A new chapter has opened for Duna House Holding, with shares in the Budapest real estate company soon to be introduced on the Budapest Stock Exchange.
The company was founded in 1998 by the brothers Doron a,nd Guy Dymschiz in a market that was growing dynamically at that time. However, while all the other international companies were focusing on the Budapest market, and within that on the group of expats, the brothers chose another kind of strategy right from the beginning.
In addition to foreigners, who comprised a large part of the demand especially in the upper price segment at that time, they also oriented their activities towards Hungarians. “We realised right from the beginning that this market is our home market,” they explain.
The demand from expats was always treated professionally, of course, and Duna House participated to some extent in the “Irish hype” at that time. However, they did not base their activities solely on this segment, as did so many other real estate agencies with well-known international names. These have by now mostly disappeared from the Hungarian market.
Focusing on the group of Hungarian customers was so important for the brothers that they were even willing to learn Hungarian. And with success – as a result, our interview was conducted mostly in Hungarian. The real estate experts, who were born in Germany and grew up in Israel, also speak excellent English and German.
View outside of Budapest
Duna House based its operations on sustainability not only in terms of choosing the target audience. While other offices were unable to resist the temptation of concentrating fully on the booming Budapest real estate market, the brothers turned early towards the market outside Budapest and began to establish Duna House offices beyond the capital as well.
They realised quickly that they could profit from the market growth even better if they were growing from their own resources. So they developed a cost-efficient franchise system with the necessary standardisations in terms of processes and appearance on the market. With the franchise system launched in 2003 the growth of the brand Duna House started to skyrocket, along with the number of offices.
Currently Duna House has 151 offices all across the country, 20 of which are owned by the company itself.
Motivated by the domestic success, the brothers soon started to seriously consider continuing their success story abroad. First they planned an entry into the Romanian market, and in 2008 Duna House was ready to launch its activities abroad. The arrival of the global financial crisis made the realisation of these plans simply impossible.
Fortunately the consequences of the crisis were not as bad for Duna House as for many of their competitors. Although the number of transactions reduced by about 40% on the real estate market in 2009, the crisis did not only have negative consequences for Duna House.
“When the market conditions are favourable, everyone can be successful and present nice numbers,” Doron Dymschiz says. “However, it’s a much bigger challenge to perform when the market is not doing so well.”
Since their company was not burdened with bank loans and had finished its first large real estate development project already in 2008, the crisis did not bring them any serious financial difficulties either. “We financed all of our investments from own capital until 2014,” Guy Dymschiz says.
This is how Duna House was able to grow steadily in the meagre years after the crisis too, when its competitors were shrinking or even losing their market share completely. The brothers could even start to reconsider expanding abroad. As Romania did not seem to have regained its attractiveness yet, they turned to look for new markets in the north.
First they opened an office in the Czech capital, Prague, in 2011. When they got the chance in 2015 to establish the company on the Polish market as well, they had to concede that this was beyond their financial capabilities at the time. After the brothers considered a few alternatives, they decided they needed to gain the necessary liquidity by entering the stock market.
Last year everything was ready to take this step, when the government spoiled their plan at the last moment by introducing an unexpected legal change that could have had unfavourable consequences for Duna House. To protect their company from possible damage at this sensitive phase, the brothers decided to delay their entrance to the stock market indefinitely.
However, this did not stop their Polish acquisition. Finally they were able to reach agreement with the Polish owner whereby Duna House will pay part of the company’s price with shares of Duna House Holding NyRt, while two-thirds of the purchase is financed from bank loans. This is how Duna House came to own the Polish company Metrohouse with 78 offices.
“It was an important feedback from the market that we could finish the transaction in this way and that fresh capital from the market was not ‘essential to survive’ for the implementation of our strategy,” Guy remarks. His brother adds: “The year that we won this way proved to be valuable, since the market actors were able to get used to the thought of investing into Duna House shares soon in a gradual way.”
Both of them are convinced that their company is taking the not completely risk-free step of entering the stock market in a clearly better setting and they can count on even more trust from the side of the investors.
