I dare say Center Point is doing its best in the Samgori district already. One of the most important projects here is a house on Moscow Ave., which will soon be finished.
Center Point is a company with 32 ongoing projects and an impressive number of different ones at its disposal. Hence, no one could ever accuse Mrs. Rcheulishvili of lobbying her business at Parliament.
Today’s priority for the company is to continue the quality and professional work the company has been know for so far.
Q. Center Point declared that the company’s turnover would reach GEL 200 million in 2008. How impressive is the figure in a relatively small market like Georgia and what percentage of the annual income does the company invest in new projects?
A. Reinvestment is a constant and never ending process for Center Point. The company founders Mrs. Rcheulishvili and Mrs. Kervalishvili see reinvestment as the top priority for the future development of the developer.
When Center Point first ansnounced about starting constructions in Samgori, the decision was treated with scepticism from our competitors, but now the situation is very different, moreover the approach is being actively followed by other companies.
The business intuition of the founders has never failed the company as their views and innovative ideas are strongly backed up by professional experience.
Q. Currently Center Point has 30 projects under construction throughout the whole country. Center Point is known for being the pioneer in entering new areas and the next project in this respect is to be launched in the Marneuli region. How much higher are the prices in Gori, Kutaisi and other regional cities getting since you or any other developer entered the market there?
A. If you take a snapshot of the construction prices, a 200-300% increase is obvious over the last decade. Logically, land prices show relative growth.
What I fully agree with the company founders about is that the land in Georgia must be bought by Georgians themselves. Center Point is a one hundred percent Georgian company and does pure Georgian business. Although it doesn’t exclude the opportunity of cooperating with MCG or other international organizations on different projects.
When by the end of 1990s Center Point was starting its business, people were able to acquire real estate in the centre of the city for as little as USD 100 sq.m whereas this price hits USD 2,000 today. So it’s an actual truth that people get rich with the company.
Q. Which banks do you cooperate with in terms of down payment services? Do you operate this service on your own as well?
A. We have not yet practiced this, but are contemplating starting cooperation with TBC.
A number of developers boast that they have zero down payment services, though offer already increased price services. While at Center Point, the company offers 20-30% cheaper options.
We’re a large-scale holding capable of maintaining the most affordable prices possible. Due to well-planned logistics, the company is ready at its maximum to overcome price changing challenges.
Center Point has its own internal down payment services with zero interest and duration of 3-4 years. Around 98% of Center Point sales come on down payment. We were the first developer to offer down payment services as well as the white construction concept.
Construction is a long-term complicated process and in order to achieve proper results you need a professional approach to the subject, which is well understood by our company.
David Makharoblishvili’s architectural studio is in charge of Center Point’s projects and we’re fully satisfied with their work.
Q. Have you ever taken credit from a bank for any project? If so, what was the amount of the sum and from which bank?
A. There was a case with TBC Bank and another with BOG. Considering the dynamic of changing prices in this business, it takes a well- planned financial strategy to foresee expected complications and be ready to take subsequent measures.
Real estate prices are showing an unprecedented annual raise. Prices of Center Point projects increased by 5-10% in 2006 and 10% in 2007.
Q. Some of the latest news concerning Georgians is the rise of interest rates on mortgage loans. How do you think these non-welcome developments will influence the so far fast pace of mortgage acquisitions?
A. Mortgage lending prices will drop, at least they shouldn’t go up for 2-3 months. It really isn’t welcome news that interest rates have become less affordable lately.
In the past we took a shot and launched down payment services on mortgage loans in cooperation with one of the leading banks in Georgia but due to the unbelievably high demand the initiative was not a success.
The primary down payment at Center Point is the sum – GEL 3,000-5,000. The rest of the amount needing to be paid is then divided into several phases. Hence, the client can refer to mortgage lending for the last moderate payment left.
Moreover, Center Point has been working on a new financial scheme for the last 8 months to increase the zero down payment duration date up to 10 years. It’s a highly flexible opportunity for people as they can keep on living in their new apartments whilst having the chance to finalize the payment of which over the next couple of years.
