Cover Story Business Magazine - Meta Estate Trust story, strategy and executive team

"I've always been drawn to entrepreneurship as a vacuum. It was drawing me in and I was going towards it."

Says Alex Bonea, one of the youngest entrepreneurs in local business. In the 11th grade, before his BAC, he made the radical decision to give up his plan to become an architect, a profession for which he was already training intensively, to venture into entrepreneurship, with the model of his father, a well-known businessman in the local business environment, in front of him. The direction took shape, the stakes being risky but promising: real estate. But he didn't just go for the classic real estate investment option, he also set out to be the one who facilitates the investments of others in this industry where every gamble must be carefully monitored to turn a profit. What does Meta Estate Trust, the company he founded two years ago, bring to the market?

"I come from a family of entrepreneurs and architects: on my father's line they are entrepreneurs, on my mother's line they are architects. I initially wanted to study architecture, at one point I was in the offices of my father's company (Dragoș Bonea, founder and CEO of interior design provider Delta Studio), I was studying, drawing, I was very methodical in what I was doing and conscientious. I saw the hustle and bustle out there, and I asked myself "do I really want to do architecture? It's going to be six years of study, after that it must be some kind of internship, what do I do? Do I do this thing?" And I made the decision, I think in five seconds, that no.

I'm not doing that, I'm doing entrepreneurship," he recounts. He was in the 11th grade, and a year later, following a recommendation, he finally chose The Entrepreneurship Academy, which followed a Finnish model of study, and was still in its infancy at the time. In parallel with his studies, he also worked in his father's company since high school. "I managed them well, it was a very good exercise." At Delta he focused more on the marketing area, but much of the company's business, half of the business to be precise, was selling to real estate developers. "And there, me coming into contact, having networking events with real estate developers that I was starting to get to know, I found it interesting to invest with them."

He recounts that back then - speaking of 2018 here - developers needed two things when starting a project. One was to finance some of their capital, and secondly to prove to banks that they had a saleable product. "And then they would come with some offers when they launched projects, where for a package they would give a discount, generally from 5-10 apartments, they would give a pretty considerable discount against a down payment. So they didn't ask for 100% at the beginning, but a down payment between 15% and 30%. That's what they offered to individual investors. The market was very interesting, it seemed like an opportunity to me, and to my father, and I said: OK, I want to take this thing on myself, I find it very interesting, and there was no other person who could take it on, because everybody was focused on the core business. So we started investing with them."

He remembers it being a great couple of years back then. One thing he also noticed in the market was that generally the investors who were buying, who were opting for these promotions, these packages, were investors who had done this kind of business before and had a tangency with the real estate market, were part of the real estate development ecosystem, whether we're talking about service or product providers for real estate developers, building materials, architects, a lot of real estate agents - who felt, knew basically the business model: you buy at a discount, the project develops, you sell at the end with a sure profit. "I noticed that it was somewhat of a hacienda, things were not very structured and arranged. Instead, there were some extraordinary returns being made as early as 2015, and I was basically seeing in 2018 how in some investments you were doubling the money from year to year.

With a down payment of 15-20%, you could practically double your money with an assignment. And the idea was simple: in the beginning, as an investor, I take a certain risk, because I can understand how that developer, that project works. But an end consumer, an end customer, is more cautious. And then he comes when he sees that the block is built, the facade is closed, he comes about 12 months later and buys at the price at that time.

Developers also did this for another reason, most of them were bank-financed, and then the bank required them, precisely for this reason, to prove that their project was marketable, required them to sell a percentage of 15-20%, to prove that they managed to finish the project, that they managed to sell it rather, and then the bank released the credit and they started building, having the necessary sources to finish all the financing.

He also says that with the market being on an upward trend, it didn't matter what apartments you sold, the project was completed, it sold. "We were working with bigger, more serious developers anyway, because our business structure was also more corporate." He gives examples here with Belvedere Residence, Parcului20, phase one, and even ONE, as well as smaller, boutique projects in the centre, and a number of projects in Năvodari. "During that period I ended up managing somewhere in the region of a portfolio of 40 apartments in total."

