Planned investments worth $300 million and a nine-project portfolio with a total construction area of more than 600,000m² – this is the development company White Square, which appeared on the market three years ago and is part of BK Holding. Forbes Georgia spoke to the managing partner of BK Holding, Irakli Burdiladze, about the company’s ambitious vision.
White Square has been operating in the real estate market since 2020. The management of BK Holding’s new brand was taken over by a team with 13 years of experience in the development industry – professionals who have created numerous successful projects. Over the past three years, they have offered customers not only apartments but also novel and appealing investment products.
To find out more about the past activities and plans of the White Square brand, we spoke to the managing partner of BK Holding, Irakli Burdiladze, at City Tower – a 100,000m2 multi-purpose complex that was built by BK Construction, which is part of the same holding company.
Irakli Burdiladze’s office wall is adorned with a map of Tbilisi displaying dozens of development projects. These buildings are well known to our readers, and they have one thing in common: they have all been completed by BK Construction over the past 30 years. Only nine White Square projects have appeared on the map so far. However, ambitious plans are already in place, and we will soon see individual residential buildings and whole new neighborhoods being built under the White Square brand in Tbilisi.
Irakli Burdiladze explains the decision to create the White Square brand because of the high potential for market development. According to him, utilizing such a large market through the synergy of an experienced team and a recognized construction company was not a difficult task at the time. The optimism of the company’s managing partners was justified: the first White Square project immediately turned out to be a success, and nearly all apartments in the 132,000m2 residential complex on Shartava Street were sold in the space of two years. Irakli Burdiladze uses sales figures to illustrate the brand’s appeal: White Square has sold properties worth $64 million in the last two years.
“White Square is part of BK Holding, which also incorporates the well-known construction firm BK Construction. The fact that other development companies are using our construction department to implement their own projects speaks of the high-quality standards at BK Holding. BK Construction is currently building or planning to build a total of 900,000m2 of floor space, a third of which is being built on behalf of other developers.”
Six of the nine White Square projects marked on the map are in the active phase of construction and sales, while the remaining three are in the stage of planning and permission.
When talking about the competitive advantages of the brand, we start with the variety of real estate projects on offer. According to Irakli Burdiladze, the current projects are tailored to different segments, allowing buyers with any preferences or financial capabilities to easily find the housing they want.
The White Square portfolio currently includes residential buildings on Shartava Street, Kavtaradze Street, Danelia Street, Politkovskaya Street and Shuamta Street, as well as a new residential neighborhood on Dzotsi Street in Saburtalo. These projects are tailored to different segments. For example, Filigreen on Danelia Street is a premium-class residential building, while the Mindeli residential neighborhood project on Dzotsi Street is designed for the middle-income segment. The company is also implementing an economy-class project on Shuamta Street in Varketili.
Another factor named by Irakli Burdiladze as an advantage of White Square projects is the high energy efficiency of the residential buildings. According to him, the energy efficiency the company achieves in its projects allows residents to save at least 25% on utility bills.
Most importantly, White Square fulfills its promises in full, in a timely manner, and to a high standard. “The fact that we are implementing the projects of other development firms is testimony to our quality. We are currently building 300,000m2 of floor space for other developers,” Mr Burdiladze points out, adding that this kind of cooperation would have been impossible without quality guarantees. “The presence of a large construction firm in our holding company gives us a competitive edge. In the construction process, we never depend on external factors such as finding a successful general contractor, allowing us to build much faster and with higher quality.”
The synergy of experience and resources allows White Square to confidently manage all its projects and ensure the orderly functioning of buildings and systems, including fire safety systems and elevators. According to Irakli Burdiladze, this makes it even more comfortable to live in one of the complexes built by White Square.
Apart from prospective residents, White Square also appeals to investors who can become involved in the company’s projects at an early stage, with the prospect of obtaining the equivalent profit of an equity partner. “You can invest directly by buying an apartment or participating in our investment projects. We can also tailor our investment offers to the interests and needs of an investor,” Irakli Burdiladze explains. These financial tools have allowed White Square to attract investment worth $4 million in the last two months alone.
According to Mr Burdiladze, the lack of access to funding remains a key challenge for people who wish to do business in Georgia. Therefore, the company is highly determined to develop the market and offer different investment products.
“In May, we introduced a new financial tool on the market, which includes both the traditional form of financing and the option to purchase the apartment for a set price. Investors have expressed great interest in this tool. The funds we attract are reinvested in accelerating the implementation of our projects.”
White Square is actively involved in developing new financial tools in Georgia. Together with the National Bank of Georgia, the Ministry of Finance, the private sector and other stakeholders, the company is currently working on establishing real estate investment trusts (REITs) that are very popular in Western countries. Adopting Western practices is something that the company dedicates a lot of effort to. Once the appropriate legal framework is established and tax reforms are implemented, Irakli Burdiladze expects the new investment product in the form of REITs to revitalize the Georgian stock exchange and turn it into a major source of foreign investment.
