GTC has agreed to sell its 100% stake in Mokotow Business Park (MBP), including 107k sqm on net rentable area for USD287.5m to Heitman European Property Partners III Fund free of liabilities. The transaction is subject to due diligence, obtainment of relevant permits and financing by the buyer and should be completed in 2006 and no later then by March 31. GTC should book a pre-tax profit of USD40m. The company plans to focus on further diversification of its portfolio in both geographical and business segment terms. GTC has been expanding in Polish secondary cities and countries including Romania, Bulgaria, Serbia, Croatia and Moldova.
Our view: We view the selling price of MBP as attractive given the fact that GTC will book a pre-tax profit of USD40m, which suggests that the selling price exceeds the recent valuation of MBP. At the same time we see the sale as a logical step as the company is taking advantage of the significant yield compression that occurred in Warsaw, which limits the further upside. At the same time this allows the company to focus more on Polish secondary cities where there is significant demand for quality real estate driving rents up while yields are higher compared to Warsaw offering further yield compression. We also see larger upside in GTC’s new countries compared to C3 capitals and therefore we see the sale of MBP in the contexts of GTC’s strategy as positive.