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GalCap Europe buys Rumbach Center for German Fund

Deals

GalCap Europe, a real estate asset and investment manager specializing in Austria and Central Europe, has acquired the Rumbach Center for a German pension fund portfolio from the by Dubai-based Al Habtoor Group.

Rumbach Center, purchased by international investors.

The latest research by Real Capital Analytics (RCA) has indicated that in the recent lockdown environment, investment deals in Europe have become harder to complete and the number of cancelled transactions has risen.  

Office has proved to be the asset sector of choice in CEE, closely followed by industrial according to Colliers International, who brokered the GalCap deal. Investors have been facing problems caused by the lockdown in addition to the existing issue of a low supply of investment grade assets.

The earlier generation, 7,600 sqm Rumbach Center was built in 1992, renovated in 2008 and again in 2014 and is located in the historic center of Budapest.

“Rumbach Center provides a stable cash flow on the one hand and offers high potential for value appreciation on the other,” comments Marco Kohla, managing partner of GalCap Europe and the official responsible for the transaction.

“The acquisition perfectly matches our value-driven investment strategy and is an ideal addition to the inner-city Merkur Palota and Central Udvar, a mixed-use scheme in the heart of Budapest, both cornerstones of the fund,” he adds.

Acquisitions concluded by GalCap Europe could be seen as reflecting the creativity needed by investors in the coronavirus-era Budapest office market, with limited supply and increasing completion for assets from both domestic and international investors and asset managers.

‘Great Opportunities’

“Closing this acquisition in the current environment shows that there are great opportunities even during times of uncertainty. Identifying these and executing them promptly needs market expertise and the right people on the ground,” says Manfred Wiltschnigg, managing partner of GalCap Europe.

The conventional wisdom is that there will not be a recovery in investment market activity until the second part of the year as more borders are unlocked and meetings and viewings in person become possible.

Further, office asset owners are not in a position where they need to sell and could adopt a wait and see policy to assess their position in the market. Prime Budapest offices are still expected to trade at low 5%, while secondary or value-add opportunities are estimated at a spread of at least 150 basis points, according to Colliers.

Wiltschnigg expects yields for office buildings in Budapest to increase to around 100 basis points immediately after the corona crisis.

“Bringing a deal to a positive closing in times of lockdown in a third country only works if experienced professional managers, both at headquarters and on-site, work together with excellent external advisers,” he explains.

“Due diligence, valuation, setting up the deal and company structure, securing financing, purchase contract negotiations and signing, as well as the entire approval process of the investor, are coordinated online from headquarters and should ideally be carried out as quickly as possible without mutual irritation of the negotiating partners,” Wiltschnigg says.

“We will continue to act as buyers on the Hungarian market and other CEE countries for our existing mandates. We are also working intensively on the preparation of our own CEE vehicle, the GalCap CEE Office Fund, which will invest in office properties in prime locations in the Central European capitals from next year on,” he concludes.  

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