From idea to startup. Seeing this great potential at the time, the idea that was born was to do this activity for other investors as well, "to institutionalize this investment activity". So in 2020, in March, when the pandemic came, he said to himself that this plan could become something serious, take the form of a start-up in this area. To this end, he contacted Adrian Stanciu, who had been his teacher and mentor at university, knowing that he had a wide range of contacts in the business area. Initially he was thinking of focusing mainly on renting, buying apartments at a discount with an advance, and not just looking to close concession-type deals, renting being the area they saw the developed markets in Europe and America moving towards, eventually ending up with income. "But we were also betting on one more thing - which didn't turn out to be true - that the pandemic would negatively impact sales, and that's when we thought that a lot of developers would want to rent their apartments and we would be able to include those apartments in a larger structure, build a larger portfolio. And in that sense we were also thinking of developing a property management company that could manage both the apartments within a holding company, like Meta is now, and at the same time for the developers who were going to have apartments to be given for rent. Because the rental business is quite different from the development business, given that we were clearly thinking of financing this model.

That's basically where the whole idea started." He then recalls that "Adrian Stanciu knew Eugen Voicu from Cert Invest and introduced us. My father, Adrian Stanciu and I talked to Eugen Voicu and we aligned ourselves on the subject, we saw this potential and we said OK, let's go ahead, let's move forward with the project. We were in the real estate market, I had been doing this type of investment, but for a short time, that is for about two and a half years at that time, and we said let's attract someone who had been doing this for a long time. And that person, whom I knew and had a very good relationship with, was Ionuț Nicolescu, who at that time was a partner manager at SVN. We aligned very well as co-founders and started to develop the project. I was most involved at that time as project coordinator. I could say something I've always done well was to be stubborn and stick to something and see it through to completion. And then I was doing everything from setting up meetings, making sure that everybody showed up at that time, that we were talking, that we had a plan, that we were following through on the plan. That's kind of what I focused on initially."

That was in May-July 2020, and after moving forward with setting up, pitching the investment, which he did himself, they all discussed the structure, found a graphic designer to work with. Then, with Cosmin Mizof, who joined from the Cert Invest team, they created the business plan. "We were banking on the idea that sales would not work, but while we were developing the business idea we saw that things were working and then we said, 'let's not stick to renting, because they also give low returns.' Let's also include this area of investment with higher returns, which I described before - the promise to buy." And we created the business plan." They set up the company in 2021. In March, they also made their first placement, also in Belvedere Residence, a very good project for in

And given that it was a relatively short maturity of 3-4 months, the annualised investment return was very high. After that, they went to work. "Investment decisions were made much more ad hoc than now, in the sense that it was us, the co-founders, and we were still operating the actual business. A structured presentation was made, Cosmin would arrange it financially, Ionuț would arrange it commercially, and we would make the decision, place the money and then deal with the sale."

There were two share capital increases, in March-April, up to 5 million euros, and then came the private placements, "we also had this fundraising activity", so before the IPO they had reached somewhere around 15 million euros of equity just from private placements and capital increases. "We did subsequent rounds. It was a very good time because there was the pandemic, everything was closed, the state helped a lot, put money into the market, put liquidity in and people, as you would say, were sitting on actual money. There was a lot of money in the market and they didn't necessarily know what to do with it. And so it was a good time to raise the funds that we raised, quite easily and quickly. And there was another thing. There was no similar product."

Listing, the generator of change. The entrepreneur recounts that they started from the beginning with the idea of listing on the stock exchange, initially on AeRO and then on the main market, and a similar model, this idea of having a diversified portfolio across several investment types, he says didn't exist. "And we've generally caught entrepreneurs or people who are succeeding from their business and their career to earn and set aside large enough amounts and want to invest. Real estate in our country anyway is, let's say, a national sport, but instead, there were people who were not very tangential to the field and they thought they'd better get some experts to invest their money and they could do what they do very well and manage to invest in other things."

After making the private placements, they prepared for the initial public offering on Aero. To that end they started building an executive team. They co-opted Oriol Castellas Deig (CEO), Raluca Drăgan (CFO), Oana Ignat (COO), "and we went ahead with the preparation of the prospectus, with another presentation. Somehow we were addressing another profile".

