Are you sure?

Developing From Good Fundamentals

Award-winning CEOs are not afforded the luxury of resting on their laurels, but then again, the reason they are award-winning in the first place is, surely, in part, down to the fact that they keep moving forward. TriGranit’s Árpád Török is no different in that regard. His company ended 2016 with a bang, but he has hopes 2017 will be even better.

Within a few weeks of each other, the Budapest-headquartered real estate investment, development and management company had closed two of the biggest deals in recent history. In September it sold its Bonarka City Center development in Krakow, Poland, to Rockcastle. The largest single-asset transaction in 2016 in Poland, it also won the “Investment Deal of the Year” title at EuropaProperty’s prestigious CEE Investment and Green Building Awards gala.  

A few weeks later, TriGranit together with Heitman LLC completed the sale of Millennium Towers in Budapest, a category “A” 70,400 sqm GLA complex comprised of four office buildings within the Millennium City Center, to CA Immo for EUR 175 million. The transaction is the largest office deal ever in the Hungarian market, by both value and gross leasable area. That, too, resulted in a title, this time the CIJ Award for Investment Transaction of the Year.

Fantastic Year 

“Last year we had a fantastic year. Beside those two deals, we also completed two office developments in Krakow,” Török tells the Budapest Business Journal in an exclusive interview. “This year we are due to launch a minimum of three office development projects, something that has never happened in the 20 year history of TriGranit: three different projects in three different countries at the same time.”

If all three are launched, they will generate close to 60,000 sqm in GLA this year, Török says. He adds, “We might be able to launch one more office development in Poland of around 20,000 sqm GLA” and admits the company, which has become an investor as well as a developer since it was acquired in 2015 by U.S.-based global private investment firm TPG Real Estate, is also looking for acquisition targets.

“Last year we reviewed more than EUR 21 billion of assets across the region – that’s more than ten million square meters of retail and office space. We made offers on maybe 30% of those. In addition to our developments, we are constantly out there, looking for acquisition opportunities. If we can acquire one or two retail projects or large office complexes, it will have been an extremely successful year.” 

Good Fundamentals 

Interestingly, Török argues that the underlying fundamentals of the Hungarian market – which saw EUR 1.7 bln in transaction volume in 2016 –have been getting better over the last four to five years, but almost all activity was held back by a number of factors that all contributed to the build up of a deeply negative perception. That has now changed.

“GDP is good; the growth is there, the stability is there, the investment grade rankings have returned. That CIT [company income tax] is now a flat 9% is positive and helping; the reduction on VAT on new residential building from 27% to 5% is significant, especially combined with better financing both for developers and people wanting to buy residential property. And Hungary still offers a very good return on yields compared with Warsaw and Prague; there is a 100-150 basis point gap on yields between Budapest and those cities for the same quality of assets.” 

He says the more interesting question is how long things will stay this positive. Given how open the Hungarian economy is, and subject to external influences over which it has no control, such as interest rate rises by the Fed or the European Central Bank, it is hard to look much beyond an event horizon of 12-24 months. Török says he expects things to remain good for at least that long.

Been There, Done That 

His career has been pretty good, too. Last year alone Finance Monthly named him “CEO of the Year” in July, and Global Brands Magazine gave him the title of “Most Inspiring Real Estate CEO” in September. He joined TriGranit originally in March 1999 (the company was founded in 1997) as a leasing manager. He left for a period of three years to help set up Cushman and Wakefield in Greece, then returned 12 years ago as a development director, responsible for overseeing everything on a project from construction to leasing, financing and potentially even the eventual sale. He was made CEO in 2009. He thinks this process is key to the way he now manages the company.

“I went through the ranks. I know almost every aspect of the company and its various roles because I have been there and done it. I am able to offer advice and guidance based on experience,” he says. Not that he thinks that means he has all the answers. “I often say, if I am the smartest person in the room, we have a problem,” he says with a laugh. “So, on the one hand I am quite hands-on, but on the other I like to give people – the real experts in their field – responsibility to act for themselves in the best interests of the firm.”

Three Developments, Three Countries, One Year

Hungary: Millennium Gardens is significant for TriGranit as it is the firm’s first development in Hungary since 2011. With 37,000 sqm GLA, TriGranit says it is the largest office building development in Budapest due to start in 2017. For more on this, please see separate news item on page 8.

Slovakia: Lakeside Park Phase 02 will be an 11-floor building with 13,000 sqm of GLA, located in a well-established business district in Bratislava III (the Nove Mesto area), only 4 km from the city’s historic Old Town. The site has excellent public transport connections by tram and bus, as well as a nearby train station. The building will be connected to Phase 01 via the 1st floor and main lobby. The complex is set into a green environment with a park in a prominent location, adjacent to the picturesque Kuchajda Lake.

Poland: Building H, the eighth building of one of Krakow’s most successful office complexes, Bonarka for Business (B4B), situated in the Podgorze district, will offer 10,000 sqm GLA to its future tenants. The development is planned for launch this year. Once fully complete, B4B will consist of ten “A” class office buildings with a total area of 95,000 sqm GLA in a unique urban arrangement in an overall development value exceeding EUR 200 million.