CEE REGION A resolve like Granit - Erik Wafler of Gránit Asset Management

Could you tell us a little about the history of your Granit Asset Management and your activities?

Since its foundation in 2009, Gránit Asset Management– formerly known as Diofa Asset Management – has become one of the largest asset managers in Hungary. Gránit is a professional institutional investor managing 24 investment funds, including the third largest retail fund in the country. Its current assets under management come to more than EUR 2.7 bln. At Gránit, as a senior investment manager, I am responsible for sourcing investment opportunities and acquiring commercial assets in Europe that match the funds’ investment strategy.

Granit Asset Management recently acquired the Equilibrium office building in Bucharest for the Gordiusz Private Equity Fund from Skanska for EUR 52 mln. Why did you choose this particular asset?

We have been searching for the right asset matching our 5B strategy for a while, which meets the criteria of class A quality asset, that is fully leased to strong covenant tenants, located in a well-established office hub and, most importantly, fairly priced. Indeed, at first this seemed to be a close to impossible task; however, I believe we can consider ourselves lucky when we stumbled upon Skanska’s landmark building ticking all the boxes. In addition, transacting with an institutional player that clearly understands investment risks and conditions has definitely served for the benefit of concluding this transaction.

What are your plans now for Equilibrium? Do you intend to hold onto the asset into the long term?

Yes. Our plan is to hold onto the asset for the long term and expand the portfolio with further assets with the same quality and return expectations. In more detail: we will need to accommodate the needs of existing tenants who are firmly pushing for extending their leases in the building with expansion requests. Over the long term, we still have some leases running slightly below ERV, at least in our opinion, and our goal is to optimise their NOI with these adjustments in due course.

How confident are you about the office market in Bucharest and the wider CEE region, given the changing working trends and economic factors?

Despite the inelastic price expectations of some investors or developers not following the real estate cycle, in our opinion, offices in Bucharest are still fairly priced when compared to other CEE capitals. The net prime yield gap is not justifiable when we compare offices, for example, in Vienna with Bucharest or Belgrade. We understand that the difference normally lies in the perceived risk; however, as a local investor we are certain that these risks are often exaggerated by non-local investors and a big part of them are only virtual. In the long term, the market sentiment will shape the commercial office market as well, and, as a result, we share the expectation of some that in the long term these yield gaps will shrink and converge, allowing investors holding assets in currently higher risk regions to benefit from the yield compression.

Do you have any further acquisitions in the pipeline? How much are you planning to invest?

Equilibrium 1 is part of our 5B Strategy that is aimed at creating a portfolio of sustainable and dominant class A office buildings in the capitals of Hungary, Serbia, Romania, Slovakia and Austria. We believe in this asset class provided their quality and location are prime. Our research has proven that, in the CEE region and over the long term, these types of assets are the most resilient to market fluctuations – even despite the short-term impact of Covid. Notwithstanding, Gránit Asset Management already holds – and our dedicated property and asset management branch, Grandum Real Estate manages – a substantial volume of commercial office space in Budapest and Belgrade, and we believe, therefore, that this is the asset class we understand the most.