All in one hand

Deals

The property industry as a whole has been hard hit by the crisis, but there are areas where the negative impacts have not been so visible. One such is asset management: market players say that offering complex services is the key to survival and see the future quite optimistically.

This year has seen a major merger on the asset management company market. At the beginning of 2011, CA Immo International bought Austrian investment fund Europolis for $363 million. The merger naturally had an impact on the operation of CA Immo on its markets in the Central Eastern European region, including Hungary.

The acquisition raised the property assets of CA Immo Group from around €3.6 billion as at 31 December 2010 to an estimated €5.1 billion on 1 January 2011. In regional terms, the proportion of the Eastern and South Eastern European segment in the portfolio as a whole was expected to expand from around 19% at present to more than 40%, according to the group’s website.

In Hungary, CA Immo’s assets doubled after the merger to €400 million, Ede Gulyás, managing director of CA Immo Real Estate Management Hungary Kft told the Budapest Business Journal.

As a result of the merger, the portfolio of CA Immo has expanded to include industrial properties, and the number of office buildings managed in Hungary has increased.

“As these properties are high quality buildings with a reliable tenant mix, I believe that our position on the market is sustainable,” Gulyás said.

Cheaper but better

There are certain challenges asset management companies have to face, such as letting, keeping tenants, keeping property value and reducing costs, market players agreed.

“Several companies make a mistake when they reduce their cost but at the same time, the quality of services is also deteriorating,” Csaba Zeley, development executive of ConvergenCE Hungary Kft told the BBJ. “But I think that the current crisis provides a good opportunity to find a way of reducing costs but improving quality at the same time.”

The asset management business of ConvergenCE has been quite stable in spite of the hardening economic circumstances.

In addition to classic asset management, the company now offers property management as well.

“We have been dealing with the asset management of the Eiffel Square Office Building, and as we couldn’t find a property management firm that could have offered the quality of services we needed, we decided to add property management to our line of businesses,” Zeley said.

Complexity rules

According to him, the Eiffel Square project is a very successful one due to its location and quality, but not all of the properties in the company’s portfolio are similarly crisis-resistant. But the company tried to act in time in order to avoid the negative impacts of the crisis.

“In the case of riskier properties, we had started negotiations with our biggest tenants already in 2008. We offered notable discounts in exchange for longer lease periods. This strategy worked,” Zeley said.

The value of the managed asset of ConvergenCE is €106 million, and 65% of the managed properties are office buildings, the rest being retail and industrial. This proportion is not expected to change in the near future, Zeley noted.

Good years ahead

Asset management companies are expecting their market to be rather lively in the medium-term.

“Third quarter data from the office market shows that there has not been any new developments, so in my opinion, the emphasis will shift to asset management services,” Zeley said.

Others, however, say that the rental market will also see some life, but only in the short-term.

“In the short-term, I expect some enlivening on the rental market, but I hope that realistic conditions will be created for financial, supply-demand and sustainability issues in the medium-term. These, in my opinion, will create a more reliable and transparent market,” Gulyás from CA Immo said.

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