Budapest-based developer Trigranit is gearing up for a strong 2017 after 2016 which was its most successful year in two decades of operation, the company's CEO Arpad Torok has told PropertyEU in an interview.
Trigranit is currently working on a new office project in Budapest, the Millennium Gardens development, which will be located on a site by the bank of the Danube close to the future Congress Center at Müpa and the National Theatre. The scheme is set to provide over 35,000 m2 of office space and over 600 parking spaces for future tenants. ‘Millennium Gardens is important for us, as it will be Trigranit’s first development in Hungary since 2011,’ Torok said.
The focus is not only on offices: the Budapest-based investor is planning overall retail developments of around 70,000 m2 GLA in the CEE region in the near future and is in an advanced stage of some possible acquisitions, Torok said. ‘We therefore expect 2017 will be even busier than 2016,’ he added.
New records
The company, which was acquired by US investor TPG Real Estate in 2015, completed two transactions in the second half of 2016 which set new records in their respective markets.
In September, Trigranit completed the sale of the 92,300 m2 Bonarka City Center in Krakow to Rockcastle for €361 mln, the largest single-asset transaction in Poland over the year. Just weeks after closing the Bonarka shopping centre deal, the company spearheaded another market-defining transaction, this time in Hungary, with the sale of the Millennium Towers, a 70,400 m2 Class A office complex, for €175 mln. The company claims this transaction is the largest-ever office deal on the Hungarian market, by both value and gross leasable area.
The Budapest deal in particular is a sign that the Hungarian market is back, Torok said. ‘Poland and the Czech Republic were already back, in fact you could say Poland never went away. But the Budapest deal is a signal to the market that the Hungarian market is back as well.’
Torok declined to provide further details, but according to well-informed sources, the Budapest office exchanged hands at a yield of 6.85%. Since the outbreak of the global financial crisis in 2008, yields in this market had not dipped below 7%. Meanwhile the Krakow shopping centre is believed to have fetched a record yield as well of 4.9%. This is just under the current level of prime office yields in Poland which are now fluctuating at around 5%.
New acquisitions
Contrary to expectations, Trigranit has not embarked on any new acquisitions since TPG took ownership of the company in 2015. The focus in the past year has been on development and sales, Torok conceded. However, over the past few months, the company has screened a ‘very serious real estate portfolio’ of offices and shopping malls in the region worth €21.4 bn in total and covering more than 12 million m2. ‘We bid on about 30% of the total,’ Torok said.
In some cases, the project tender was withdrawn, in others Trigranit was outbid. ‘There were also projects we did not purchase because they did not reach the required levels of economies of scale,’ he said. The company aims to focus on larger transactions and is monitoring portfolios that span several countries or asset classes, he added.
‘We have the flexibility to acquire cross-country portfolios and not only single assets where it’s more profitable. We are interested in both single assets and whole portfolios in several countries in the Central European region.’ In the case of shopping malls, the focus is on well-located assets of at least 25,000 m2 GLA with a value of around €100 mln, or that have at least a key position in the city where it operates. In the case of offices, the smallest acquisition target Trigranit would be interested would be worth at least €25-30 mln.
The full interview will be published in the January/February edition of PropertyEU Magazine
