Hungary Looks to REIT Market in Bid to Attract Share ListingsBy
Budapest Stock Exchange sees up to three listings next year
Granit Polus could be first non-listed company to create REIT
The Budapest Stock Exchange’s long-delayed plan to create one of eastern Europe’s first REIT markets may be about to bear fruit.
As many as three closely held Hungarian companies are expected to set up real estate investment trusts next year, according to Rita Szalay, director of the exchange’s listing division. The first could be Granit Polus, a developer that’s been preparing to convert a Budapest shopping mall into a REIT for about a year.
Hungary has for several years tried to revive its equity market as trading volumes dropped, reaching a 19-year low in 2016, and initial public offerings almost dried up. An amendment to an ineffective 2011 REITs law, which came into force in June, allows companies to raise money more easily for new projects, enabling them to take advantage of the country’s buoyant property market.
“This is an unmissable opportunity for real estate companies,” Granit Polus Chief Executive Officer Gyula Aghazi said in an interview.
The change to the REITs law reduced the amount of capital needed to create an investment trust as well as providing tax benefits. That prompted some publicly traded companies to announce plans to register as REITs, and non-listed property companies are now preparing to join the market via an initial public offering.
REITs will be exempt from corporate income tax and local business tax. They will have to distribute at least 90 percent of their annual taxable income to shareholders via a dividend, which could make them attractive to Hungarian investors and help boost trading volumes.
Granit Polus will decide whether to spin off a Budapest mall into a REIT by early 2018, Aghazi said. His company’s shareholders include Sandor Csanyi, the chairman and CEO of OTP Bank, and Sandor Demjan, one of the Hungary’s richest entrepreneurs.
Graphisoft Park SE, a publicly traded office-property manager, is so far the only Hungarian company to have registered to become a real estate investment trust. Budapesti Ingatlan Nyrt., a real estate company known as BIF, also intends to seek REIT status.
Konzum Nyrt., one of the world’s best-performing stocks this year, last month announced a plan to convert Appeninn, a publicly traded property company, into a REIT. That was after Konzum agreed to buy a 49 percent stake in the company last month to become the biggest shareholder.
“REITs definitely attracted the market’s attention after the amendments” to the 2011 legislation, said Ferenc Furulyas, managing director of Jones Lang LaSalle in Budapest.
The Budapest Exchange, in an effort to revive the country’s equity market, previously announced plans to sell stakes in state-owned companies and encourage small and middle-sized enterprises to follow. So far, these efforts have fallen short of expectations. Just two companies were added to the stock exchange since the beginning of last year, including real estate company Duna House in October 2016.
It may take some time before some closely held properties companies trade as REITs. That’s because of a rule that enables them to initially be registered as a so-called pre-company, which are bound by less stringent requirements than fully fledged investment trusts.