Robert Smyth in Budapest -

While a lot of Hungarian firms talk about doing business abroad, TriGranit Development Corporation is one of the few that is seriously engaged in it.

TriGranit currently has around 30 projects in Central and Eastern Europe at various stages of completion and with the announcement earlier this year of a €5.5bn venture with Russia's Gazprombank-Invest, it's now looking east to the Russian market as one of the new engines of growth.

"We've realized major landmark projects in [Hungary and Slovakia], which have brought a nice return to our shareholders. We want to do more of the same, but in more countries," says Lorant Varga, TriGranit's CEO.

TriGranit's deal with Gazprombank-Invest announced in January will be a 50-50 joint venture to develop residential and commercial real estate projects to the tune of €5.5bn. TriGranit has another €2bn earmarked for other new developments in the country, with the partners looking into establishing new projects in St Petersburg, Krasnodar as well as Moscow.

"We're not planning to invest the whole amount in six months, but rather over a several years timeframe. And I think the Russian market is big enough; the individual markets of Moscow and St Petersburg are extremely big by themselves," says Varga, in response to a report in the local daily Kommersant that the Russian Market may be too small for such a large investment.

"Our smallest project will not be under $100m and up to $1bn," he says. "It's a big amount of money, but it's a big country."

The Russian media has also been rife with reports that TriGranit is planning to build a film studio in Russia, but this is rather the work of the company's chairman and largest shareholder, Hungarian entrepreneur Sandor Demjan. Demjan is already building a major studio close to Budapest.

"We're a development company while [Demjan] is building a film studio in Etyek and has plans also to build one in Russia, but this is not Trigranit's business. Sometimes there can be a link, but not in this case, it's beyond our strategy to take risk in a film studio," Varga says, adding that retail, shopping centres, residential and commercial are the areas in which it excels.

"We're developers - we buy the site, plan what to build there, and put in the money and take the risk in finding the tenants at the right rent," he says. "It's like building your own house – you're not the one who builds the house, but you give the money, get the financing and most likely become your own tenant."

Meanwhile, TriGranit partner firm Euroinvest is partnering Russian companies in the construction of three sugar refineries. The closest to completion, located in Ryazany in the southern central part of Russia, is a €200m undertaking.

Elsewhere in the region

A number of projects in Warsaw, Prague, Bucharest, Ljubljana, Sofia and Zagreb are also in the pipeline for TriGranit. In particular, TriGranit is targeting the real estate markets of Poland and Romania. "These are countries with strong potential, good growth and high populations, as well as lots of smaller cities that require developments," Varga says.

Investments in Poland are expected to reach €2bn within the next five years. Projects are underway in Katowice, which is likely to absorb around 40% of the total investment, and Krakow.

Polish future project

"However, every country has its potential," he says referring to the likes of Croatia and Slovenia.

In April, TriGranit and its local Croatian partner Ingra received the green light from the Croatian authorities to build the Zagreb Arena, a multifunctional sports hall with a 15,000-seating capacity. Construction works are scheduled to start in July 2007 and will be completed by November 2008. The building of Zagreb Arena is the first phase of the creation of the wider Arena Complex.

Bigger still is the company's plan for Montenegro, where TriGranit is planning to build a city centre retail, office and possibly residential project in the capital Podgerica. On the country's coast, it is also considering a seaside resort project comprising apartments, hotels, and entertainment. "A casino could be an add-on," Varga says, on the question of whether TriGranit is planning to build the new Monte Carlo.

Demjan has stated that TriGranit's mission is to be the dominant Central European real estate company.

"The [combination of new activities] will make us a real regional player and very dominant. Until now, we've been quite dominant but by the end of 2008, I think we'll be the number one regional developer," says Varga, adding that he ranks TriGranit as being in the top three currently.

To describe TriGranit as a strictly Hungarian company does not reflect the role played by foreigners – both savvy expatriates and new hires in the network of countries that TriGranit is carrying out developments in.

The CEO's profile fits in well with the twin Magyar and international profile. Raised in the Netherlands by Hungarian parents, Varga has served with international real estate consulting firm CB Richard Ellis Hungary, in addition to ABN AMRO Bank in Hungary, Holland, Belgium and Brazil. In January, he also became the first Hungarian to head TriGranit, succeeding Canadians Todd Cowan and Jordan Dermer. TriGranit shareholders include founder Demjan and Sandor Csanyi, CEO of Hungary's regionally expanding OTP Bank - both of whom are widely regarded as Hungary's most dynamic entrepreneurs-cum-businessmen.

Other owners include Austria's Immoeast; Peter Munk, founder of the Canadian Barrick Gold; and Atticus Capital's Nathaniel Rothschild.

Taking over at the helm of a company that's already considered as successful, Varga insists the company must not rest on its laurels and sees his role as accelerating growth. "In the past, this company would do a maximum of three projects in parallel. By the year-end we'll have seven construction projects ongoing and by 2008 this might exceed 10 projects across seven or eight countries."

He says this as drilling can be heard next to the refurbished old building that houses the company's management next to its West End City Center complex. In preparing the company for a bigger scale, the company is installing a new state-of-the-art enterprise resource planning, or ERP, system.

"You can handle three of four projects with a basic management system, but if you want to manage and mitigate all the risk of 10 to 12 projects simultaneously, you need a state of the art system," he says.

Such talk sounds as though the company might be improving transparency to prepare for an IPO. "It is a possibility, but all these things have to be taken care of when you become a bigger company anyway. Problems arise when the company and the internal organization is not prepared for the growth," says Varga. "All of these efforts are not in vain even if there's no IPO in three, four or five years' time."

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