“Real estate investment trusts will help increase economic activity. Companies whose main field of activity is not related to real estate ownership will have the opportunity to release capital invested in real estate and develop their main business activities with the help of these funds,” Mr Burdiladze explains. For example, private schools, banks, the healthcare sector and others could sell their real estate to a REIT and lease the property back from the trust for a predetermined rate while investing the funds obtained from the sale into developing and expanding their businesses. The resultant increase in economic activity on the market will create new jobs and raise tax revenues. Since REITs are traded on the stock exchange, new securities will appear in Georgia, facilitating the entry of foreign investors into the country.
Irakli Burdiladze’s optimism is based on the current trends in the real estate market. According to him, real estate demand is growing both in Tbilisi and the rest of Georgia. The rate of growth is so high that demand significantly exceeds supply in the capital. This is what causes price rises in the market.
The managing partner at White Square sees several reasons for the growth in demand. According to him, falling interest rates on foreign currency deposits have prompted depositors and others to look for alternative investment tools. At present, the real estate market provides an opportunity for profitable investment by purchasing real estate at an early stage and then reselling or renting it out. According to Irakli Burdiladze, profits are substantial in both cases.
Another reason for the growing demand for real estate in Georgia is the large average size of households in the capital. According to the World Bank, the average number of people per apartment in Tbilisi is 3.5, compared to 2.5 in Western European countries. Irakli Burdiladze explains that due to the high rate of economic growth, people’s income increases, and the first thing they do is buy real estate.
Growth expectations are also created by improved access to mortgages. The growth potential is quite substantial in this regard. In 2022, there were 45,000 transactions worth approximately $2.6 billion in the residential real estate market in Tbilisi. Only 20% of these transactions were mortgage-financed. “This is a very low rate for the real estate market. As people’s income grows and mortgage rates fall, people will have increased access to finances,” Mr Burdiladze predicts, adding that such developments will further increase the demand for real estate.
Irakli Burdiladze explains why supply lags demand. “On the surface, growing demand has led to a significant increase in supply. As a matter of fact, the rate of supply in Tbilisi cannot keep up with the growing demand, as evidenced by the rising prices. Once again, there are several reasons for these developments.”
The signing of the EU-Georgia Agreement on the Deep and Comprehensive Free Trade Area (DCFTA) has led to legislative reforms and harmonization with EU norms. As a result, construction regulations have become stricter, especially with regard to obtaining permits. The fire safety of buildings, energy efficiency, earthquake resistance and other important health and safety factors are now well regulated. According to Irakli Burdiladze, it is not easy for new and smaller companies to obtain these permits. “Increasingly, to operate in this market, you need to be a large and experienced company that spends considerable sums on architectural and engineering services, fire safety and energy efficiency. I predict the number of developers to decrease through the consolidation of real estate market players.”
Another factor affecting supply in the capital, particularly in its central areas, is the lack of construction space. According to Irakli Burdiladze, there are barely any free plots in Tbilisi where large-scale projects can be implemented. The only way to generate supply in these areas is by replacing old buildings with new ones. “This can be a drawn-out process, as you first need to come to an agreement with each resident, then plan the project and obtain the necessary permits. This process requires a lot of time and money. Ultimately, this has an adverse effect on the supply rate.”
As the interview continues, it becomes apparent that the management of White Square considers these opportunities and challenges in every action they take. Along with construction and development firms, the BK Holding portfolio also includes the construction college “Construct2” in the city of Zestaponi. The structure of the holding company echoes the vision of its managing partners about what is needed from a leading real estate player in Georgia today.
“I have often said that the two main obstacles to rapid growth in the real estate sector in Georgia are access to finance and a qualified workforce.”
The structure of the holding company itself provides an opportunity to diversify cash flows. The construction business is one of the most important sources of cash flow, and BK Construction is one of the largest construction companies in the region with highly qualified engineering and technical staff. Additionally, professionals are now being trained in eleven different fields at Construct2 College, meaning that members of the holding group will have a significant pool of capable staff to choose from.
The result of this synergy is the long-term vision that we discussed with the managing partner of BK Holding at the end of the interview. According to Irakli Burdiladze, it will take up to four years to complete the White Square projects that have already been planned. New projects will actively be developed in the same period. At the same time, by expanding the team with engineers and technical staff, BK Construction is laying the groundwork for the geographical diversification of its construction business. This means the company is going international. According to Irakli Burdiladze, plans for business growth on this scale are still at an early stage. However, if we look at the company’s history and recent results, we can safely say that the ambitious vision of its managers will turn into another achievement for White Square in the coming years.
Photo Credits to Khatuna Khutsishvili / Forbes Georgia
