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Erste Real Estate Acquires Advance Tower

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Futureal has completed the sale of the 12,000 sqm Advance Tower, located in the Váci Corridor, to the Hungarian Erste Real Estate Fund. This, the second investment deal between Futureal and Erste Investment Fund, was provisionally agreed last year.

Advance Tower by Futureal.

The fund has acquired the first phase of the center and has an option on the second 8,000 sqm phase of the complex, currently under development and due to be completed in the second half of the year, bringing the total space to 20,000 sqm.

The deal reflects the current strong demand for high end office assets, the dominance of domestic capital in the Hungarian investment market and the ability of local funds to conclude deals at earlier stages in the development process through their established contacts in the market.  

“The recent agreement is a new milestone in a tried and tested professional relationship that will further strengthen our unique real estate portfolio,” says Balázs Pázmány, chairman of the managing board of Erste Asset Management.  

“The state-of-the-art solutions provided by Advance Tower and its international tenant portfolio provide us with innovation and stability for the long-term,” he adds.

Local capital is now a structural feature of the Hungarian investment market and, as with Czech Republic, is considered to bring increased market security and an exit possibility for developers. The performance of Hungarian funds is expected to remain very strong at circa 50% of market activity, although more new foreign capital is expected to enter Hungary this year.  

Benjamin Perez-Ellischewitz, head of Hungary capital markets at JLL describes the strong showing of domestic funds as “reassuring”. It shows “a positive evolution in the accumulation of capital and the development of a robust local saving systems channeling money towards real estate investments (this is the role of local open-ended funds) and also the development of local private investment groups including developers and asset managers,” he adds.  

Liquidity  

This gives international investors a clear sign that local investors can provide liquidity to the market if there is an exit of international capital, Perez-Ellischewitz concludes. His consultancy has traced low investment activity of EUR 150 million for the first quarter against an annual volume of EUR 1.3 billion-1.5 billion.

The lack of product is continuing to limit activity. Further Váci Corridor core office products, established logistics assets and retail assets are expected to close soon, bringing the volume to EUR 600 million for the first half year. Stronger second and third quarters are expected by investment consultants.

“Erste Open-Ended RE Funds (the Funds) aim for a stable and attractive return from the long-term lease of properties in its real estate portfolio,” says Róbert Varga, real estate asset manager at Erste Asset Management and LEED green associate.

“The fund mainly invests in premium assets, including offices and commercial properties, which mostly have long-term rental contracts with stable, multinational partners from the start of the investment,” he explains.  

“We see the local market attracting international investors, but our local knowledge, market experience and multinational background ensures that the funds will continue to play a leading role in the Hungarian market,” Varga adds.

Advance Tower phase 1 was designed by the Mérték architectural studio (since re-named Paulinyi-Reith & Partners) and has been awarded BREEAM certification and WELL Building Standard precertification according to Futureal.  

In another Budapest office development designed by Paulinyi-Reith & Partners, Skanska is due to deliver the 14,000 sqm Nordic Light Trio in the second quarter of 2020; the third phase of Nordic Light has been designed in accordance with WELL Building stipulations and has also achieved LEED “Gold” certification. 

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