Private equity real estate fund manager Benson Elliot Capital Management has acquired a 60 per cent stake in Karolyi Istvan City Centre, one of the largest residential-led developments in
Private equity real estate fund manager Benson Elliot Capital Management has acquired a 60 per cent stake in Karolyi Istvan City Centre, one of the largest residential-led developments in Budapest, on behalf of Benson Elliot Real Estate Partners II.
In total, the project is expected to comprise some140.000 square metres of residential, office, retail and ancillary space, to be delivered in three phases over the next three years. The value of the completed development is expected to exceed EUR220m.
The Karolyi Istvan City Centre site was formerly a leather factory and its redevelopment is a key element in a broader community effort to link the historic centre of Újpest to the River Danube. The first phase of the project, which will be completed this year, is already more than 80 per cent pre-sold.
The four-hectare site is prominently situated along Váci Ut, around eight kilometres north of the city centre. Váci Ut is known as the city’s ‘office corridor’ and boasts its highest concentration of class A office buildings.
Karolyi Istvan City Centre is the second largest private sector, mixed-use, urban regeneration project currently underway in Budapest. It involves the redevelopment of an entire city block, just 50 metres from the Danube, and will provide Budapest with its first high rise residential towers. Debt financing for the project has been provided by Unicreditbank Hungary.
Benson Elliot acquired its interest in the Karolyi Istvan City Centre project from principals of CEU-Reality Group, a privately owned Budapest-based developer established in 1998.
‘Budapest is an important part of Benson Elliot’s central European residential strategy,’ says Marc Mogull, who founded Benson Elliot in 2005. ‘We’ve been keeping a close eye on the Hungarian government’s economic reform efforts, in particular efforts to reduce the country’s fiscal and current account deficits. We see commitment and we see progress.
‘In the real estate sector, well-located, distinctive housing projects, offering value for money to a broad swathe of middle-market buyers, are attractive to us. Karolyi Istvan City Centre is such a project, and we are confident that, together with CEU-Reality, we can deliver to the community, future homeowners, and the fund’s investors, a successful result.’
Mogull helped to pioneer emerging market investing in Europe in the early 1990s as the first director of property and tourism at the European Bank for Reconstruction and Development. In Hungary, he led both commercial and hotel transactions, and was part of the team that led the EBRD’s investment, alongside Accor, in the 1994 privatisation of Pannonia Hotels.
Mogull, who began his European real estate career with Goldman Sachs in London, was subsequently managing director and the senior real estate executive at Doughty Hanson, where he established and ran the USD632m Doughty Hanson & Co European Real Estate Fund.
‘Benson Elliot is one of the most experienced development funders in Europe,’ says Járosi Támas, chief executive of CEU-Reality. ‘They bring to our joint venture a broad perspective on the real estate sector and an understanding of best international practice in mixed-use projects. In central Europe, Marc Mogull’s track record is well known. We hope this will be the first of many joint endeavours.’
The transaction marks Benson Elliot’s second investment in central Europe, following its acquisition last year of a three-hectare site and the planned development of up to 1,500 residential units in the Slovak capital, Bratislava.
Karolyi Istvan City Centre is the eighth investment for Benson Elliot Real Estate Partners II since it began its investment programme at the end of 2006 and takes the total end value of the fund’s portfolio to more than EUR1bn.
Fundraising was launched for Benson Elliot Real Estate Partners II in April 2006 and the fund closed in August with subscriptions of more than EUR335m. All funds managed by Benson Elliot are fully discretionary. The fund acquires completed properties as well as funding development in the UK, Germany, Scandinavia, Italy, France, Spain and central and eastern Europe.
The CEU-Reality group comprises three service companies and several project management firms. The service companies cover acquisition and project management, marketing and sales, asset appraisal and surveying markets for clients including McDonald’s, Unicreditbank, Ellabank, FHB Bank, MKB Bank and Talentis Programe. The company has completed seven development projects; Karolyi Istvan City Centre is the eighth.
