GTC announced that it has signed a preliminary agreement with Heitman to sell Mokotow Business Park with 107k sqm of net rentable area, for USD287m as announced earlier this year. The transaction is expected to be closed no later than by March 31, 2007 resulting in a pre-tax income of USD40m in the 3Q06. In addition, GTC announced an acquisition of 1.3ha site in Wroclav in Poland for construction of 30k sqm office park. Finally, GTC expects its two-office towers in Bucharest, City Gate, to be fully leased before its completion scheduled for 2009 based on already 10k sqm signed and further 12k sqm under advanced negotiations.
Our view:
We continue to see GTC’s disposal of MBP as positive showing the company’s execution ability. Further, we believe that deploying the proceeds in Polish secondary cities and/or new countries such as Ukraine, Bulgaria and Romania increases the upside potential. Based on our rough calculation assuming USD1,500 construction costs per sqm, a yield of 7.5% and USD15/sqm/month rent, we believe that the new Wroclaw project could add cPLN0.4 to our valuation of GTC.