On April 1, 2016, CEE Legal Matters reported that Voicu & Filipescu and Reff & Associates (a member of the Deloitte Legal network) had advised on Bel Rom Twelve’s sale of 12 of the 22.5 hectares of land it owned in Ramnicu Valcea, Romania, to the South African investment fund New Europe Property Investments (NEPI).
The transaction represented the third sale of real estate between the parties and was described by Bel Rom shareholder Hendrik Danneels as “one of the most important real estate transactions in Romania over the recent period.”
- Roxana Negutu, Partner, Voicu & Filipescu: Counsel for Bel Rom
- Diana-Mihaela Radoi, Managing Associate, Reff & Associates: Counsel for NEPI
How did you, Roxana, originally become involved with Bel Rom Twelve, and how did you, Diana, become involved with NEPI? How were you selected as external counsel initially, and when was that?
R.N.: We have been cooperating with the Bel Rom group of companies for over ten years now, during which time we have assisted them in numerous transactions as well on day-to-day matters. The assistance has covered either conducting due diligence investigations in the process of acquiring plots of land or other subsequent operations aimed to the development of their retail parks throughout Romania.
D.R.: The collaboration between NEPI and R&A started in 2007, when NEPI was founded by former Deloitte colleagues. The initial collaboration was due to a strong relationship between people at the top of the two organizations. In time, the relationship grew richer and deeper, expanding at multiple levels as we worked together in tens of transactions over about nine years and as several colleagues of ours joined NEPI at one time or another. I believe that an important part of R&A’s development is owed to NEPI’s growth in the market which was in turn enabled by our dedication to their business.
At what stage were you brought on board, and what, exactly, was your mandate when you were retained?
R.N.: We were involved in the previous stages of this investment project intended by Bel Rom, years ago. The economic downturn interrupted the client’s initial plans and this particular project was put on hold, until the discussions with NEPI for sale were initiated. Given the features of this plot of land, [Bel Rom] had considered it for a mixed retail and residential project ever since it acquired it. By this deal, 12 hectares were sold to NEPI for future retail development, while the remaining plot was kept by Bel Rom Twelve for a potential residential development.
From the moment this deal was first put into discussion, we were part of the team assisting the seller in the process of due diligence, handling the matters related to the updated status for the land, the dismemberment operations, and providing assistance in drafting and negotiating the transaction documents.
D.R.: Initially, we were approached by NEPI to perform a title check with respect to the land located in Ramnicu Valcea held by Bel Rom Group. At that time, it was not clear whether the transaction would be structured as an asset or share deal. Consequently, the object of our legal analysis was subsequently extended as the outline of the transaction got clearer. The new areas of our legal review included aspects such as environment, development (urbanism and construction aspects), and even corporate matters regarding the owner of the property subject to the transaction, although the project was finally structured as an asset deal.
Additionally, the title check proved to be broader than we initially thought, as there were certain issues that required extensive investigation with the public authorities and cadaster officers. Our main purpose was to clarify all the identified issues and eliminate the risks in order for the acquisition to be performed by NEPI.
Who were the members of your teams, and what were their individual responsibilities?
R.N.: The core team was formed of three team members, coordinated by myself.
D.R.: The R&A team in charge of the legal due diligence included more members in order to cover the vast areas of the analysis intended to be obtained by NEPI, as follows: Cristina Buric, Miruna Stanciu, and Maria Nitulescu for title check and development; Adina Gutiu for environment, and myself as the coordinator.
The transactional team, however, included myself and Maria Nitulescu, under the direct coordination of Partner Alexandru Reff, while we also collaborated closely with the legal department of NEPI at the time (Amalia Rapan and Mihai Vlad Lintmaier) who facilitated the performance of the transaction.
How was the transaction structured, and how did you help it get there?
R.N.: The project consisted of a preliminary sale purchase agreement in which the main conditions precedent were agreed upon and which were afterwards implemented by the seller. These varied from dismemberment operations to clarification of pending litigations, consent for the existing lease agreements, and so on. Among others, a particularity of the transaction consisted in a superficies and servitude neighboring right granted between themselves by the parties for the future projects to coexist.
D.R.: The transaction was in the end structured as an asset deal concluded in two stages: first a bilateral promissory sale and purchase agreement, followed by the conclusion of the sale and purchase agreement with an effective transfer at the signing date. In addition, an easement and superficies agreement was also concluded for the construction of an access road on part of the land remaining with Bel Rom Group.
We should perhaps also mention that the object of the transaction changed following negotiations and internal decisions of NEPI regarding the required area of land for the development of their project. This resulted in the amendment of the transaction structure several times, but in the end, we managed to reach a form suitable for both parties.
What would you describe as the most challenging or frustrating part of the process?
R.N.: The volume of documents to handle and formalities to be performed was considerable, and input from the Romanian authorities was also necessary. These aspects extended the procedures longer than the parties had anticipated. The plot was initially aimed for industrial use [and] was linked with an abandoned railway network, [and it] had become meanwhile subject to certain pending restitution claims subject to the Romanian special law for assets confiscated under the communist regime.
D.R.: The continuously changing structure was the most challenging aspect of the project for lawyers on both sides. It required an additional amount of work in order to maintain a good position for our clients and not to lose sight of the initial intention, which was to reduce and eliminate the risks before implementing the transfer of ownership. I suppose that at one point it became frustrating, especially when things would change after we, the lawyers, had reached an agreement on the form of the contractual provisions, as we would have to re-negotiate the terms of the amended provisions. This process always takes time, as the lawyers have to meet again and agree on the form of each single clause.
