Building a power-house

Already listed on the Euronext Stock Exchange in Paris since December 2000 and on the Prague Stock Exchange since February 2005, Orco Property Group has now arrived on both the Warsaw and Budapest bourses.

Although Orco is a Luxembourg-based company, it entered Euronext first because Jean-Franćois Ott, the founder and president of Orco, is French. "Later, we decided to list the company in Prague because it was in Prague that Orco was founded in 1991," says Ott.

Now the time for Warsaw has come.

Why Warsaw?

"The Warsaw Stock Exchange is the biggest bourse in the region. The biggest supply of capital [in the region] is here ... I see Orco's entrance onto the WSE as a logical process," says Ludwik Sobolewski, the WSE's president. Orco is the third foreign company from the sector that has debuted on the WSE this year.

Through the listing in Warsaw and Budapest, Orco wants to increase the liquidity of its shares significantly, make use of its stronger presence in two of the company's key markets and enable both institutional and individual investors to take part in the future development of the company.

Witold Stępień, president of DM Banku Handlowego, says the Warsaw listing is more advantageous than another share issue in Paris or Prague would have been. "I don't think acquiring the same amount of money would have been possible, and it is much easier for Polish investors to monitor the company if it is listed in Warsaw," he points out. "Also, the company wants to emphasize that they intend to invest more here," he adds.

Constructing capital

On the day of its debut in Warsaw and Budapest, the company released a total of 1.5 million shares on all of the bourses on which it is listed - all designated for institutional investors. Some 60 percent of the shares was acquired by investors on the Hungarian and Polish bourses. The new shares constitute 14.7 percent of the company's total capital, which had been divided into over 8.65 million shares before the issue. The issue price was set at E115 (zł.435) per share. When trading opened, the company's share price rose over 10 percent and reached zł.480.

Thanks to a market capitalization amounting to some E1.2 (zł.4.5) billion, Orco is now the fifth-largest firm on the Budapest Stock Exchange. In Warsaw it will enter the group of 30 biggest companies. Orco hopes to enter the blue-chip indices BUX (in Budapest) and WIG20 (in Warsaw) by the end of the year.

The company raised E172.5 (zł.652.5) million from the issue.

"The proceeds of the capital increase will be split between financing our existing pipeline, and developing our asset and land-bank portfolios. It will enable us to expand our existing portfolio on the fast-developing real-estate market of Central Europe. It is also a clear signal for the capital market as well as a conformation that Orco has a unique and effective approach to investments in the real-estate sector," says Ott. 

Arnaud Bricout, deputy president of Orco adds, "The funds raised from the floors will be invested mainly in Hungary." He also said that one third of the funds will go to a fund which invests in class-A properties.

Developing strategy

Ott says that Orco's strategy is based on three pillars: property investment, development and land bank, as well as asset management.

"These three activities provide us with complementary sources of revenues. In the property-investment division, Orco targets value creation by refurbishing exceptional assets in prime locations. Residential development is the cash-flow business, with a wide range of offers, from middle-class projects (our main turnover provider) to high-end projects. The exceptional land bank of more than 2.6 million sqm that Orco owns, gives us a pipeline of more than 8,000 units. Finally, the asset management business is a recurring-fee provider, building its reputation on Orco's know-how," says Ott.

In 2006, the number of properties in Orco's portfolio doubled. "From 2000, the time of the first listing of Orco, the value of our portfolio increased from the E53 [zł.201] million to E1.3 [zł.4.9] billion at the end of 2006," Ott adds. "We definitely intend to see the company maintaining its rhythm of growth."

This growth is also apparent in the company's financial results. Last year's revenues amounted to E173 (zł.657) million. In Q1 2007, revenues rose 263 percent and reached E58.6 (zł.222.5) million. Orco's target for 2007 is revenues of E223 (zł.847) million. Last year's net profit amounted to E97.8 (zł.371.3) million.