Taking over the scene

Investment & finance
The closing of the transaction by US investor TPG Real Estate to take over Hungarian developer TriGranit, its asset management division and a large section of its property portfolio, was finally announced in early December after months of negotiations. TPG has entered the Central European market in a big way in the last few years, through the acquisitions of P3 Logistic Parks in late 2013, DTZ in 2014 and this year of C&W, which DTZ has been merged into. For TriGranit’s view of the latest takeover, we spoke to Árpád Török, the CEO of TriGranit Corporation

Nathan North, Eurobuild CEE:
Is TriGranit set to undergo any kind of transformation due to the takeover – in terms of its structure and the scope of its operations?

Árpád Török, the CEO ofTriGranit Corporation: As you may know, TriGranit, with operational and capital support from TPG Real Estate, will build on its leading Central European real estate platform, which is focused on office and retail projects. In order to achieve this, TriGranit will manage a much wider scope of activities than before – we will pursue a full spectrum of real estate activities, including acquisitions, development, construction, and property and asset management. As for the structure of TriGranit, one remarkable difference is the unification of the earlier development arm of the company, TriGranit Development, and the management arm, TriGranit Management. From now on, it will be TriGranit that manages all the real estate activities of the two previous companies. However, the senior management team remains with the company. The shareholder structure has similarly undergone a profound transition – with the transaction, all four shareholders were bought out. The sole owner and shareholder is, from now on, TPG. We are currently monitoring real estate portfolios of already standing assets that include retail centres and/or class ‘A’ office buildings.

Why was the takeover such anattractive proposition for TPG?

TPG’s main aim is to create the leading Central European real estate platform by multiplying TriGranit’s present platform-size through acquisitions and new developments. They regularly invest in companies that are the most successful and experienced on a market. TriGranit absolutely represents a unique opportunity to achieve those aims – as one of the largest fully integrated, real estate platforms in Central Europe with a long history of successful real estate activities. TriGranit’s present portfolio and multicultural, experienced management team provides the perfect base for further growth.

The closing ofthe transaction required longer than was originally anticipated. What was the reason for this?

Considering the complexity of the transaction, I would say it was done in almost record time. The deal involved the agreements of four different shareholders, as well as assets of different classes in four different countries, in six cities. The different classes included retail and office assets and also development plots. The surveying of the assets, the administration and the transactions were much more complex than in the case of the purchase of a single asset or a listed company. Bank and JV partners’ approvals for the asset acquisitions were also needed before closing.

You opted not to employ the services ofexternal advisors for the acquisition. Why was this the case? Would the
transaction not
have taken less time ifyouhad done so?

This was the decision of the shareholders at the time. All of our colleagues involved carried out this difficult task perfectly, with the entire transaction perfectly managed by them – and here I would like to take the opportunity to express my gratitude for their contribution and dedication. All of this shows the strength of TriGranit – a well-functioning integrated platform that is already in place.

Where, ingeographical terms, will the new TriGranit be focusing its attention?

We will be focusing on the so-called Visegrád countries – Poland, Hungary, Slovakia and the Czech Republic. In terms of liquidity and size, Poland far surpasses the others. It accounts for 50–60 pct of our portfolio and will continue to be our main focus. Here we will be concentrating on Warsaw and on secondary Polish cities. In the other three countries we are concentrating on the capital cities – such as Budapest, Bratislava and Prague. However, we are flexible in terms of portfolio acquisitions across the region, where TriGranit has extensive experience and a proven track record.

And will you be developing and investing inthe same kind ofprojects?

The types of projects we are interested in are integrated office and retail schemes, stand-alone complexes and malls, the prototypes of which we have already developed in the past in Hungary, Slovakia, Poland, Romania, Croatia and the Czech Republic These are the kind of ‘products’ TriGranit is known for, has deep experience in and will continue to distinguish us in the future. We are continuing with the development of the B4B Offices complex in Kraków – this year towers ‘F’ and ‘G’ will be opened, with 20,000 sqm gla – and we intend to launch new office projects in Poznań and in Katowice. We are also looking beyond Poland and plan to acquire assets in the Czech Republic and in Hungary.

Is it not the case that the retail and office markets are rather saturated at the moment inthese cities especially inPoland?

I disagree. In Warsaw, for example, the office space per capita stands at around 3 sqm, while across Poland it is 1 sqm. In comparison with major German cities, where the office space is 15 sqm per person, even if the convergence might not be the same, this shows that there is still room for growth. Occupational costs are much lower in the CE region than in the UK or in Germany, while the quality of the workforce is similar, in terms of the language skills and business education. According to some of the research that has been carried out, in secondary Polish markets 150,000 office jobs could be created in the next few years, representing a significant boost to the country’s GDP.

And what is the present situation with retail? Saturation is certainly currently afeature ofthis segment even in
secondary cities.

In the markets where TriGranit is active, some opportunities still exist to develop landmark retail complexes, such as Bonarka City Center. It is true that the market is becoming much more marginal and that the larger secondary cities are reaching their limits. In our view, the main potential lies in newer formats and more modern retail schemes – for example, convenience centres. In Prague, Budapest, and even in Bratislava the major retail centres are of the first generation that opened their doors in the late 90s or in the early 2000s. These are outmoded and do not meet today’s customers’ expectations. According to our acquisition strategy, we are interested in such assets for redevelopment or expansion opportunities.

In terms ofequity, how much will TPG be providing to TriGranit for all this investment?

I do not want reveal any exact figures at the moment, all I can say is that we will be a very significant investor in all of the sectors and markets we have been talking about.

The man at the helm

Árpád Török has been employed in the international property development and advisory business for more than 19 years, holding different executive positions for at TriGranit for 14 years. After being employed for several years by Ernst & Young and Cushman & Wakefield in Hungary and Greece, he was appointed CEO of TriGranit in 2009. Under his leadership, TriGranit has completed retail and office developments in Hungary, Romania, Poland and Croatia with a combined 350,000 sqm gla and a total value of EUR 800 mln, including Poznań Główny, the Bonarka for Business office towers in Kraków and Arena Centar in Zagreb. He is a member of the Royal Institution of Chartered Surveyors (MRICS) and was awarded the Order of Merit of the Republic of Hungary – Golden Cross by the President of Hungary in 2012.