Duna House brings fresh air to Budapest Stock Exchange
It was clear for the brothers that the entry to the stock market would happen in Budapest. “We did not consider other stock exchanges, since we only had the general familiarity necessary for a successful stock market entry here in Budapest,” Doron says. Guy adds: “Anywhere else we would only be a company with good numbers, but still only with numbers. As a Budapest company we could only consider the Budapest Stock Exchange (BSE).”
As to why the BSE is an attractive option for Duna House while, diplomatically speaking, the Budapest parquet is not really overflowing with Hungarian companies, the brothers can only guess. The expectations about transparency probably scare away many companies that would be interested. For Duna House this requirement is not a problem. “We have always worked in a very transparent way and we hardly needed to change anything about our ways of working in order to enter the stock market,” Guy says in a self-confident way.
Playing the exotic role of being the only newcomer this year on Budapest Stock Exchange has its advantages. This way Duna House received all possible support from the employees of the exchange, who are of course very happy to receive this refreshing new member.
This is not a surprise, since Duna House is a solidly built company that has been growing in the two-digit field since 2012. “The fact that we are often the topic of conversation due to our stock market entry – especially since this is not an everyday occurrence in Budapest – has a pleasant effect on our marketing as well, of course,” Doron happily points out.
However, entering the stock market is certainly not the only big thing happening at Duna House this year. The company is also issuing an open-end real estate fund. “Whoever would like to profit from the real estate sector, which is booming again in the meantime, without having to buy and maintain a real estate personally, can do that via our fund,” Doron explains.
In order to anticipate questions about this, he quickly adds that not only real estate marketed by Duna House will be part of the fund, but all types of generally attractive real estate that will be chosen according to objective criteria. Guy adds: “The fund serves primarily the aim to find buyers for the best performance possible, and it is not created in order to be able to sell our own real estate better.”
Duna House is back as a developer
Independently from all of the above, Duna House is re-entering the market as a real estate developer after years of absence. They have founded the company MyCity Group together with the Eldar Company from Israel, sharing ownership equally, for this reason. Currently being planned is the development of 430 apartments with a total area of 30,000 square metres. In some cases the construction has already began, in others only the land has been purchased for the time being.
These construction activities do not mean that Duna House is changing its focus. Just like before, they are to be primarily regarded as real estate agents and not as developers. “However, the conditions in the housing construction market are so favourable right now that of course we do want to take our share of the profit,” Guy explains.
Still, they are looking at this branch of activity as additional business. “We are not planning to engage long-term and in an intensive way in the real estate development sector, which is from time to time subject to strong decreases,” Doron adds, pointing out the experience learned from the serious crisis of the real estate market, which is still only just behind us.
Business activities that are in direct connection with trading real estate are a completely different matter. So for example they founded a company right after the foundation of Duna House that specialises in financing real estate transactions. Additionally they are marketing saving schemes with the aim of real estate purchase or construction. There is also a company in Duna House’s portfolio that deals with real estate valuation. The most recent addition is a company that completes energy certificates for real estate.
“These services are naturally also available for external clients,” Doron says. “The aim of these activities and any further similar activities is to make the business success of Duna House as independent of the fluctuations on the real estate market as possible,” Guy adds. Plus, profitability is naturally more secure when your operations are based on several pillars.
The good relationship of the brothers is an important foundation
Duna House’s success rests especially on the harmonious relationship of Doron and Guy Dymschiz. The fact that their chemistry is right became really obvious during this one-hour interview, just as it did when the author of this article interviewed them in 2003.
The reasonable division of labour is important but they make all major decisions together. “This does not mean that sometimes we do not have a lot of discussion between us … ” Guy says, as Doron adds, “ … but they are always very constructive and they are working as a filter, which the decisions have to pass, so they are working like a kind of defence line for us.”
To put it quite simply, they just don’t have time for contra-productive conflicts, the two agree with a smile.
They own about 95% of Duna House Holding NyRt at the moment, with about 3% owned by Polish shareholders and another 2% in the hands of managers working at Duna House. After their entry on the stock market and some other possible transactions, the shares held by the brothers will decrease to about 70-75%. This guarantees that the strong backbone of the company will remain undisturbed.