Orco announced acquisition of multi purpose City Gate building at the boundary of historic downtown in Bratislava, Slovakia. Orco plans to redevelop current premises by the end of 2008 with CAPEX estimated at EUR 42m. The property should provide modern shopping area with exclusive restaurant at the ground floors, A class office space on the second floor and the rest should be used for residential units and luxury apartments.
Although we don’t have any info about what rentable area will be available for the moment, nor the price paid for the project we believe based on past experience that Orco made a good deal and redeveloping the property in the prime area will bring reasonable revaluation gains. We see the multipurpose of the project as a good strategy as location will undoubtedly attract tenants and strong demand for luxury residential units among increasing affluent individuals is still not meet with the demand. Note that luxury residential units allows Orco to book higher margins of some 25%-30%, while middle range units only some 15%. We view the news as a postive.