With the collaboration of Nhood, a Mömax furniture store will soon open in Székesfehérvár

In addition to property development, leasing and operation, Nhood Hungary is also involved in the sale of land and recently sold a plot to the XXXLutz Group. In this context, we spoke with our Chief Operating Officer Balázs Gábosy about the details of the transaction, the utilization possibilities of the land portfolio of Ceetrus, Nhood's positive approach, and the secret of its success.

A Mömax furniture store is opening soon in Székesfehérvár. Can you tell us about this deal?

This area, which is part of the Székesfehérvár retail park, belongs to the portfolio of our client Ceetrus. Nhood represented Ceetrus in the sale of the land. Basically, the main objective of Auchan, Ceetrus, and Nhood – as a representative of Ceetrus -  is to ensure that Auchan Commercial Centres offer the widest possible range of products & services to customers. It's no coincidence that Székesfehérvár already has a Decathlon next to Auchan, or there are also fast food restaurants, shops and other service providers. Through this transaction with the XXXLutz Group, a new profile will be added to the commercial center, which will be a Mömax furniture store.
 
Is the land under public utilities?

Yes, Ceetrus usually, depending on the agreement, tries to sell plots with public utilities. This is what happened now as well. Mömax is buying a prepared site for which it has obtained building permit, and then the sale and purchase of the land took place. The licensing plans are in place, the construction plans are being prepared and we hope that the new Mömax store will open next year. Since January 2021, Nhood represents Ceetrus in its entirety as company and real estate portfolio manager, which includes the management of the entire land portfolio. This is how we got in contact with the Lutz Group and managed the sale from the first negotiations. By the way, we didn't start talking about the possibility of building a Mömax, Möbelix or XXXLutz store on this 1.7 hectare just now, but years ago. The Lutz Group is very successful. It operates more than 700 home furnishing stores in Europe. In addition to Mömax and Möbelix, they also own the Mann Mobilia, Poco, Lesnina, Aiko, Mobo and But furniture stores among others. They are the second largest furniture retailer in the world after IKEA.

What was the reason for the transaction taking place only now?

Due to the development of the economic situation, the negotiations were restarted several times and the acquisition of permits was also difficult. Finally, in August, the building permit for the construction of the Mömax store was obtained. In addition to conducting the sale, we played a role in preparing the land. The department store will be operated by the Lutz group, but will be part of the Auchan Commercial Center, just like the Auchan hypermarket, Auchan Korzó, Decathlon, KFC fast food restaurant or GumiFlex Plusz. We are also happy about the transaction because these commercial units have a positive effect on each other, and thus the number of visitors and traffic in the park continues to increase.

What is the size of Ceetrus’ land portfolio in Hungary?

Ceetrus' land portfolio currently exceeds 300 hectares. The development sites are located in the outskirts of Budapest and in the countryside - mainly near the existing Auchan hypermarkets and Auchan Korzó shopping centers. But there are also plots, for example in Nyíregyháza or Győr, which are waiting for alternative investment.
 
For what purposes can these areas be used?

As these areas were purchased in the past for the purpose of creating retail parks, they can be used primarily for commercial purposes. Fortunately, all areas in the portfolio are located along highway junctions and are therefore easily accessible, which makes them ideal for logistics and warehousing. But since the portfolio is large and the store openings of retail companies have not grown at the same rate in recent years as, let’s say, at the beginning of the 2000s, even light industrial utilization can be considered as an alternative option. The reason I mention light industry is that neither Ceetrus nor Nhood supports industrial activity that could be potentially harmful to the environment.
 
How can a plot of land be managed well and in a way that increases its value?

Nhood has clearly moved in the direction of sustainability, and I can perhaps say without being presumptuous that it is considered one of the pioneers of biodiversity-preserving projects on the Hungarian real estate market - just think of the ground squirrel reserve we created next to the Auchan Commercial Center in Solymár or the nature trail in Dunakeszi. In Kecskemét, for example, we use ecological lawn management. For this, the municipality needs to understand and accept this - that the reason we don't cut the grass is not that we don't want to, but because if we let the wildflowers grow in the area, they will suppress the ragweed. Until an area is put to use, that is what we do. What's more, we strive to ensure that enough green space is left after our developments. In this, Nhood wants to be at the forefront and set an example.

