Hungarian housing market is underpriced - Portfolio.hu Interview with Benson Elliot chief Mogull

UK-based Benson Elliot Capital Management has recently acquired a 60% stake in the Károlyi City Centre project of CEU Reality. Marc Mogull, the head and founder of Benson Elliot, a private equity company investing solely on real estate markets, was in Budapest at the time of the transaction and talked to Portfolio.hu about the Hungarian real estate market, the intimidating state of the local economy, financing crisis and the conquer of private equity in the real estate sector.

Why Hungary?

1/2 next page →

Portfolio.hu: Why Hungary, why Budapest and why Károlyi City Center?

Mark Mogull: We were not necessarily seeking to invest in Hungary, but equally we were not averse to do so either. This is very important because in certain countries we are in fact reluctant to make investments. So Hungary is a market where we feel comfortable to bring money to and the residential sector is where we have a lot of experience. Currently, the residential sector represents about 40% of our total portfolio. Why this project? I think it has the right concept, the right location and - perhaps above all - the right developer.

Portfolio.hu: Are you not concerned about Hungary's sluggish economic growth? You are also present in Slovakia, so you definitely have a point of reference...

Mark Mogull: It is certainly troubling. We've been monitoring the government's economic reform efforts for some time, in particular the measures to reduce the country's fiscal and current account deficits. These aren't easy issues, but real progress is being made.

As we can see these efforts have a negative impact on short-term growth, but that does not mean that people are going to stop having babies or families are going to stop looking for better quality housing. While the current economic environment does make it harder to find good opportunities on the market [.] It's not one of those markets where you can just buy up everything on offer and look back 12 months from now and feel confident you can make money. However, as I've said, this doesn't mean that you can't find opportunities either.



Portfolio.hu: Why do you think residential real estate prices are lower in Budapest than in most of the CEE capitals?

Mark Mogull: I believe it has to do partly with lower construction costs and lower land values. Another likely factor, I think, was the lack of confidence in the market in recent years.

	1/2 next page →
1. Why Hungary?
2. For whom credit crunch is an opportunity