Dylan Cullen of Appreciating Assests started working there on commercial investments in the mid noughties and was asked by his Bulgarian contacts if he knew any Irish and British investors who owned property there. The problem for the Bulgarian was and still is that they get contacted Russian investors wanting to buy property, but unlike the Irish, Russians will not buy off-plan and most of the newly completed property there is owned by Irish and British investors. This is where Appreciating Assets come in, they help owners of overseas property find Russian buyers.

Here is the full article.

The Sunday Business Post – Russian hope for Irish investors
21 November 2010 By Michelle Devane 

The Irish obsession with overseas real estate became so extreme that, at the height of the market, people were buying properties abroad without ever stepping foot in the country where they were purchasing.

These investors found it was very simple process to buy overseas properties, but it’s a different story trying to sell them.

Thousands of Irish people bought overseas properties in the last decade, and many are now suffering losses as a result of the collapse in property prices and economic deterioration across Europe.

Instead of heading abroad on inspection trips to buy property as they did in the past, an increasing number of Irish people are now trying to sell their overseas investments – that’s if construction of the property was completed in the first place. 

An increasing number of second-hand holiday properties throughout Europe are coming back on the market, as overseas owners realise that they can no longer afford to pay second mortgages.

In many cases, the Irish invested between 2000 and 2007 when prices were spiralling.

Those who invested in later years are, in many cases, facing financial problems, and cannot afford to hold on to the property hoping for the economy to improve.

The Irish are not the only investors in this predicament. 

An estimated 1.2 million Spanish holiday homes are for sale, owned by a wide range of international investors.

Few people, except the very wealthy, are in the market for a holiday home, despite drastic price reductions.

There’s no longer a strong resale market for second-hand properties as Irish and British investors, who once dominated sales, have stopped buying.

Dylan Cullen, managing director of property investment firm Appreciating Assets, realised that Irish investors would have to look to other markets in their attempts to sell overseas investments.

Three years ago, he began helping Irish and British overseas property investors to sell their assets.

The firm specialises in selling Bulgarian investment properties, to Russian investors in particular.

Cullen has experience in a number of overseas markets including Bulgaria, the Czech Republic and France. He began investing in the Bulgarian commercial property market in 2006 when his friend, who was dating a Bulgarian, convinced him to go to the country to examine its investment opportunities. 

‘We bought and sold, made investments, gave seed capital to builders, filled the gap and were paid handsomely for it,” Cullen said.

He did not develop properties in Bulgaria, but managed to build contacts in the property market. ‘‘Because of the level of activity that wealthy Russian investment funds had in Bulgaria at the time, we ended up with a good contact list of estate

agents and developers in Bulgaria and estate agents in Russia,” he said.

‘‘As the market started to turn, we started getting contacted by people finding it difficult to sell their properties and asking for help.

We looked at our list of contacts and realised we could offer a service.” That was in late 2007. 

Since then, Appreciating Assets has focused on reselling residential properties and acting as a broker between Irish and British sellers, and estate agents in Russia. 

The company has recently expanded to include other Russian investment hotspots such as Spain and Portugal.

For a fee of €50 per month, the firm creates a sales brochure for its clients that’s then marketed to Russian and Bulgarian estate agents. Appreciating Assets’ website becomes a database for the Russian estate agents, and the company receives commission for any transactions.

Cullen said that the company has sold over 230 property in the past two years for its clients. 

The Dublin-based firm employs full-time professional valuers and agents in Bulgaria and Russia. In total, it has 11 employees.

‘‘We’ve two full-time staff in Russia who call estate agents to promote the properties.

We’ve got staff in Bulgaria who are on the ground, who go check out developments for us, talk to local agents [and] get the local knowledge of what properties are actually changing hands at.”

Cullen said that many of his clients were keen to sell their overseas assets because they had built up equity in their Irish properties to cover these purchases. Cullen said that, in many cases, his clients’ Bulgarian property was their only unencumbered asset.

‘‘There’s a lot of value there for people if they can sell their Bulgarian property; €50,000 in Ireland today is worth €80,000 three to four years ago. 

