The essential element for navigating a path through COVID and beyond for landlords and asset managers lies with the client relationship, says Mátyás Gereben, the country manager for CPI Hungary.
“Right now, the key to survival is concentrating on the needs of the tenants; they are the ones paying the money and keeping us alive,” points out Gereben. “We really have to act as partners in these difficult times. Not just financially, but we also have to try to solve their problems in getting through these days. When life gets back to normal, we hope and believe they will pay back that loyalty.” Tenant relations have always been a core part of the equation for CPI, Gereben says, because it is not the sort of developer to follow a build, sell and move on strategy.
“The difference between us and some other developers/investors is that we have a clear strategy to hold our properties long-term. So, we need to find where we can get the maximum return from our buildings over the long term. Put another way, what is important for us is where we can find long-term value.”
Once your mindset is long-term, building the tenant relationship becomes the obvious next step, Gereben says. “We look to find planning solutions that are convenient for our tenants and their employees for work, for well-being. We need to think together with our tenants, if we are going to stay together long-term.” Two examples of that in action are CPI’s green bond issued last year and the certification of its portfolio by disability inclusion group Acces4You. CPI Hungary issued the first-ever green bond for real estate in Hungary (a 10-year bond that raised HUF 30 billion) on August 5, 2020. In doing so, parent company CPI Property Group became the second firm headquartered outside of Hungary after Mercedes to issue under the Bond Funding for Growth Scheme of the National Bank of Hungary (MNB). “Our whole philosophy is that we do not fund ourselves through classical financial instruments like bank loans, but though bonds. We started about four years ago, and it has been working well for us,” Gereben says. He describes the issuing of a green bond in Hungary as a natural next step in clearly demonstrating a deep commitment to the sustainability and well-being of its properties, partners and tenants. The bond fits within a sustainability framework Gereben says CPI has put together to cover everything it does from sourcing sustainable materials to reducing CO2 and other emissions.
The World Bank defines a green bond as a financing option to support climate and environmental investments, and says “investors are attracted to green bonds because they allow a closer connection to positive social and environmental impacts.” In other words, it gives CPI and, just as importantly, investors, tenants and their employees a “feel good” factor. Ethical investments are a growing trend and one that also plays into company branding efforts, especially important for attracting Gen Y and Gen Z employees. “It is a strong initiative in creating a much more sustainable operation in terms of development, asset management, the tenant relationship, their employee relationships. There are so many aspects and we want to share this sustainable strategic approach, and not only in Hungary but across the group.” Gereben says the CPI PG was able to give its Hungary operation a head start when it applied to launch its green bond as it had already been given a rating by international agencies, saving time, money and effort. “The MNB team were very professional, as were Raiffeisen, who acted as our agents, and Dentons who were our legal support. The whole process was really smooth.”
Another first for CPI Hungary was obtaining certification from Access4you, which assesses buildings based on their access to people with disabilities. Gereben admits to being amazed when Access4You told him the numbers of potential workers – available workforce was a not insignificant problem in Hungary pre-COVID ¬– who, whether in a wheelchair, deaf or blind, were excluded from buildings because their needs were not considered at the planning stage. All building apart from one has received acces4you certification within CPI Hungary’s offices and hotel portfolio. “Access4You has technical people with whom we have a very good cooperation, discussing the sort of elements that need to be thought about even at the planning stage,” Gereben says.
COVID has taught the likes of CPI the need to be simultaneously “more cautious and flexible.” It has properties in all the main real estate sectors, so what does their future look like? “It seems the majority of people in offices really want to return. There will still be a huge need for office space, I am not worried about that. How employers use that space may be different, with more common areas and less open plan areas,” he suggests. Technical changes will also be required, with more access to fresh air, a quicker circulation of air, better filters and the like. Logistics has been the great beneficiary of the pandemic, and Gereben says CPI’s business here is booming. It is not, however, a market leader, specializing in smaller sized units of 2,000-3,000 sqm such as at its Airport City project close to Budapest Ferenc Liszt International.
“Right now, there is 0% vacancy in the sector because the available stock was well under the European average, and even the Eastern European average. As it develops and matures and more space is added, that will flatten out.” Gereben says CPI would like to add additional, similarly-sized units to its portfolio while remaining a “boutique” provider of quality space. Retail and hotels, on the other hand, have suffered much more, but Gereben believes the return of tourism will see them recover, albeit some creativity may be required on the part of the former. “It seems we have got used to shopping online for everything, yet every woman I speak to tells me they miss the social side of shopping with family or friends, of shopping with their senses, trying clothes on. If we can find the right tenant mix, and make sure there is sufficient entertainment possibilities, I think we can make ‘experience shopping’ work very well,” he explains. Gereben thinks that might also help save the high street, at least in certain areas. “If I think about being in downtown Berlin, or strolling with my wife in Barcelona, I want to go through those high street shopping areas because that is part of the experience. Once we get tourism back, I think what were high profile destinations like Budapest or Prague will be able to maintain high street shopping. I think there is also an element of urban planning to this, though.
How can we create five or six hubs that have a social or entertainment mix that will attract people to them?” And, just to be clear, hard though life might be for us all, that doesn’t mean there aren’t still opportunities out there. “CPI is in good shape in terms of liquidity, we are keeping an open eye for possible acquisitions and investments, and we have a considerable landbank ready to be developed,” the country manager explains. Wherever we find an opportunity where the numbers are working, we won’t be shy.”
Source: Real Estate Review_April