Was there any part of the process that was unusually or unexpectedly smooth?
R.N.: Not necessarily, as it was rather the other way around. The smoothest part was the fact that the parties knew each other and worked jointly to finalize the deal.
D.R.: The signing formalities for concluding the promissory agreement and the sale agreement went smoothly, mainly due to the fact that we managed to put all documentation in place before signing and also because Voicu & Filipescu cooperated with our notary for the authentication formalities.
Another aspect I should mention, and maybe this is also the result of the cooperation of V&F lawyers, is that the due diligence documents were provided in an orderly manner almost to the extent that we received a complete set of documentation for the ownership history. Usually the due diligence documentation is not provided in such a complete and friendly manner. By this we mean the sellers’ representatives may send only parts of a document, improperly scanned agreements, or mixed up documentation (corporate and environment in same folders, unrelated documents scanned together etc.). These aspects always generate additional issues in our report based on the lack of information provided. However, it was not the case with this project, where we managed to eliminate most of the issues resulting from lack of documents.
Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?
R.N.: The mandate was clear from the beginning and fits the particularities of this type of deal. Our services were adjusted to [NEPI’s] expectations and exigencies as we have always done in relationship with all our clients.
D.R.: The final result matched the initial scope of work in a very general way, namely that of offering the necessary assistance for the acquisition of a plot of land from Bel Rom, while the specifics changed on the way, as mentioned earlier. Nevertheless, even with these amendments, I believe the final result still matched the initial intention of the parties.
Although, the legal due diligence analysis required longer hours than we expected as additional information and documents were provided to us for further review. Both teams of lawyers were actively involved in obtaining documents and confirmations from authorities, and it was a common purpose of both parties to eliminate findings and perform the deal in good terms for both parties.
What individuals in Bel Tom Twelve directed you, Roxana, and what individuals in NEPI directed you, Diana, and how would you describe your working relationship with them?
R.N.: In Bel Rom Group we worked directly with the members of the board for this specific project.
D.R.: For this project, the R&A team worked under the legal coordination of Amalia Rapan, former in-house lawyer with NEPI. The commercial decisions were made, however, by Alexandru Morar, now the CEO of NEPI.
I believe that my working relationship with Amalia would be best described as efficient and productive. The intentions of NEPI were communicated to us by Amalia in a clear way, so we managed to deliver materials that required little or no amendments on their part.
How would you describe the working relationship with your counterparts at the other firm on the deal?
R.N.: We have a good and cooperative relationship with the team from Reff & Associates. This was the third time our clients Bel Rom and NEPI have met in this type of deal and this has significantly smoothed things out, as by now everybody knows each others’ expectations and is familiar with the drafts to be used.
D.R.: V&F lawyers acted in a professional manner and always had in mind the purpose of closing the deal; from this perspective we had a common goal. Perhaps that is why, apart from the customary contradictory discussions regarding certain contractual terms usual for these types of negotiations (e.g., liability of seller, payment of the purchase price., etc.), it felt like we worked together for the effective performance of this transaction.
No unnecessary or pointless issues were raised just for the sake of carrying the negotiations. Also, Roxana Negutu was very helpful with the due diligence information, and she was actively involved in the formalities with the public authorities with the purpose of clarifying certain issues from our report. It is interesting, I suppose, how, as a lawyer, you can help your client by working effectively with the other party.
This is not the first deal you’ve worked on between Bel Rom Twelve and NEPI. Does that familiarity make the transactions happen faster – at this point is it a pretty simple process?
R.N.: It does help, as I mentioned before, because this familiarity also comes with a level of already gained trust. On the other hand, each project has its particularities and every negotiation calls for fine tunings in the approach of the consultants, if they are to help their clients meet the most optimal solution.
D.R.: The familiarity does help, but it does not necessarily make it a simple process. There are certain aspects you just cannot ignore or skip. Each side needs to negotiate the contractual terms in the most favorable way for its client and has to perform all kind of checks on the documentation, regardless of the trust you have with the other party. I won’t deny though that the familiarity helped during negotiations between the principals and certain aspects that needed to be resolved were temporarily sorted out based on the trust of the parties until an effective solution to a problem could be found.
How would you describe the significance of the deal in Romania?
R.N.: I would say this deal is important due the message it sends – the message of a new wave of interest to develop retail projects in middle cities in Romania. While so far Bucharest and only two other main cities seemed to draw the attention of investors, NEPI’s interest for Ramnicu Valcea comes as a signal of the investors’ attention towards expansion.
D.R.: This transaction had a value of approximately EUR 10 million so it can be easily considered an important deal on the real estate market, especially now as investors are still reluctant to put their money in real estate. The significance of the deal may be also viewed from the perspective of the general development of the area where the new NEPI project will be located. As such, the construction of a new commercial center of an important size in Ramnicu Valcea, where NEPI is not currently in the market, will have an impact on the real estate market of that area.
On the other hand, we consider this project to be one of the smaller deals we have assisted NEPI in closing, as opposed to transactions with values ranging between EUR 40-100 million. Just recently we assisted NEPI with the acquisition of the European Retail Park Sibiu from Argo Group and previously owned by Bel Rom Group. The value of this transaction was EUR 100 million and was performed rather quickly considering the complexity of the entire project.
This Article was originally published in Issue 3.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.