Futureal Group has sold its portfolio of Corvin office buildings to the Hungarian OTP Real Estate Investment Fund. The transaction involves the six operating office buildings at the mixed-use Corvin Promenade urban regeneration project in addition to two offices centers currently under construction. The eight class “A” buildings have a combined GLA of almost 80,000 sqm.
Corvin ONE was built in the first construction phase of the Corvin Promenade urban regeneration project completed in 2008, and represented the start of what was to be one the largest ever office development projects in the center of Budapest, according to Futureal. Corvin Towers, realized in the second phase, consists of four office blocks, and was followed by Corvin Corner.
In addition to the completed office projects OTP Prime Real Estate Investment Fund has entered a preliminary agreement to purchase the twin-phased, 27,000 sqm Corvin Technology Park, currently being constructed adjacent to the Skypark building.
In addition to the Corvin Technology Park, Futureal plans to continue to develop the Corvin 7 office center.
“The resources released will provide a solid basis for further development of the Futureal Group. Over the years, the company has become a leading real estate developer and investor in CEE. Currently we are managing more than 30 projects simultaneously, with a total value of EUR 1 billion and a gross area of over 700,000 sqm,” says Gábor Futó, the founder of Futureal Group.
The deal concluded between a Hungary-based developer and a local investment fund reflects the increasing role of domestic capital at the top end of the Budapest investment market. Local investors are able to develop long-term relationships with developers and exploit these contacts to react quickly when an asset becomes available.
“The share of local investors should amount to some 50% of the total transaction volume,” says Benjamin Perez-Ellischewitz, head of capital markets at JLL Hungary.
“A significant pool of local capital should be reassuring as it shows a positive evolution in the accumulation of capital and the development of local based saving systems from private investors – this is the role of local open-ended funds – and also the development of local private groups including developers and asset managers. This gives international investors a clear sign that local investors can provide liquidity to the market if there is an exit of international capital.” JLL provided advisory services to Futureal on the transaction.
“The OTP Real Estate Investment Fund’s net asset value has increased dynamically over the last year to almost HUF 380 bln, up by HUF 170 bln,” says Zsolt Perlaky, director of real estate management at OTP Real Estate Investment Fund Management. It was launched by OTP Real Estate with the aim of investing in class “A” real estate. Last year the fund acquired the 25,000 sqm Skypark office building from Futureal, the first element of the eastern block of Corvin Promenade.
JLL forecast the annual transaction volume to reach EUR 1.6 bln-1.7 bln roughly in line with the 2017 level of EUR 1.8 bln.
“We still have a few significant transactions, including a retail portfolio and a prime high street asset, due to close before yearend. Prognostics for 2019 are difficult as the official pipeline is limited but several off-market discussions are ongoing, so I would give EUR 1.5 bln-1.7 bln as my estimate,” comments Perez-Ellischewitz on the expected volume for the year ahead.
Cushman & Wakefield have traced EUR 1.5 bln in investment volume for the first three months of 2019, with Hungary providing a 70-100 basis point yield premium on Warsaw and Prague.