That’s [probably] their last unencumbered asset; they can choose what they wish to do with that property – not like if they sell their house in Dublin. If they sell that, the bank takes back the money.”

Cullen said one of his clients had just completed the sale of a two-bedroom apartment at Sunset Resort in Bourgas on the Black Sea coast in Bulgaria.

She sold the property for €55,000 to a Russian investor.

‘‘I can’t remember the last time we sold to someone other than a Russian. The Russian economy is very strong. I genuinely consider the Russians are the new Irish, in that there’s a huge amount of them that are only feeling some sort of financial security in recent years.

There’s a real rising middleclass over there,” he said.

‘‘Historically, the Russians are also very comfortable in Bulgaria. If you go down to the Black Sea during the summer months, there’s a huge mixture of Russians, Irish and English.”

Russian buyers are showing resilience to worldwide trends of negatively towards property investment. 

According to CIA research, the Russian economy is faring much better than many other European countries, despite having recorded a fall in GDP of 7.9 per cent in 2009. It was hit hard by the 2008-2009 global economic crisis, as oil prices plummeted and foreign credits that Russian banks and firms relied on dried up. 

However, the economic decline appeared to bottom out in mid-2009 and, by the second half of the year, there were signs that the economy was growing, albeit slowly. 

The International monetary Fund (IMF) has forecast that within three years the Russian economy will be the second largest in Europe after Germany. 

The IMF expects the Russian economy to grow by 4.25 per cent in 2010.

Owning international property is fast becoming the status symbol of choice for Russia’s middle-class, just as it was in Ireland during the economic boom. 

Russian buyers are not attracted by off-plan properties, instead they want completed units, so they represent a potential market for Irish sellers.

Liam Bailey, head of residential research at Knight Frank in London, said Russian buyers were leading the demand for prime property in London and other European cities. ‘‘Russian buyers have had a considerable influence in London in the last decade.

They’ve been buying in prime market such as the south of France, the Alps, Switzerland and to an extent in Paris,” said Bailey.

‘‘The Russian economy is still going strong; their drive is to buy property and they’d rather buy it overseas than at home. There are many Russians looking to acquire assets at lower prices, and they are interested in Bulgaria as a leisure destination.

‘‘Wealthy Russians are targeting the south of France, but the middle classes are buying in Bulgaria because of its close proximity, and it’s low prices,” he said. ‘‘Eighteen months ago it wasn’t known how far the Bulgarian market would fall, but now investors are more confident about prices and there’s some stability.”

Ac cording to Knight Frank’s research, prices have fallen by 32 per cent in Bulgaria since the peak of its property market in the third quarter of 2008.

Bailey said property prices had been dropping quite rapidly until June of this year, but prices seemed to be stabilising, as they slipped only slightly in the third quarter. ‘‘It would appear the bottom of the market has been reached there and there’s more confidence among buyers,” he said.

Figures released last month by Russian property website www.1-property.ru found that Bulgaria was the most popular destination for investment out of 30 countries among those surveyed on its website.

During July and August, the website recorded 359,173 searches, with 60 per cent of these searches for apartments and condos.

The Black Sea resorts of Sunny Beach and Sozopol came first and third, respectively, in its top regional table.

The second most popular destination for investment was Spain, with its coastal resort of Costa Blanca coming second in the regional table. 

The majority of those surveyed were interested in purchasing properties within the €50,000 and €150,000 price bracket.

Cullen was adamant that property could be sold in the downturn, and said investors had to be realistic about price.

‘‘There’s no point dwelling on it. One of the things I say to customers constantly is that I cannot guarantee I’ll sell your property. I will put your property with a number of estate agents that have a track record in selling properties like yours, but I’m not guaranteeing I’ll sell your property,” he said.

He said that Appreciating Assets did not advocate selling overseas properties at distressed prices and that even though prices were down, sellers could get the current value for their asset if it was marketed well and in very good condition.

He said it was a ‘‘huge misperception’’ that everyone that bought property in Bulgaria or overseas lost money. ‘‘That’s wrong. I’m not saying they made huge profits, but there’s a lot of people getting out with roughly what they paid, or taking a small haircut. 

Then there’s people who bought ridiculously, and that’s life.”