On the one hand it’s an interesting challenge for the company to take in terms of promotion, but unless exact calculations are made the risk is too high as prices on real estate go up rapidly. Center Point is targeted at the middle class and that’s another reason why demand and prices of our products are dynamically increasing.
Q. What is the overall volume of Center Point projects and the overall volume of real estate owned by your company at the moment?
A. As we sell our property in advance we retain only land bank for future investment projects. Land bank size is approximately 250,000 sq. m.
We’ve already covered a volume of 1 million sq.m, which was an unbelievable figure nine years ago when the company started its business with small constructions and exclusive projects.
These statistics prove that there’s a growing demand for Center Point products and in the future we anticipate even more impressive results.
Q. Center Point is very active in the suburbs as well. In this respect we’ve launched quite successful projects in: Dighomi, Didi Dighomi, Sanzona, Nakhalovka, Moscow Avenue and Krtsanisi. In which of the suburbs do you see an increased demand on commercial estate?
A. We’re frequently asked why Center Point isn’t currently active in the centre of the city. The answer is simple; the central part of the capital is saturated enough.
Center Point head office, the so-called elite house, construction in Vake is soon to be completed. The project will be called Center Point Plaza and is intended to be a kind of visit card of the company.
Q. The colour balck dominates in Center Point Plaza. You’re corporate clients of Sanguko, the company which was in charge of Center Point re-branding services last year. How much did the company spend on re-branding and what’s your annual PR campaign budget?
A. Black, white and red, these are the corporate colours of Center Point as we see the combination best fits our profile.
As for the expenses, re-branding cost us GEL 150,000 and the annual PR campaign budget is USD 500,000-600,000.
Center Point Plaza will have white outdoor lighting and a logo in red and black colours.
Q. Which of the numerous projects initiated by your company are the luxury ones and which of them is the most expensive?
A. We basically build for the middle classes. The most expensive ones are planned residential projects in Vake and Bagebi districts, price exceed USD 2,000 per sq.m.
The largest-scale project by Center Point, which has been being constructed for three years already, is Center Point City. It’s the largest shopping mall in the Caucasus, spread over 300,000 sq.m. The value of the project is USD 200 000 000.
The Garden of Almonds in Bagebi-Vake, an elite construction by Center Point, a kind of closed town-house complex is also a luxury project. People of USD 5,000 monthly income only can afford to buy luxury real estate like this.
Q. The company plans to construct around 100 hotels under the brand name Rcheuli within the next 5 years. Could you define, are there any completed projects by your company for this summer?
A. One boutique hotel in Batumi is already open and in use. In total four hotels: Batumi – Rcheuli Villa, Telavi – Rcheuli Marani, Kurta – Rcheuli Machabeli and Signagi – Rcheuli Pirosmani were completed during one year.
All the four hotels are individual and have different attractions but are built according to one joint concept.
As for the clients, people of different social status from students to the wealthy segment of the population are guests of the Rcheuli brand. In Signagi out of the 18 accommodations 6 are targeted at students and cost USD 20-25. Corporate clients and Center Point inhabitants have discounts at the Rcheuli boutique hotels.
In the next 4-5 years we’ll have up to 100 hotels completed. Currently ongoing projects include: Bakuriani, Likani, Kutaisi and Lagodekhi ones.
As for the PR campaign at this point we haven’t started intense activities in this regard as we’d like to first create a strong basis and only then to make it a priority.
The best promotion is a happy client and for that you need qualified services. That’s why we pay huge attention to attracting qualified personnel at the hotels.
Q. Due to the devaluation of the USD currency, some of the local developers and realtors have switched sales from USD to EUR. Do you plan to further maintain the sales policy in the national currency?
A. Since we’re one hundred percent a Georgian company, sales will be maintained in GEL. The national currency has proved to be a fixed one in the local market and we believe Center Pint will further make its contribution to building the economy of the country.
