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EUROPE NEWS: Hungary for agriculture

London-based Chayton has teamed up with US firm CV Starr to acquire a majority stake in a Hungarian former state-owned agricultural and horticultural company. PERE Magazine December 2008/January 2009 issue

Central and Eastern Europe is still attracting some private equity real estate capital, despite many GPs looking back towards the larger established western markets in the wake of the credit market freeze.

Chayton Capital, the London-based firm established by former Goldman Sachs partner Neil Crowder, has recently acquired a majority stake in Hungarian firm Skoglund Holding, which owns a portfolio of 52 sites worth around €150 million.

Chayton is investing through its €110 million Sava opportunity fund and is co-investing in the deal alongside CV Starr, the US firm led by Maurice Greenberg, the former chairman and chief executive of AIG.

We like the Budapest market because real estate values have not become as inflated as many other Central and Eastern European cities. Some segments of the Budapest market are particularly attractive such as the industrial sector.

According to Chayton, the firm acquired a minority stake in Skoglund earlier this year before raising its stake to 74 percent with CV Starr more recently.

The stake has been acquired from entrepreneur Gabor Kovacs, who bought the former state-owned company in the 1990s as an agricultural and horticultural concern. He spent a decade re-zoning and selling off plots of land but decided greater value could be earned developing out some of the sites, so he sought a partner.

Crowder told PERE the deal had been structured so that Kovacs retained a sizeable minority stake in the company. The portfolio has been refinanced at a “relatively low loan to value” at the same time as the acquisition, he adds.

The strategy is to concentrate on developing a handful of the best sites. The least attractive sites will be sold.

In order to manage the company, Chayton has appointed chief executive, John Verpeleti. Most recently, Verpeleti was head of Central Europe for Paris-based Axa Real Estate Investment Managers.

Now that Chayton and CV Starr control Skoglund, they are receiving enquiries from prospective co-investment partners and developers. One of the most attractive sites is the Hatar Commercial Centre in southern Budapest. In total, the portfolio has 10 million square metres of developable land.

“There are a lot of very well located sites in the portfolio,” says Crowder. “We like the Budapest market because real estate values have not become as inflated as many other Central and Eastern European cities. Some segments of the Budapest market are particularly attractive such as the industrial sector,” he adds.

Chayton's Sava Fund is targeting not just Hungary, but Bulgaria, Croatia, the Czech Republic, Romania, Serbia and Slovenia. It is the second fund launched by Chayton, having already closed and invested a €114 million vehicle, the Duma Fund. That vehicle has invested in a mix of properties in Bulgaria, Croatia, Hungary and Romania.

Crowder is a former co-head of European research and co-chief operating officer at Goldman's global investment research division.