Benson Elliot extends Central European Activities to Hungary

Joint venture with CEU-Reality established to deliver up to 900 residential units in Budapest

29 February 2008 — Benson Elliot Capital Management, the leading private equity real estate firm, announced today that it has acquired a 60% stake in Karolyi Istvan City Centre, one of the most significant residential-led developments in Budapest. Benson Elliot invested on behalf of its fund, Benson Elliot Real Estate Partners II (the “Fund”).

In total, the project is expected to comprise c. 140.000 square metres of residential, office, retail and ancillary space, to be delivered in phases. The Karolyi Istvan City Centre site was formerly a leather factory and its re-development is a key element in a broader community effort to link the historic centre of District IV (Újpest) to the River Danube.

The four hectare site is prominently situated along Váci Ut, at the border of Districts IV and XIII, around eight kilometres north of the city centre. Váci Ut is known as the city’s ‘office corridor’, and boasts its highest concentration of class 'A' office buildings. Karolyi Istvan City Centre is the second largest private sector, mixed-use, urban regeneration project currently underway in Budapest. The project involves the re-development of an entire city block, just 50 metres from the Danube, and will provide Budapest with its first high rise residential towers. Debt financing for Karolyi Istvan City Centre has been provided by Unicreditbank Hungary.

Commenting on the transaction, Marc Mogull, Benson Elliot’s founder, said: “Budapest is an important part of Benson Elliot’s Central European residential strategy. We’ve been keeping a close eye on the Hungarian government’s economic reform efforts, in particular efforts to reduce the country’s fiscal and current account deficits. We see commitment and we see progress.”

“In the real estate sector, well-located, distinctive housing projects, offering value for money to a broad swathe of middle-market buyers, are attractive to us. Karolyi Istvan City Centre is such a project, and we are confident that, together with CEU-Reality, we can deliver to the community, future homeowners, and the Fund’s investors, a successful result.”

Mr. Mogull pioneered emerging market investing in Europe in the early 1990s, as the first Director of Property & Tourism at the European Bank for Reconstruction and Development. In Hungary, Mr. Mogull led both commercial and hotel transactions, and was part of the team that led the EBRD’s investment, alongside Accor, in the 1994 privatisation of Pannonia Hotels. Since 2005 Mr. Mogull has served as Vice Chairman of the UK Council of the Urban Land Institute, a role which has put him at the forefront of urban development in Europe.

Benson Elliot acquired its interest in the Karolyi Istvan City Centre project from principals of CEU-Reality Group, a privately owned, Budapest-based developer. Since its formation in 1998, CEU has grown into one of the most respected property companies in the Hungarian market. It is currently involved in three of the largest development projects in Hungary, either as developer or through the firm’s project management and consulting arms.

Járosi Támas, Chief Executive Officer of CEU-REality, added : “Benson Elliot is one of the most experienced development funders in Europe. They bring to our joint venture a broad perspective on the real estate sector and an understanding of best international practice in mixed-use projects. In Central Europe, Marc Mogull’s track record is well-known, and we’re extremely pleased to have him and Benson Elliot as partners in the development of Karolyi Istvan City Centre. We hope this will be the first of many joint endeavours.”

The transaction marks Benson Elliot’s second investment in Central Europe, following the announcement last year of its acquisition of a three hectare site, and the planned development of up to 1,500 residential units, in the Slovak capital, Bratislava.

Karolyi Istvan City Centre is the eighth investment by Benson Elliot for the Fund since it began its investment programme at the end of 2006.