Things took a little while, but Bonea says it was business as usual. So while the original planning had called for the AeRO listing to take place in 2022, in the first quarter, it finally happened in August. "The listing was a success and basically on 29 August 2022 we rang the bell on the stock exchange. And from there on things went in a pretty clear direction and that was pretty much the story of setting up the company."

Various impediments also arose. "We were a startup, I mean a new company, but still we couldn't afford to have a margin of error like all startups have, because it wasn't a product with, let's say, exponential growth potential, like in technology, but rather what we had to do was make good investments and make sure we were managing the risk and the potential return, because a lot of the funds were shareholder funds and we were basically investing with them and for them."

He then recounts that the market context has also changed. "So a little bit after the war started, somewhere around the end of 2022, we started to see that things weren't really on an upward slope and we started to explore how we could do things better and manage investment risk even better."

Because it had become a publicly traded company, but also because the business model created some confusion among shareholders about exactly what investment activity they had, Bonea says it became very important to have a very clear and transparent strategy. "And here, basically, we wanted to start creating a strategy, let's say like it is now, that it's put out for public debate, but we very much wanted to be structured and organized, because investment decisions were very much taken until that moment less structured, depending on how someone understood the market, how someone understood that it was an opportunity, more instinctively, and we were making decisions quite quickly. Now, with the economic context that has changed and we thought it was going to change, we started to think that we had to sit down, be more calculated, more organised and communicate, be more transparent with shareholders. In that sense, let me say, the management vision was a little bit maybe in polar areas, because at the same time, when you have a structure, you can also have an opportunity cost. When you make some structured decisions, you can miss some opportunities just because you run them through a certain template."

So, from that time, sometime around the end of 2022, until around June 2023, close to the time Bonea took over as CEO, the company was in an effervescence of finding a vision, an effervescence among the founding shareholders, with a lot of discussions, about how things should be done, what's the right approach and so on. "But, in fact, I think that such a step was necessary and would have been necessary in the evolution of any company. We based ourselves on certain market dynamics that we had observed, but we couldn't take an effective model, per se, from outside or here, from Romania, because there wasn't one for our market, as it was at the time, and then we needed, after investment activity of, let's say, a year and a half, almost two, to draw some conclusions and learn from that experience in order to update our thinking and vision with a strategy more adapted to the context of the moment and the context of our business evolution."

Then, he says, it was somehow in June that they somehow came to a conclusion about what strategy they could address, and basically what skills they needed within the executive team to get to a different stage of development of the company, in a different economic context. "That was also somehow the reason I wanted to take over as CEO, and if there was one thing I was good at in this whole thing, it was to bring in people with much broader expertise than mine and from different fields, who together would create value. And in that sense with the arrival of Antoana Comșa, who has a lot of experience in this area of real estate development and knows it in all its details, together with my arrival, me somehow representing the initial vision and knowing the smallest details of the project, and now with the arrival of the new CFO, Bogdan Gramanski, who has a lot of experience in financial auditing, I think we have a team that is very prepared for the moment we are in today."

Bonea says this change in approach has been seen primarily in a team empowerment, in a "restructuring, although it's a pretty tough one, but that's what it has been: a restructuring of ongoing investments." He says they re-examined every large exposure in the portfolio, every investment, re-examined the risk, the size of the risk, how that risk could be managed and "together with the partners, with our counterparty, who we invested in, we came up with other structures. Basically we secured ourselves, we took mortgage guarantees, real estate guarantees, somehow we secured our investment, whether it was an associated loan in a company that we invested in, any of it was a promise to purchase for certain real estate, we basically made sure that we had real guarantees". That was the first thing they did.

For the investments they then made, "new business", they started exploring this idea of partnerships with developers more than just buying some apartments. "Because if we ended up buying a large number of apartments, automatically by the time the project was coming to completion and in the context that sales during this period were not doing very well in this early stage area, we ended up competing with him and then there was the potential where we were bidding a price both us and him and we had to lose. We said OK, let's try another approach, let's be equity partners. We go in as partners and we see. We want a profit share, so just the profitability of the project, and we focus together on basically bringing sales to the project and that project being successful and us benefiting from that success from the partner position."

