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Benson Elliot muscles into Hungary

The London-based firm is making its second foray into Central Europe for Benson Elliot Real Estate Partners II.

Benson Elliot Capital Management has acquired a 60 percent stake in a large residential-led project in Budapest, Hungary.

Karolyi Istvan City Centre is being developed on the site of a former leather factory in Váci Ut located around eight kilometres north of the city centre, according to a statement.

It is the second time Benson Elliot has deployed capital in Central Europe out of Benson Elliot Real Estate Partners II, which closed on €335 million ($509 million) of capital commitments in August 2006 four months after launching.

The first Central European investment was sealed last year when the fund acquired a three-hectare site for up to 1,500 residential units in the Slovak capital, Bratislava.

Benson Elliot has acquired the majority stake in Karolyi Istvan City Centre for an undisclosed price from principals of CEU-Reality Group, a privately owned Budapest-based developer. In total, the project is expected to comprise around 140,000 square metres of residential, office, retail and ancillary space to be delivered in three phases over the next three years. The value of the completed development is expected to exceed €220 million. Phase one is more than 80 percent pre-sold and is due for completion this year.

Karolyi Istvan City Centre is being developed in an area refereed to as the city’s “office corridor”. It 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 50 meters from the Danube and will provide Budapest with its first high rise residential towers.

Debt financing for the scheme is being provided by Unicreditbank Hungary.

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,” he said.

“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,” he added.

Karolyi Istvan City Centre is the eighth investment by Benson Elliot for the fund and takes the total end value of the fund’s portfolio to more than €1 billion.

Mogul was managing director and the senior real estate executive at UK private equity firm Doughty Hanson. Prior to that, he led the property investment and financing team at the European Bank for Reconstruction and Development, as the bank’s first director of property and tourism.