The long road of Musachevo towards Macao (29.05.2015)
“Saint Sofia” in numbers:
- Area: 1.3m square meters.
- Investment: EUR 1.5bn
- Expected start date: October 2015
- Expected finish date: Summer 2018
- Hotels with a capacity of 3,600 rooms, which makes the project one of the largest in Europe.
- Exhibition center with a capacity of 31,000 people, suited for large events and conferences.
- Golf course “Saint Sofia” with 18 holes.
- Street with bars and restaurants.
- Monastery, artificial lake and a garden with Bulgarian roses on an area of 4,000 square meters.
- The largest year-round indoor aqua park in Europe with an area of around 50,000 square meters – an indoor version of Wild Wadi Water Park in Dubai.
- Shopping mall with an area of 100,000 square meters, over 250 stores, including Bulgarian boutiques for traditional items and souvenirs, with a design similar to Dubai Mall.
- Sports/Fitness center with a capacity of 11,000 people.
- Casino with low minimum bets.
- Children playground with an area of 9,000 square meters similar to Sega World Joypolis in Tokyo.
Despite the 8 month delay, the investors of the megaproject are determined to complete it by summer of 2018.
The major projects are usually welcomed with a big dose of skepticism from Bulgarians, regardless of the investor type or nationality. The fact that behind the idea of the megaproject in Musachevo stands a Hong Kong investor, does not make it an exception. In the basis of the skepticism stands not only the comparison of the scale of such projects and the Bulgarian market but also the failure of ventures such as “Super Borovetz”, “Destination Rila” near Separeva Banya or the ski zone in Berkovitza. Regardless of the 8 month delay from the original plan, the investors are committed to build the “Saint Sofia” project within the reported deadline – end of 2018 or even earlier, in the summer.
It is not an easy task, keeping in mind the scale of the project, which is about to stretch over an area of more than 1.3m square meters in the Elin Pelin region, between the villages Ravno Pole and Musachevo and its total value is estimated at EUR 1.5bn. Apart from the purchase of this enormous area of land, another issue is building the infrastructure surrounding the project “Saint Sofia” and acquiring the necessary permits. “We are working on all those points” said Josie Lock, Executive Director of Bulgaria Development Holdings Limited (BDHL). The capital increase through warrants was organized and completed last week. Manager of the warrant issue was the Bulgarian investment bank Mane Capital. Negotiations for a large part of the land purchase continue and a new workforce for institutional support at a government level was gathered.
It is expected the construction of the project to begin in October this year. If everything goes according to plan, a hotel, casino, conference and exhibition center, the largest indoor aqua park in Europe, shopping mall, an artificial lake and golf course would be built near Musachevo for the summer of 2018.
Land comes first
The construction of such project, regardless of the fact that it has a certificate for a priority investor from the Investment Agency, is not a mission with a guaranteed success. This status gives the right to acquire state or municipal property without an auction in a fairly wide range – at market or even below market price, but not below the current tax authorities’ valuation. The buyer could also be tax-exempt when changing the designation of the land. Up until now, the company has bought about 300,000 square meters of municipal land, but is still in negotiations for a discount on the necessary areas most of which are state-owned.
The municipal land was acquired at prices from EUR 1.5 to EUR 3 per square meter said Josie Lock. She added that a higher price was indicated for the state-owned land, which is the reason why the negotiations with the government are still ongoing. The negotiations with private owners are also in their last stage.
One of the deals which BDHL has executed is the purchase of the golf course from Krasimir Gergov with an area of 874 decares which the company bought for nearly EUR 11m. According to Lock the location of the golf club makes it a good addition to the entertainment part of the project.
The investors are getting closer to securing the full financing necessary for the project. There are several Hong Kong investors, companies with different profiles, some purely investment, others from the hospitality sector, which have invested in the project. Lock stated that some of the investments in the project would come from investment funds and other partners, and there are even negotiations with a large corporation. Over a year ago, representatives of the businessman Steven Lo in Sofia, said that negotiations with investors from China, Malaysia, Hong Kong and Singapore are underway.
One empty construction period
In order to ease the transition of investors through the administrative procedures, a new team of experts led by the deputy minister Daniela Vezieva has been employed. Around the change of the government, Steven Los’ team said that they have waited 8 months for this new team to be formed.
According to the investors it is exactly this delay that postponed the construction for January.
“In Bulgaria, as well as in other countries, investors in large projects have direct access to the government. I can point out multiple examples from Macao and Singapore. What significantly simplifies the work of investors, is the opportunity to do several things in parallel, which speeds up the construction of the projects. We could not achieve this here.” said Josie Lock. “Since we do not own the whole land, it would be good if we are given the opportunity to prepare and submit for approval all the project documentation, while the procedures for acquiring the land are still ongoing in order to save time.”
The company has only two out of the three years planned, according to the certification for a priority project during which it can use institutional help.
Entertainment for Europeans
After the project was repeatedly classified by different observers as the European Las Vegas or the Macao of Asia, the investors are no longer relying on this aspect. According to Lock, the project would not only be used for entertainment purposes for tourists, but also the desired destination for family or business travel.
“Our main objective is to attract Europeans, which is the reason we chose Bulgaria. The geographical location of the country makes it convenient for Europeans and is only a 3-hour flight away.” According to her, the fact that the project is new and quite impressive, would definitely attract the attention of the actively traveling Asians even though they are not the main target group of “Saint Sofia”.
It is important to develop the business aspect of the construction project, as the idea would be to attract large brands to present their products in the expo center or organize large conferences. We also focus on the entertainment part, as we plan to use the large conference room for hosting different musical or sports events. There would also be a casino, which is another part of the entertainment element of the project” comments Lock.
The large scale of the megaproject would also need a large number of employees. According to Lock about 10,000 people would work on the project, without including the employees of the contractor firms. The personnel would consist of Bulgarians but the management of the shopping mall, hotel, exhibition center and the conference hall would be foreign. The aim is to use foreign experience and expertise for the successful operation of the project. Negotiations with potential partners for the management of the projects are currently ongoing. It is possible that Bulgarian companies might be included in the execution of the project, but the auction for construction companies is yet to come. “We prefer to choose different executives for the different buildings of the project so that we do not rely on only one company for the construction. This would also allow us to build multiple buildings simultaneously.” said Lock.
Apart from the construction of the project itself, another important element is building the infrastructure surrounding “Saint Sofia”. Investors are currently leading negotiations with the government about constructing connecting roads from the two highways Hemus and Trakia to the megaproject. “The results are positive so far, but as expected, the necessary budget is still not available” commented Lock. According to her, the support from Bulgarian institutions is sufficient for the successful execution of the project in time. We could expect signs of whether this would happen as soon as the early autumn.
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