Weekly Euro informs about Orco's acquisition of 34k sqm office complex close to Prague 7 - Bubny for EUR 24m. Orco acquired this property from PPF Alpha, together with some 20k sqm of various properties in smaller Czech cities and 50k sqm of land bank. Acquired office complex is occupied by current tenant - Ceska sporitelna until mid-2008.
Our view:
Based on preliminary calculation paid price is below the replacement costs for such a property and thus is advantageous for Orco. This acquisition supplements Orco flagship project of redevelopment Prague 7- Bubny area for the next 10-15 years, where company plans to spend some EUR 700m. The project is scheduled to be launched in 2008 after acquiring all necessary paperwork. We don't expect this news to have any significant trading impact on today's share price; nonetheless we reiterate our Buy recommendation with fair value of EUR 116.