In many instances, he said his clients had to sort out major issues with their properties before they could sell them.

Like Ireland, difficulties with poor management companies are one of the most common issues that need to be rectified before they can sell. Cullen said one investor took control of the management company at a development which was mostly Irish-owned, because proper up-keep of the communal areas was not being maintained.

Once the communal areas were made attractive, he was then able to sell the property on.

‘‘My advice for someone who wants to sell is to find an agent you can have a decent rapport with.

Be realistic about your asking price, shop around – get your property valued by a number of companies, don’t just take one person’s word for it.

‘‘Ask the questions about the value of selling it quickly or over a few months; ask the agent how you can get more money for it and what you can do with the property to improve the chances of it selling,” he said.

For further information, contact Appreciating Assets on 01-6141300 or e-mail in fo@appreciatingassets.ie.

There are now many problems with stalled developments that Irish people have invested in right across the globe. I am currently supporting the Dublin legal firm Anthony Joyce & Co on six different cases. In a lot of instances the developers didn’t sell enough of the properties to finish the developments, but have spent the money paid by the initial investors.

Where people have been lucky enough to get their hands on finished property the values are now much lower than they were during their boom. If people bought early enough, say pre-2005 and in some cases 2006, then they can still make a profit because some markets we climbing by such large amounts that even with a 50% reduction they are still above what investors will have paid.

The problem came with the people that were late to the sector and paid peak prices. Their problems are compounded by the fact that a lot people remortgaged their primary residence in Ireland many off whom are not left paying very large mortgages in Ireland, that are in negative equity and which we used to pay of an overpriced overseas property that is now well below it’s peak. They effectively have two or properties that are in negative equity.

Whilst most agents who sold overseas property have gone bankrupt or run off with their high commission before the investors come after them, one company [disclosure: they are a client of Republic] is turning the overseas property market on it’s head and helping investor sell on their properties.

Appreciating Assets started by developing commercial sites along European Strategic Corridors in Eastern European countries like Bulgaria. Here they made good contacts with the no-nonsense down to earth way of doing business and struck up some long term partnerships.

The Russians have always been keen to do business and pleasure in former Eastern Bloc countries like Bulgaria. During the boom it was the Irish and British investor that we dominant on the Black Sea and in the ski resorts, but as the economies in their countries waned so demand from Russia remained strong.

But, there was problem, Russian property investors don’t buy off-plan and most of the recently built properties were owned by Irish and British investors. Whilst they Bulgarian businesses had good contacts with Russia they had little or no existing contacts in Ireland and the UK. This is where Appreciating Assets were asked to step in, their Bulgarian contacts needed them to help target Irish and UK property investors who wanted to sell their property. This is a niche that they have successfully turned their sights on and in the past 18th months have helped over 230 property owners sell their properties to Russian buyers.

Now they are expanding. They have asked if they can also provide properties to Russian buyers in the more upmarket locations in Western Europe where Russian investors are now buying. Seafront properties are very popular Russians who are very prominent prestige buyers on the Costa Del Sol and Côte d’Azur, as well as the French Alps.

So Appreciating Assets have now expanded their services to property owners in France and Spain, two countries where Irish and British property buyers were prolific during the boom.

It is rare to see a property investment company expanding during a property slump, but the reality is that their niche market is actually booming. This is because the downturn and financial pressure at home has meant so many people need to sell their properties. When times are tight that house in sun can look like an expensive luxury and most people bought the property as an investment anyway with the intention of selling.

If investors want to sell their overseas property then an exit strategy is key. By exit strategy I mean how the property is going to be sold. There is little point trying to sell it to Irish investors because they simply aren’t buying, so investors need to look to countries that are still expanding and where affluence is still increasing, such as Russia and use companies that have a track record of dealing with people there.

The good thing about Russia is that it hasn’t fallen into recession and the outlook looks good. There is a lot of talk these days about the investment markets focusing on the BRIC countries, and Russia is one of these; the others are Brazil, India and China. The IMF backs this up and forecasts that Russia will be the second largest economy in Europe within three years; second only to Germany.

So if you have any overseas property that you want to sell in France, Spain or Bulgaria then sell it to the Russians by contacting Appreciating Assets – please click here fore details.