In fact, what they want to do from now on is to focus on identifying projects with potential and making sure, through constant monitoring, that they are going according to the investment plan originally agreed. This he says is very different from what they did before, because before they focused on finding the investment opportunity and the investment, waited as long as they needed to and then focused on the exit. Instead there was a period between investment and exit that was not very active. "But considering how it is with the whole economic context, before this thing worked because things were going well, you didn't have to look at certain things because developers were selling and things were being completed successfully. Now we haven't got to a situation where things don't complete successfully, but we wanted to predict that and also focus on monitoring projects, more than just entry and exit. And we have a monitoring policy and depending on what deal we have with the developer in question we look at balances, bank statements, and very importantly, sales status. If there have been bookings, promises closed."

As a result, he says they are much closer to every investment they make. "What I think we need to do now is to specialize, because the real estate development business is quite complex and very different from the business, rather, that we might specialize in, which is analysis, investment and capital market financing. We rather look for competent developers, we know what they look like, what we are looking for and then we rather specialise here. We specialise in finding and analysing developers and projects and we specialise in attracting money from the capital market to make the investments we are talking about."

A trio of risk. On the risk presented by investing in a property development, he points out that it generally has three dimensions. There is the legality dimension, where the real estate developer is looking to get a building permit in the first place and has to take steps depending on where he is building, like the PUG, like the PUZ, and now other things have come up that make it even more unpredictable. "We all know the situation with the local authorities in Bucharest, where no more building permits have been given. And in this sense we are looking very closely at the legality area, how he obtained his building permit, what opinions he had in the urban planning certificate, on the basis of what he obtained the building permit, a private PUZ, a PUZ that is valid, where the PUG stands in relation to the PUZ and the building permit. There's a PUZ that in the PUG was on green space, it's already a red flag, because there's a big potential for it to be challenged in court, as we're just seeing these things happen." In addition to the building permit zone, what's also very important after the project is built is the completion report, Bonea notes.

"This is where the local authorities check if what has been built is in parameters with the building permit. And we monitor this in the sense that we look quite closely at the development of the project and the works in the context of the building permit, we check that there are no differences. However, any developer does that, it's just an oversight." In addition to the area of legality he says you also have to look at budget feasibility. "And here we look at two things: we look at the budget in the context of prices and quantities. Basically, we check that the budget is in the market. In addition to the price area, we look at sources of funding. And it's a very easy calculation to do: we add up how much the bank loan is with the developer's equity and the amount of investment we want to make and see if things add up." The second risk, in addition to the legality risk, is the risk of defaulting on a real estate project generated by insufficient funds and the non-completion of the real estate project, bearing in mind that almost every time there is a bank loan, the project ends, the interest flows and that's where things get stuck.

And the third dimension of risk is linked to the feasibility of the sales plan, in the sense that they compare the project with what has been sold in the area and at what prices, and they look at the area, the quality of the finishes, the partitioning, the structure of the apartments, how many are two-bedroom, studio, three-bedroom, four-bedroom and the facilities in the area, or rather the facilities that the real estate project provides. This is so that they can make an informed decision about the likelihood of the developer's sales plan coming to fruition. "With this size, it basically closes the loop."

Diversification strategy. The business currently manages 20 projects. If we're talking about the type of projects Meta invests in, Bonea says they've aimed from the beginning to diversify, and that's because another advantage they wanted to bring to the market in the context of the MET action was to propose a diversification of risk, a diversification that comes largely from two dimensions: different investment typologies with polar risk-return profiles, with rentals having low risks, low returns, and developments - higher risks but much higher returns. "And in addition to this diversification of investment typology structure, we are also looking at other market segments. Mass market we didn't do much and it was good that we didn't, but we're looking at medium upper and we had high end as well. But in general, our market where we focused was on the medium upper."

In addition to this diversification of market segments, or rather of buyer segments targeted by these projects, they also look at different geographical areas. "We focused on Bucharest, but we also had projects in Constanta, from which we also came out, Sibiu and Poiana Brasov. It was, in a way, a more or less unified coverage of where we had access to and where there was enough interesting real estate activity."

In terms of geographical area of interest, in parallel with Bucharest, Meta is looking closely at Brasov and Poiana Brasov, because it sees a lot of potential there for several reasons - the airport, but also the fact that Brasov is located closer to Sibiu, Cluj, Timisoara, but also to Bucharest. "And on top of that, the HoReCa market is clearly developed and, in general, we are looking at the area of apart-hotels and hotels, which looks very interesting."

