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Capstone Equities Addresses Letter To Board Of Directors Of Orco Germany And Orco Property Group

NEW YORK, Dec. 5, 2013 /PRNewswire/ --

VIA E-mail
[email protected]
Orco Property Group S.A.
Orco Germany S.A.
40, Rue de la Vallee
L-2661 Luxembourg

To: Board of Directors of Orco Germany and Orco Property Group

December 4, 2013

Dear Board of Directors,

Capstone Equities Capital Management ("CECM") is a hedge fund based in New York City and a shareholder of Orco Property Group ("OPG"). CECM is an experienced real estate investor in both direct real estate investment and public market securities. Since 2004, the principals of CECM have acquired 18 properties with an aggregate purchase value exceeding $1.5 billion. Since 2012, we have been successfully investing in real estate securities (Debt & Equity) in Europe.

We wanted to bring an urgent matter to your attention. On Monday, December 2nd, OPG announced a capital increase at Orco Germany S.A ("OG") for the amount of €54 million, where 114,600,000 new shares are to be issued at EUR .47 per share. The problem with this equity issuance is that it is offered to one shareholder, Tandis, which is an entity related to Mr. Radovan Vitek. This is especially concerning considering the Net Asset Value per share is currently €1.13 per share.

At a price of €.47, this would imply an 8% capitalization rate including G&A (9.5% capitalization rate without G&A) or €462 per square meter for the underlying real estate. This is incredibly cheap for Berlin real estate.

CECM has been in touch with several significant US based private equity firms and we know for a fact that many groups would be interested in Orco Germany S.A. at higher levels than €.47 or interested in offering a capital injection at a less dilutive share price.

The actions of the past few weeks regarding the governance issues, aggressive write-downs, and this incredibly dilutive capital raise undermines the objectives of the company. In the past four weeks since the convening notice became public[1], the stock price of OPG has dropped by over 22%.

As shareholders, we demand the board make the capital raise available to all shareholders proportionally; respect the legal rights of minority shareholders and focus on developing profitable real estate projects; while maximizing value at OG.


Capstone Equities Capital Management


Adam M. Chud
P: +1-646-517-1411
E:  [email protected]

[1] The date of the original convening notice the stock closed at €2.21



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