Refurbishment results in lease extension

Carion Property Fund in co-operation with the tenant converted its industrial facility located on Illatos út by creating high class office areas, meanwhile the storage areas were expanded and modernized. Generally Illatos út is well-known for Class “B” and “C” industrial properties where the modernized Carion property stands out with its high quality.

The former tenant of the property, Outokumpu Kereskedelmi Kft. – which is a Finnish stainless steel production company listed on the NASDAQ OMX Helsinki – signed a new lease contract for additional five years by using almost 3,000 m2 storage area and more than 400 m2 office space in the industrial property which is suitable for city logistics in Budapest, District IX. After the refurbishment of the building, the storage area become a modern warehouse building with greater internal ceiling height that is able to serve the increasing requirements of the tenant and exploit the development potential of the land parcel.

According to Tibor Lak – consultant at Colliers International Hungary and appraiser of Carion Property Fund – the owner chose the most appropriate way to maintain the value of the property during the period of the real estate crisis, which shows the importance of asset management.
The refurbishment of the property and long term lease agreement creates a stable cash flow, thereby reducing liquidity risk and simultaneously improves the condition and leasability of property leading to an increase in value that offsets the costs associated with the renovation.  With the presence of Outokumpu, the facility operates at a high occupancy level, only some additional office area is available for potential tenants.

Ádám Papp, Portfolio manager at Carion Property Fund said that their asset management activity focuses on achieving higher occupancy levels and increasing property values by continuous communication with tenants and finding solutions representing a compromise. The aforementioned lease agreement extension with Outokumpu is a prime example of their strategy.