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This article also appeared in the July 2010 issue of You And Your Money the Irish personal finance magazine.

During the Celtic Tiger, developers from all over the world marketed and sold property to Irish investors. As a result it seems as if we paid for half the buildings in Eastern Europe.

In previous generations we would have had Irish workers doing the actual building but, in recent years, with the cheap credit we had access to, we were happy to pay other people to do the building and just wanted to enjoy the end product.

The problem for many Irish overseas property investors is how they purchased their property and the issues that are now affecting them at home.

The boom in the Irish overseas property sector investment market grew as a result of the increasing property prices in Ireland. The Irish banks were flush with cheap money from the ECB, but viewed saw overseas property as too risky, so they refused mortgages to give mortgages on foreign properties.

Instead they saw that Irish people had a lot of equity built up in their Irish properties, and preferred the investors to risk this equity by encouraging them to release that equity via equity release loans, which used the existing property to guarantee the equity that was released. This allowed owners of Irish property to add the cost of a foreign property on to the value of an existing Irish mortgage, which in many instances was the investor’s main home.

These loans were granted freely to Irish homeowners are much cheaper interest rates than could achieved in the country of choice. For instance in Bulgaria interest rates were 12-14% during the boom, whereas they were as low as 2% in Ireland.

This is has led to a double jeopardy for investors with their Irish properties and their foreign properties both reducing in value whilst some investors are effectively having to finance mortgages on two or more properties. There are many reasons why this is proving more difficult in the current market, reduced wages, higher interest rates and lower yields. With interest rates expected to rise in Ireland it is important for Irish investors to protect their credit rating in here because this could cause many more problems in the future, especially with restricted approval procedures in the banks.

With any investment an exit strategy is vital, when it comes to selling an overseas investment property an exit strategy means how you are going to sell the property and who you are going to sell it to. The problem is few investors have a realistic ‘exit strategy’ and there are few options out there. In some emerging markets, such as Bulgaria, there isn’t even an established second hand market in which to sell the property.

Without an exit strategy there is no way to recoup the return on your investment. Many people bought overseas property investments with little thought for their exit strategy i.e. how they were going to sell their property. With many people assuming that they would be able to either sell to another Irish investor or local property buyer. This is now rarely possible

The new market conditions mean that there are fewer options left to those investors wanting to sell their property, there are very few Irish and British buyers out there and the many local economies have taken as much of a hit as ours as. The remaining investors that are out there are often from countries to which Irish buyers have little or no existing links, such as Russia, which is part of what are called the ‘BRIC countries’ i.e. Brazil Russia India and China; these are the countries with economies that are estimated to grow the most over the next ten years.

Now Ireland is dead financially all the money men are turning their focus towards the BRIC countries. For most Europeans, Russia is the natural market to target, indeed the IMF has forecast that by 2013 Russia will be the second largest economy in Europe in terms of purchasing power.

The Russian economy is faring much better during the credit crunch than any other European country. With Russians continuing to holiday around Europe they are now some of the biggest buyers of overseas property and one of the largest customer bases that Irish owners of overseas property should be targeting if they want to sell their property.

We started developing commercial property investments Bulgaria at the turn of the century. A few years ago our contacts there asked us to help them source residential property for their Russian clients. The problem was simple, most of the new build property was owned by Irish and British investors, and to a lesser extent the Dutch and Scandinavians, but the Russian agents had no links to these investors. So they needed some way to bring the two sides together, which what we have done successfully for the past few years. Since the beginning of last year we have been helping Irish investors sell their properties to Russian investors, selling over 225 units.

The situation is very similar in many other parts of the world with huge amounts of property owned by Irish and British investors. As a result we recently expanded to include other Russian hotspots in Europe where Irish people bought en mass: Bulgaria, Spain, Portugal, and the Adriatic namely Croatia and Montenegro.

Different countries will have different demands. It may that where you bought the demand is coming from German, American or Arab investors. The key is establishing your exit strategy: who is you target market? How are you going to target them? And how much will pay you for your investment?

By Dylan Cullen, Appreciating Assets www.appreciatingasset.ie

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