GTC SA, a real estate company controlled by a foundation set up by the Hungarian central bank, is seeking to expand into Swiss and French luxury properties, in a surprise move away from its focus on eastern European offices.
(Bloomberg) — GTC SA, a real estate company controlled by a foundation set up by the Hungarian central bank, is seeking to expand into Swiss and French luxury properties, in a surprise move away from its focus on eastern European offices.
Shares in Warsaw-listed GTC fell after it said it’s in advanced talks for the acquisition of a majority stake in Ultima Capital SA, which develops chalets and villas from Gstaad in Switzerland to Cannes in France and the Greek island of Corfu. Ultima said the enterprise value of the deal may be in a range between 1.25 billion to 1.35 billion Swiss francs ($1.4 billion-$1.5 billion), according to the latest indications.
The transaction will be funded from the sale of equity notes, which may be converted into GTC shares, after approval by at least 80% of shareholders at a general meeting, the suitor said. The deal will help diversify its portfolio by entering a “highly-rated and stable market,” it said.
The latest foray represents a major turnaround for GTC after a decades-long pursuit of office projects in eastern Europe, fueled in part by the relocation of global business centers to the region.
The company started an overhaul after being acquired in 2020 by Optima Zrt., the entity set up to manage a $1 billion endowment for the Hungarian central bank. Last year’s investment in an innovation park in Ireland was one of the first steps in that process. In May, GTC said it may expand into hospitality segment, mentioning its assets in Croatia.
‘Surprising’ Move
“GTC’s move is quite surprising, as it has no experience in the challenging luxury hotel segment or even in markets where Ultima operates,” said Maciej Wewiorski, an analyst at BOS Bank SA. “Minority shareholders have perceived the company as the proxy for eastern Europe’s offices, and now they may be puzzled.”
GTC shares dropped 2% on Monday and are down 6.8% this year, missing out on an 17% jump in Warsaw’s all-share WIG index.
A presentation by GTC showed Optima already owns 355 million francs of Ultima notes, redeemable in cash or in-kind for a 58.3% stake in the Swiss company. GTC issuance in the same amount would pave the way for the Polish company to take over Optima’s stake in the Swiss firm without tapping its cash reserves, at least in the initial stage.
GTC said that if its stake in Ultima tops 33.3%, it would be obliged to make a public tender offer for the remainder of the shares. The Warsaw-based company said it’s seeking to spread out potential future payments for the Swiss company over the next four years.
Ultima last year generated about 17 million francs in revenue from its portfolio of 48 residences, chalets, villas and plots across 11 locations valued by the company at about 1.1 billion francs. GTC collected €167 million ($182 million) in rental revenue in the same period from portfolio of projects exceeding €2.3 billion.
“The yield on Swiss assets is indeed lower compared to our current portfolio, but the risk is also substantially lower,” GTC Chief Executive Officer Zoltan Fekete said on a conference call with investors, analysts and reporters.
Officials at Optima didn’t immediately respond to an email and a call seeking comment on their strategy.
–With assistance from Zoltan Simon.
(Updates with deal details and CEO quote from the 7th paragraph)
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