Property Focus: Flawed Pearl - Sophia Echo

The opening of Mall of Varna, which claims to be Bulgaria’s largest shopping centre to date, was marked by controversy over its paperwork.

After the official opening, Varna-based daily Narodno Delo said that the building lacked the final right-to-use permit (popularly known as act 16), and is therefore flouting regulations. The permit validates that a completed construction complies with all safety standards as well as the initially approved design and architectural plans. The issue of the document falls under the jurisdiction of Bulgaria’s Directorate for National Construction Supervision (DNCS).

Tsvetelina Ivanova, a spokesperson for DNCS, confirmed that such a permit has not been issued, as quoted by Narodno delo. On June 17, officers from the Varna branch of the directorate embarked on a massive spot check during which they discovered that all shops were operating. Ivanova has stated that tenants could only open shops for business after a commission determines that the building is entitled to receive the right-to-use permit. This could take over a month, and it would depend on what kind of judgement the fire department, the local electrical company and Varna’s company that holds concession on water and sewerage will pass. So far, only the fire department has inspected the building, and has confirmed that despite the lack of the permit, it is not fire-hazardous.

A statement against the mall’s owner has been drawn up, which could result in a fine of somewhere between 1000 and 10 000 leva. The same fate could also befall the owners of about 120 shops currently trading in Mall of Varna, their lack of awareness about the matter notwithstanding.

“At this point, the mall’s management refrains from making any comments,” Antonia Angelova, Mall of Varna’s communication manager, told The Sofia Echo on June 18. “We had such a wonderful opening, the whole city streamed in, so, no, we wouldn’t like to comment on what’s been said in the media,” she said.

The media, however, had a comment from  Krassimir Uzunov, CEO of Mall of Varna on the issue. Narodno Delo quoted him as saying that there is no such thing (as the missing permit).

Uzunov’s Intersevis Uzunovi AA is a major Varna-based investor that has invested close to 50 million euro in the project. It is now up to the authorities to establish whether Mall of Varna has all the necessary documentation to function in compliance with the law.

Besides the “Act 16” controversy, it was business as usual for Mall of Varna on the opening day. The day marked an official change of ownership with Miller Developments, a privately-owned company taking over after Intersevice Uzunovi AA agreed to sell the then-incomplete development for 120 million euro. The selling price is the highest paid for a shopping centre in Bulgaria to date. It is also the second most significant transaction in the country in terms of real estate value, according to Dnevnik daily. The annual rate of return, estimated by Miller Developments, is up to 7.5 per cent, the daily said.

After the mall switched ownership, Uzunov retained a CEO appointment.

The property is Miller Developments’ first acquisition in Bulgaria, and its largest one-off investment on the Balkans.

The building, designed by UK-based architects Chapman Taylor, is on the intersection of Vladislav Varnenchik and Hristo Smirnenski boulevards. Both are major thoroughfares in Bulgaria’s biggest Black Sea city, offering easy access to Varna Airport and the city centre.

Mall of Varna houses a skating rink, eight cinema halls, 10 bowling lanes, a 3D cinema- XD Theatre – as well as an 800 sq m children’s entertainment centre called Capella Play. The total built-up area is 70 000 sq m, out of which 33 000 sq m is the total retail space. The property management and leasing is overseen by Cushman&Wakefield and their Bulgarian affiliates Forton International.

The mall also features world-famous brands like Miss Sixty and Energy, Esprit, L’Occitaine, Nine West and Puma. The supermarket chain Piccadilly Gourmet will also have a store, the chain’s biggest, spread out over 2000 sq m. For the convenience of the mall’s customers, the parking lot is equipped with 800 spaces.

Miller Development announced that it planned to improve its European portfolio in upcoming months through the establishment of joint ventures. Currently, the company has offices in Romania, Denmark, Hungary and Portugal and intends to invest in Ukraine.

In Bulgaria, Miller Developments is looking to invest in residential property and has said it is already eyeing potential plots.