In the future, will there be more focus on Nhood's involvement in land sales?

Land transactions have not been in the background so far either, but perhaps we have allocated fewer resources here. I would like to add that the 300 hectares used to be more - from the portfolio approx. 30 hectares have already been utilized in recent years. As I mentioned, we strive to find the best possible utilization, which in many cases is not so easy. If we find a suitable use, the current regulations may not allow it. We also need to find the common ground with the local government. One example of this is the large number of people who have moved to the Budapest agglomeration in recent years. The many residents also require a lot of infrastructure. And in these suburbs around the M0 motorway, where Ceetrus has many sites, the local government can only provide schools, kindergartens and doctors' surgeries up to a certain number of people. Therefore, if we want to develop, let’s say, a residential estate, it may not be well received. Trade and industry however - which brings production and income to the local government - is welcomed in most cases.

The ESG approach is playing an increasingly important role in the domestic real estate market segment. How does all this affect the operation of Nhood, what is the company's green strategy?

Nhood was created with a strong green vision. Our goal is to stay ahead of the regulations as much as we can, so we are green not because we are required to be, but because we believe it is the right direction. That's why we're trying to gradually re-green the areas of the commercial centers we manage, and if we lose green in a development, we compensate it by planting trees. At Nhood Hungary, tree planting has been a particular focus in recent years. Auchan is also more and more open to this, and as a result, cooperation is becoming closer. We plant trees without building a single square meter. In addition, the building can also be green - there are solutions such as green roofs, green walls, and even the parking lots can be greener. Another issue is that financial aspects also play a role in feasibility. A green roof, for example, is expensive as it requires a heavier roof than usual because of the vegetation cover, which also affects the structure of the building.

How are the current macroeconomic conditions affecting real estate development and how is Nhood addressing these challenges?

The current economic situation is not really favorable for real estate developments. Several of our planned projects are delayed because today's interest rate environment provides completely different opportunities than, let’s say, two years ago. As a result, the rate of return has changed, bank financing has become questionable, and investors are asking themselves whether it is worth putting money into a development project when the base interest rate in Hungary is 13 percent. But we are optimistic and hope that the situation will change. Plus, there are ongoing projects that are still successful, for example our Boróka Park residential real estate development, where we will soon complete the third phase, and we have already started the preparations for the fourth phase. And, in addition to the negative effects, there are also positive ones on the market, such as the release of construction capacity. A developer who is thinking about a smaller project - and by smaller we obviously mean a multibillion-forint investment - is now in a much better negotiating position because what was previously dwarfed by larger-scale infrastructure developments can now become an interesting proposition for even a leading general contractor.

What kind of clientele does the company think about, what is the mindset of the potential investors and partners with whom Nhood can cooperate well?

An important aspect of Nhood's corporate philosophy is that, in addition to profit, we would like to have a positive impact on the natural environment and people's quality of life. Therefore, we think in partners who share the same vision. ESG has been mentioned, but the term "green washing" is also used for companies that talk about protecting the environment but don't do it. We really do strive for a positive environmental impact - both during developments and during property management. In the past six months, we have had three projects that exemplify this aspiration, two of which have been handed over - the previously mentioned ground squirrel reserve and the Dunakeszi Turtle Nature Trail. In addition, there is the Palánta organic and educational garden in Maglód, which we started last year. It is important for us that we work with partners who see value in this, as much as we do, and not just look at the numbers. Because in many cases, the effects of these projects are still difficult to express in numbers, but we hope that in five years’ time, we will be able to quantify what kind of impact the given CSR activity has on the existing environment or on the number of visitors.

What do you think is the secret of Nhood Hungary's success?

I think the most important thing is that Nhood Hungary has a team of people who love what they do. They believe in the company's vision of positive impact, and they are dedicated to their tasks because they are confident that their work creates value.