What is your company focusing on at the moment and what are your future ambitions?
I have to start with the beginning of the crisis because it affects all of us especially here in Europe and very much in Central Europe. Fortunately before the crisis in 2006 and 2007, we exited approximately €500 million worth of projects.
We were quite lucky and we are developers, so we don’t like to hold on to our assets - we develop and then we sell. So when the crisis hit Central Europe in 2009, we were very healthy. We had lots of liquidity, we still had projects to finish, so even in 2010 we delivered two shopping centers to the market, Corvin Plaza in Hungary and Gold Plaza in Romania.
After completing these projects, we were left with relatively a lot of cash and we still had more than 100 experts in our Budapest office and our offices in Warsaw and Bucharest. We had to rethink our strategy, because we knew that speculative projects were not working anymore.
So what is your current strategy?
We have taken two ways out of the crisis; on the office market, we started looking for tenants first and then finding projects. For example, in Budapest we have an office project the construction of which we started this year. What we did is that we contacted KPMG, who is in need of new headquarters by 2014, we asked them about their preference regarding location, accessibility and quality.
We had very specific requirements from them; they wanted a building in a certain part of Budapest on the Vaci office corridor, not further than 150 meters from the metro station. We found a property for them, we bought it, we demolished the existing building which was a hotel and now we started construction.
The second strategy that we established is based on our equity and on the experts that we have in the office. We started looking for projects that got frozen, not because they were bad but simply because of the crisis and especially because of the financing problems. We allocated €100 million in the beginning of 2011 for partnerships. Why partnerships? First of all because compared to our strategy before the crisis, when we were planning to go country-by-country, we are more cautious about establishing country offices and we were more concerned whether a project is good enough to get involved.
That’s why if we find a project anywhere in Central Europe, we don’t want to build a national team. So it’s good to have a joint venture partner who already has experience with other projects there as well. On the second hand, we think that if it’s a really good project, the project holder probably wants to stay into the project. It’s an assurance for us that they really believe in the project.
So we announced this Futureal partnership program more than a year and half ago. I have to say it is successful in a sense that we spent so far approximately €30 million and on the other hand it’s difficult to find really good projects to spend all this amount. We have investigated at least 30 potential projects.
Which real estate segments are you active in?
Currently, we have a retail project in Poland, Nova Park Shopping Center in Gorzów Wielkopolski. We invested in the KPMG office tower in Budapest, which is also a joint venture project, and we recently signed a letter of intent for a Polish residential package.
We keep looking mostly for retail, because the retail market is not completely mature in Central Europe. We are also looking for office projects, mostly in Warsaw, that is still up and running. We all know that any money allocated to Central Europe mostly goes to Poland so you have to be careful, as there is a great supply of projects coming in that market. Currently we are openly looking for other neighboring countries specifically investigating projects in Austria, Czech Republic, Serbia and Croatia.
Are you also trying to expand further to Russia or Western Europe?
We will stay mainly in Central Europe, we would not go further to the East. At this point we are looking at Serbia which is outside the European Union, but is an interesting albeit difficult market.
How do you distinguish yourself from your competitors in Central Europe?
I think we have two main advantages; one is that about eight years we started a huge city center regeneration project in the center of Budapest which is called Corvin Promenade. It is half a million m² project with many elements, including a shopping center, street retail, offices, residential and even special-purpose functions such as the largest fitness center in Budapest or a stand-up comedy theater.
In a complex project like this we really learned how these different functions influence each other. Therefore, we have a complex knowledge on developing all these types of properties; we have a very experienced team, from the transaction to the execution, leasing and legal aspects, who can do such complex projects.
Secondly, we finished many of our projects during the crisis and we made them survive. Corvin Shopping Center and Gold Plaza in Romania were delivered in 2010 in the midst of the crisis. We know how to behave in such situations, we know how to manage the risks that unfortunately have not been foreseen.
We have a saying at the company: “Every project dies 10 times and you have to bring it back to life again and again”. I would say that in times of crisis every project dies 20 times and you have to bring it back to life, and we managed it. Actually during the crisis I think we gained even more experience than before.
What is your outlook for 2013 in real estate in general and for your company? Are you confident that it will improve?
We are looking at many projects; last year we broke two deals and this year we are finalizing one deal and another deal is very close to completion; hopefully we will sign both deals this year. But what is coming in 2013 and 2014 is very uncertain.
Unfortunately in our home country the economic situation is very difficult, as there is a great lack of financing. But I have to say we are used to it so we are ready to travel and we already know many countries quite well. We are looking forward to meeting some good project owners and to doing joint ventures.
What is your view on sustainability?
I think no developer can avoid thinking about sustainability. It definitely is an issue for investors so you have to consider it. Also if you are a professional working long time on the market, you must be socially responsible.
On the other hand, the business side of sustainability is very difficult. When sustainable projects manage to earn more on the rental market I think sustainability will really be established and become a basic element of every project. Unfortunately today there are very few tenants who are ready to pay more for a more sustainable building.