ORCO PROPERTY GROUP | Media
Media
Management statement
Orco focuses on its three pillars in its core markets Recently, Orco’s share price has fallen substantially. Management would like to highlight its strategic priorities which remain concentrated on its three core pillars:
1) Leasing prime properties that we have developed in the capitals of Central Europe to quality tenants;
2) Developing middle class residences that provide the customers with quality products at an affordable price; and
3) Managing investment funds such that institutional investors can have access to our unique expertise in Central Europe
Our strengths lie in development and in asset management: purchasing, positioning, permitting, financing, building, renting, and selling whether for our own account or for third party investors. In turn, our Endurance Funds leverage off the Orco development and asset management platform.
For several years, our investments have been focused on Central Europe, Germany and Moscow and this is where they will remain. Orco will continue to take advantage of the particularities and cycles involved in each of our cities’ markets and segments.
Since 1991, Orco has managed more than 150 projects and investments of land, buildings and real estate companies in 9 different countries. Our teams have proven their ability to generate value in challenging environments.The Vaci One high street retail development project in Budapest is a good example. We bought the former stock exchange building 3 years ago for €18 Million. Last week, we received the building permit and obtained financing at 3M Euribor + 115 bps for €52 Million, for a total development cost of € 60 Million, leaving 8 Million of equity in that project. First leases have been signed. With total rents targeted at € 9 Million per year the building could reach a value of approx €160 Million when delivered in 2010, which would grow NAV by more than € 100 Million and either provide Orco with recurrent income or substantial exit profit.
2008 outlook
At a consolidated
level, our investment properties continue to perform well. Our main underlying office markets in Prague and Berlin are showing decreased vacancies and a slight increase in rents. Our residential development activity will see increased deliveries during the 2nd semester across its markets. Our Endurance Fund business, which has recently registered new commitments, will also continue to grow albeit at a slower pace than originally forecasted. The management reiterates its previous turn over target of € 322 Million The sharp decline in Orco’s stock price will nevertheless have a negative impact on our financial result because of increased non cash financial expenses related to our warrants and convertible bonds.
Despite a challenging credit climate worldwide, financing is still available to us in our core markets as evidenced by the 2nd quarter signing of the refinancing of our jointly owned hospitality portfolio for €114.9 Million at 3M Euribor +150 bps and the Vaci One financing.
For the 2nd semester, the company does not plan any new real estate acquisitions except for those that will be made on behalf of its Endurance funds. It is focusing on implementing its disposal program aiming at €200 Million of cession for this year to both the Endurance Funds and external investors. After the selective disposal of part of the hospitality portfolio and some large office properties (like Pier 1 in Duisburg) in 2007, the company is set to sell its logistics and industrial portfolio and several office properties. The equity freed up will be allocated to the highest return per share investments. The company strategy is to execute every year an arbitrage of €200 Million of its assets.
As of December 2007, our Net Asset Value was €91 per share for a portfolio value of €2.4 Billion. By driving up the value of our portfolio and by focusing on creating value by the development of our unique prime locations pipe line, we are capable and committed to growing Orco’s NAV in 2008 and over the next years, while offering to our clients the best properties in the new Europe.
***
Orco Property Group is a leading investor, developer and asset manager in the Central European real estate and hospitality market, currently managing assets of approximately EUR 2.5 billion. Operating in Central Europe since 1991, Orco Property Group is a public company, based in Luxembourg, and listed on the Euronext, Prague, Warsaw and Budapest Stock Exchanges. Orco Property Group operates in a number of countries including, mainly, the Czech Republic, Hungary, Poland, Russia, Croatia, Germany and Slovakia. Orco Property Group is continually analysing investment into new territories.
Orco Property Group is also sponsor of The Endurance Real Estate Fund, a Luxembourg–regulated closed–end mutual fund (fonds commun de placement - fonds d'investissement spécialisé) organised as an umbrella fund with six sub-funds focused on real estate acquisitions on office and retail, residential, industrial & logistic, and Health Care markets.