Q. You also have other elite projects in the Saburtalo district and a huge 500,000 sq.m ‘down town’ type tower in Didube near the Eliava Market. The latter also envisions the construction of the largest shopping mall with no analogue in the Caucasus. How would you define the development trends of commercial estate construction in the country and what’s your strategy regarding this?
A. One of the most important segments for Center Point is commercial estate construction. At this point the largest shopping mall construction in under way in the frame of Center Point City project. An A class boutique trading centre will be constructed on Liberty Square.
As for the suburbs, the Lubliana commercial estate project is under way, entrances and exits of the city are also priority areas.
Q. As for construction materials, who are your local and international suppliers? How rapidly are prices on construction materials increased?
A. Center Point has enough resources itself to produce construction materials that are locally available, whether it’s concrete or metal plastic and aluminium window and door frames.
As for imported materials, we’re the largest importers of armature. The material is brought from Ukraine.
Q. Which insurance companies do you cooperate with in terms of construction insurance? Are prices the same for commercial, residential or office estate and how much are they per sq.m?
A. In this respect Center Point announces transparent tenders for each of its projects. The companies winning the tender are in charge of choosing an insurance company. We’ve faced no complications so far and hence no need for the direct involvement of the insurer was needed.
As for quality management, we have a team of professionals taking care of internal monitoring. Beso Dulashvili and Sandro Baliashvili are the persons responsible for this approach.
Q. Center Point offers both ‘white constructions’ and fully renovated apartments and it’s up to the particular client to decide what suits them individually. Taking a look at the statistics, which of the two above mentioned options are most in demand?
A. White construction is the least completed type of project at Center Point. Our thinking is that a building should be fully finished and ready for use.
Center Point Service is oriented at working out individual orders from the clients. Around 60 companies are our suppliers, mainly local ones. Besides full renovation full furnishing is also available through Center Point Service.
Q. How would you compare the construction business development in Georgia to the situation with its neighbours: Armenia, Azerbaijan, Kazakhstan, Ukraine, Turkey and Russia? Do you have or plan to start operations in any of the above mentioned countries? If so, please define in which specific country?
A. We don’t have any ongoing projects outside of Georgia. As for the country’s position as far as real estate development is compared to its neighbouring countries, a construction boom was started in Moscow and spread all over the post Soviet Union region. The whole infrastructure of the region needs to be professionally renovated.
Center Point’s founders have initiated investing in the so-called Khrushchov apartments project. The interest in this initiative is very high.
Q. As for the local market competition, how tight is the situation and who do you see as your direct competitors?
A. There are a number of decent companies in the local market who Center Point would be willing to implement some projects in cooperation with. Arci, Axis, Iberia – these are the popular brands and institutional developers which are fully ready to take on various joint challenges with us.
Q. As far as the city’s architecture is concerned, how would you evaluate the quality and standards of the modern design of Tbilisi? Who are the people whose views you consider while working on projects?
A. David Makharoblishvili, a well-known Georgian architect, is working on these issues at Center Point. Though, we cooperate with other architectural studios as well. The Saakadze project was led by Givi Metreveli, and Center Point City – Nika Shavishvili.
Q. Does your construction company work on projects exclusively for Center Point or is it possible to get engaged in other company’s projects as well? What’s the average price for hiring a construction company and how is the price calculated?
A. For the majority of the projects we hire builders, although we have JV with Eren, its capacity is not enough to cover all our current projects.
Q. As for the situation overseas, the first three months of 2008 marked the worst quarter for American homeowners in nearly three decades, according to the report, issued by the Mortgage Bankers Association. What’s the situation like in Georgia in this respect? How concerning does the future of Georgia seem, where the rate of unemployment is much higher than the U.S’s 5% indicator?
A. Although the prices of real estate have not dropped in 2008 they have not risen as sharply as in previous years, they are more or less at the same level. Banks have not yet reported the material rise in delinquencies of mortgage loans. A smaller proportion of real estate acquisitions are financed with mortgages in Georgia than in America.
Written by Kate Tabatadze
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