GTC announced on Friday acquisition of 75% stake in company building a shopping mall in Stara Zagora, Bulgaria. The acquisition provides GTC with a plot of 12,500 sqm, where 23,000 sqm of net rentable area will be developed. The completion is expected in 1H2009. GTC paid € 4.1m for the land, which implies taking into account GTC’s share price of € 440/sqm. Total CAPEX, excluding cost of land is estimated at € 36.5m, which implies € 1,587/sqm.
In addition to Bulgarian acquisition, GTC acquired 66.7% stake in the company possessing 46,500 sqm plot in Bucharest, Romania, on which 85,000 sqm of apartments will be build. The land plot is in the Northern part of Bucharest, not far from the recent GTC’s acquisition there. GTC paid € 9.61m for the stake, implying price of € 310/sqm of land. The project is scheduled for completion in 2009-2010. GTC will be responsible for the management of the project, for which it will receive a fee equal to 5% for the investment costs, excluding land.
Our view: We view GTC’s cooperation with local partners in the SEE region positively as these markets with higher upside potential are also more risky. GTC has a good track record in signing value creative deal. Although Bulgaria’s retail market is increasing it is still extremely underdeveloped, and is the country with the lowest retail space per capita in the EU. We believe that this acquisition could add some PLN 0.3 to our fair value based on € 20/sqm/month rent and yield of 7.5%.
As we mentioned previously, we believe the Romanian residential market provides huge potential as the availability of mortgages increases and more people are eager to acquire their own apartments. Based on assumed price of € 1,200 per square meter and for Romanian market rather conservative 25% margin, we believe this project could add another PLN 0.3 to our fair value estimate.