According to him, they chose to focus on residential because that's where they knew what to do and they also saw the greatest potential to generate returns, but rather the potential to institutionalise the business, that was where the most open market was. "It was also somewhat fortunate for us that we knew how to do residential and that's what we looked at. We picked a good market, we picked a good time and we were able to capitalize on it."

In the office area, on the other hand, he says things were pretty settled, with big outside players already in the market. "And in residential we have Prime Kapital, we have NEPI, we have a few other big players, but on the other hand, in my opinion, it's harder to succeed as an outside investor in the residential market, because it has some peculiarities that are very much related to the local relationships you have."

Now, instead, he says they're looking at retail parks because they've seen them develop very nicely, they're closer to their know-how and understand them better, and that's because retail parks, after all, are still aimed at end consumers, and this direction also offers potential for risk diversification. "If we invest in industrial and logistics for example, there you have maybe fewer, bigger players, but I also see a higher systemic risk if the market doesn't go in a favourable direction."

On the profile of stock market investors in Meta, Bonea says that, given that more than half of the company's capital has been raised so far through private placements and capital increases, the profile has generally been one of high net worth individuals. The other profile is the retail market - not necessarily small investors, but investors who do this activity in their spare time, or do it as their core business, but are looking to make a smaller investment. The advantages for the two profiles, the two segments, intersect in places, notes the entrepreneur. For the retail market, he says, a main advantage is that they can now buy a share in Meta Estate Trust at a much lower price than they could buy an apartment in a real estate project, and somehow in this way barriers to entry are reduced, even excluded. "And by buying a share in MET I, as a retail investor, can say that I enter this real estate investment market and I am exposed to this market and I can diversify my portfolio with a small amount that at the same time is liquid, I can get out of it being listed on the stock exchange.

Liquidity is a common advantage for the other segment. Conversely, it may not be the most pursued thing by these investors and for them what I think is very important is that they are diversifying their investment exposure to the real estate segment as well and doing it through a team of real estate professionals." And that's because investing in real estate, no matter how much money you go in with, is not necessarily risky but it requires attention and expertise, the executive adds. "And that's basically what we offer: a bridge for both small and large investors to the real estate investment market. With a team with a lot of expertise in this market, with a diversified portfolio - because diversification of risk is a very important thing, because it's very different when you have an isolated investment in a real estate project or when you have an investment in a portfolio of real estate projects. If a particular project suffers, slows down or at worst defaults, you still have much more exposure on other real estate projects and the chance of them all defaulting is much, much smaller."

Ambitious short and long-term goals. As for the timing of the move from Aero to the mainstream market, Bonea says this step is expected to be taken in 2025. "We want to take 2024 as a preparatory year. We already, in a way, behave like a listed company on the main market. We have a five-member board, not a three-member board. What we should do, and we'll start in 2024, is to look at IFRS integration as a way of looking at accounting. This is something we need to do additionally and we will start testing from next year. The target remains 2025."

In terms of future goals, he says that "the most ambitious, in a way, or rather the way we want to get there, given that we have several business lines, investment typologies and that we are a holding company, is that we want to start, and we have already started doing this, to move the business to subsidiaries." One example he gives is a subsidiary that would, for example, do rentals. "This is where I see a lot of potential, because a company can grow as a financial result, balance sheet, annual profit and loss statement very nicely, as a pure rental business and somehow enclosed within an entity that does just that. We've said from the beginning that we're a hybrid between the REIT (Real Estate Investment Trust) model and the REOC (Real Estate Operating Company) model."

