Bloomberg News

Orco Expects to Sell Sky Office Tower This Year, Chief Says

October 10, 2011

(Updates with closing shares in fourth paragraph.)

Oct. 10 (Bloomberg) -- Orco Property Group SA, a developer with most of its assets in central and eastern Europe, expects to sell its Sky Office tower in Dusseldorf before the end of the year, Chief Executive Officer Jean-Francois Ott said.

“There has been a lot of interest from investors and I’m confident the transaction will take place before the end of the year,” Ott said in a phone interview from Paris. The company expects to receive a net 40 million euros ($54.3 million) to 50 million euros from the sale, Ott said.

Orco is disposing assets in an effort to find cash to refinance its 300 million-euro loan for Berlin’s GSG housing portfolio and another 100 million euros of bonds at its German unit before the mid-2012. The company already agreed to sell Russian assets worth 53 million euros to a local investor in September and will receive parts before the bonds’ maturity.

Orco added as much as 7.1 koruna, or 8 percent, to 95 koruna and closed at 94.5 koruna in Prague trading. That’s the biggest gain since August 15.

Safeguard Plan

Ott reiterated Orco’s full-year revenue forecast of 340 million euros to 370 million euros, including asset sales, rental and development income.

Orco operates under a so-called safeguard plan approved by a Paris Court in May 2010. The program, according to French law, temporarily protects companies from creditors and allows management to renegotiate debt. Orco pledged to overhaul the company and use some of cash from disposals on existing projects to revive the business.

Orco is in talks with a number of German banks to refinance the loan for GSG, Ott said. A group of as many as six lenders has a “reasonable appetite” to take part in the transaction, Ott said. Still, the total amount the company may raise is less than the 300 million euros needed to refinance the loan.

“We’re at a level of 225 million euros to 250 million euros, so I’m aware that there might be a gap,” Ott said. The executive expects to reach an agreement with lenders in January.

Orco isn’t considering selling GSG or a part of the asset, Ott said, adding that the company doesn’t “intend to break up the essential part of our portfolio.”

Morgan Stanley Joint Venture

Orco acquired Berlin-Based Gewerbesiedlungs-Gesellschaft mbH, or GSG, a portfolio of commercial and housing buildings in 2007 for 400 million euros together in a joint-venture with Morgan Stanley Real Estate fund to expand in the German capital.

The developer’s other flagship projects include Zlota 44, a tower in Warsaw designed by Daniel Libeskind and the Bubny estate in Prague. Sky Tower in Dusseldorf is the city’s seventh- tallest building and was completed in 2009.

Some bondholders of Orco’s German unit would agree to Orco’s proposal to swap bonds for Orco Property Group shares, Ott said. The company, which is holding “polite and constructive” talks with bondholders, expects to reach an agreement with the creditors before the end of the year, Ott said.

Ott reiterated Orco’s full-year revenue forecast of 340 million euros to 370 million euros, including asset sales, rental and development income.

--Editor: Douglas Lytle

To contact the reporter on this story: Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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