Orco won a tender to re-build Prague 7, Bubny in the total area of 25hactares offering cEUR38.5m outbidding the other 5 interested parties. Orco plans to build flats, shopping centres, offices and leasure facilities in the area within the next 10-15 years. The total CAPEX should reach cEUR700m.
Our view: we expect that Orco can build up to c470k sqm of gross rentable space with net space reaching c300k sqm. Assuming an average rent of EUR15 and an yield of 7%, we expect the deal to create a value of EUR41.6m or EUR5.1 per Orco’s share. We reiterate our Buy recommendation.