The-Yield.com: The Yield speaks to European developers Futureal Group
The Yield caught up with Rezső Ezer, Director of Transactions and Investor Relations & András Kárpáti, International Project Director, to discuss their ongoing residential, office and commercial projects across Central-Eastern and Western Europe.
Please introduce Futureal Group and Cordia to our readership.
Futureal Group was established almost 20 years ago and is headquartered in Budapest, Hungary.
Futureal started as a mixed-use property developer and quickly grew into one of the largest real estate developers and investors in the Central-Eastern European region. Futureal and Cordia’s history is rooted in the award-winning city rehabilitation project Corvin Promenade (“ULI Global Awards for Excellence” from ULI, “Best Mixed Use Project in Europe” International Property Awards, Bloomberg TV, The New York Times, “Best Purpose Built Project Worldwide” by International Real Estate Federation (FIABCI))
Cordia is the residential arm while Futureal Developments is undertaking commercial developments. The company’s home market is in Hungary, but we have offices in Romania (Bucharest) and Poland (Warsaw, Cracow, Gdansk, Poznan, and Sopot) as well as developments and investments in Spain (Costa del Sol) and the UK. We are developing resi in 6 major cities in the CEE region while our commercial and retail activities are focused mostly in Hungary. We currently have roughly 500 people employed and some 700,000 m2 under construction.
What are Futureal and Cordia currently developing? Could you share some information on your flagship developments?
Futureal’s flagship projects in Budapest are the Budapest ONE Business Park and ETELE Plaza shopping centre.
Futureal completed phase 1 of the 65,000 sqm2 Budapest ONE earlier this year with phase 2 currently under construction.
Etele Plaza is going to be the first major and dominant shopping centre built in Budapest in the last ten years, the largest in Buda, as well as the first smart plaza in Hungary, sized at 55,000 sqm2.
Cordia is currently developing and selling some 4000 residential units with and additional > 11,000 land bank units in our pipeline.
Our focus in Hungary is Budapest, in Romania it is Bucharest and in Poland they are in Warsaw, Krakow, Poznan and Gdansk. Cordia has also just completed the acquisition of Polnord, a long-standing listed developer on Warsaw Stock Exchange. They have a major landbank that we are excited to develop and deliver over the coming years.
We are also strategically focusing on certain European markets, primarily on the Costa del Sol as well as exploring opportunities in the UK and Germany.
What is the company’s focus at the moment?
Cordia still focuses on its core activity of resi-for-sale but has started exploring a resi-for-lease business in CEE, where we are pioneering this new asset class. We are exploring the possibility of developing rental products in cooperation with institutional long-term investors (including investment baskets, forward sale arrangements other structured schemes).. There are strong headwinds coming from the Hungarian government and Central Bank for this asset class to be established, so we see a lot of prospect and opportunity in this going forward.
We are excited about our Western European operations; we recently acquired a 21% stake in Argo Properties, a real estate investment company in Germany where we are actively renting out 1200 units in three German cities. We view this as Cordia’s first step it the resi-for- lease market as we believe that, long term, countries like Poland and Hungary will develop along the same lines as their Western counterparts. We see this as a strategic business line that we are going to build up in the next decade, starting in Budapest and Warsaw as they are mature enough to have the first purpose built institutional resi-for-lease projects. We will seek equity investors for such projects.
What about the size of the investment for the resi projects?
The size of potential investment in the projects will range from 5 million euros to 20 million euros. We can also reach higher amounts of investment by combining 2-3 projects into one investment basket. We have already purchased the land parcels forming a landbank of >11,000 units in the counties of operations while a further >4000 units are under construction. Sales at 19 sites out of which 60% has been already pre-sold (95% of the deliveries in 2020, 75% of the deliveries in 2021).
How has the pandemic impacted your operations?
Sales slowed down in March and early April but now we are seeing the signs of market recovery, especially in Poland. We think that the sales will get back to normal by autumn. Of course, Covid-19 caused us some operational headaches, especially in terms of building materials supply chains (especially with materials from Italy). The constructions are, however, already back to normal without delay across all 23 Cordia and 5 Futureal developments.
What is the profile of investor you are looking to reach out to?
We know Asian money is looking for a place to invest across Europe… not only Chinese but Singaporean and Korean. Korean money has been particularly aggressive in looking for Central and Eastern European opportunities. As Cordia/Futureal is one of the largest real estate development groups in this region, we are open to discussions about establishing a property development and investment platform with some very predictable long-term partners coming from Asia, especially those looking for anti-cyclical acquisition opportunities and new strategic businesses like resi-for-lease in CEE. The scale of our operations now makes us visible for large scale investors to come in at 100 million – 150 million euros as an initial investment. Family offices are also within reach as we can offer both large and small scale portfolios to suit the needs of Asian investors.
You said you are expanding to the UK? Is Brexit an issue?
We are in the final stretch of launching a widespread cooperation with a resi developer who is an expert in build-to-rent in the UK, which will help bring further diversity to our group. Brexit has an important effect on the markets we are looking at so we are certainly considering the medium to long term effects. We are taking an opportunistic approach in our acquisitions and keeping as much optionality as possible such as when to start projects. Brexit, as well as Covid 19, has highlighted that the residential (especially rental) market is a very resilient asset class. We are monitoring the situation closely and have done extensive research on various demographic and market trends. We are confident in the UK resi market for years to come.