The REIT model he believes is somehow where you end up every time in a developed real estate market. "We look at America, Europe, Germany, pretty much everywhere, we see basically these REITs. Right now we don't have legislation that can support this vehicle, because you need a special statute. These companies have operational limitations, in the sense that more than half, 70-90% - it varies depending on the legislation - of the revenue has to come from rents, there is an obligation for the company to make rents. A percentage of, also, 70-90% depending on the legislation of the profits generated must be distributed by the company as dividends to shareholders. And, in return, you have some tax benefits in the sense that the tax on dividends is normally lower." This, Bonea points out, creates the potential to address the market for investors looking to do rentals exclusively. It's much lower risk from an investment standpoint, it's much more predictable and doesn't have swings, and when the market goes into an economic downturn, things are pretty stable. "This model, if it comes in - and we, Meta, will try and support the development of the legislation, we will get involved as much as we can - I think it will develop the market a lot, I think a lot of money will come in through this vehicle and, first of all, you will suddenly have a big buyer in the market who buys apartments to rent. He's simply absorbing the supply and holding it and putting it up for rent and as we're seeing over the last six months, as the number of transactions has gone down a little bit on the sale, rents have gone up, demand on rents has gone up, chir prices have gone up and I see a trend in that."

In addition, for the next decade he also aims to reach an ambitious threshold: "In 10 years from now I want to reach a capitalization of one billion lei, so 200 and a bit million euros. I think the potential is there. When I was studying at university, every year I had to go to another country, I went to Amsterdam, Cape Town, Dubai, and I think what's nice about Romania is that we have a very big potential for development. If you compare it with other European markets and other developed international markets, you don't find this opportunity to witness a substantial change and maybe even to be part of this change. In this sense, I believe in Romania very much and I believe that the Meta project could develop together with the local market."

The siren song to entrepreneurship. As a leader, Alex Bonea would describe himself as an encouraging humanist. "This word leadership has a rather polar valence in our culture. Some believe that a leader should be the one who bangs his fist on the table and dictates and gives directions. And then there's the other profile of a leader where you're more likely to work with people and manage to create a team and a structure that can function without your actual involvement in the operation. I rather see myself here in the other profile where I focus on identifying the competence that we need, bringing it and managing to motivate it here together with everybody." Sometimes it's also a trade-off, he says, because at the same time he really enjoys the work itself of analysing investments, negotiating, sitting in discussions with a partner, but he mustn't forget that another of his goals is to create a team here that will work without him in that work. "I think that's the challenge with entrepreneurs, it's very hard because you love what you do, but at the same time you have to know that you have another hat, the hat of manager or leader."

When I asked him if he faced any fears when he ventured into entrepreneurship, he said it's interesting that entrepreneurs are somewhat risk takers, "but I don't have a particular fear in mind right now. I've always been drawn to entrepreneurship as a vacuum. I was drawn to it, and I would go for it. I can't identify a general fear of entrepreneurship." Instead, he says that now, and since taking over as CEO of Meta Estate Trust, the facts of the matter have somehow changed, because it's a much bigger responsibility, considering he's in the position where he and the team also manage other investors' capital. "It's a much bigger responsibility and the decision to take on this role wasn't as quick as I've made other decisions before, but I felt and believe I was and am the right person to grow this business exactly as we started from the beginning."

In his opinion, it's important for any professional, any entrepreneur, to find a balance in their career, because the lack of balance decreases your output and the results you get. "In the last couple of months I've been working sometimes from 8am to 11pm during the week, but I try to maintain a balance in that area. Other passions I have are extreme sports. Sometimes I can find a weekend where I can get away to the mountains to go motorcycling or cycling, and I also love sailing." Sailing, he says, is an increasingly common passion, because the moment you're on the boat and you're sailing and you see the sea and you hear the wind, it's very disconnecting. "At least in your spare time, I think that's really important, to be able to disconnect. And I think that delivers, I would say, the results that many people want. Parallel to that is extreme sports, where if you're not careful, you kind of crash. I now realize that my hobbies are generally in an area where I manage to disconnect, with the goal of also enjoying life, but also with the goal of resting and coming back to the office with new sources of energy."

Bonea also believes that right now the idea of entrepreneurship is being promoted a lot and generally promoted in this area of getting rich quick, easy. "I don't think it's very healthy, it seems like a mirage to me. People who get rich quick and easy are generally lucky. And luck is something you can't control, rather you have to look at the things you can control. I think a key thing in what I was able to do was that I had, through the family business, tangents with the reality of business. Effectively, I've been exposed to discussions, negotiations, implementing plans and I've had a very good understanding of how a market and the business world in general works. And especially the business world in Romania, which is very different from the entrepreneurial books, and this area of locality and culture must be taken into account."