“I think that Orco will be here even after I’m gone,” said the company’s director Jean-Francois Ott a year and a half ago. But today question marks hang over the company he founded in Prague 18 years ago.
On Monday Orco announced that it would not publicise its economic results for last year on Tuesday as planned but at the end of March. It has asked stock markets to put on hold trading its stocks until then.
But the stock markets rejected this request, and, after a one-day break, trading was set to start again on Tuesday. Investors are panicking, as the y speculate what is going on with the company.
A number of share holders have been complaining about the 44-year-old Ott for a while now, saying he and other managers are responsible for the depth of falls on the stock market becasue they have not been able to deal with banks’ unwillingess to give loans for new projects at a time of crisis. The value of stocks has shrunk from the beginning of last year by 96%.
“The price of our shares does not correspond to the value of the property or the value of our projects,” says Ott.
A success story
Until last year, Ott seemed to succeed at whatever he did. After finishing school, he spent 18 months in the army in South Korea, and for a while he worked as a broker on the Paris stock market. He came to Prague in 1991 and started to realise the Czech version of the American Dream.
He used his savings to buy a building in Mánesova street, which he then reconstructed and sold at a profit. From there, he proceeded step by step to found his own company and become one of the key developers in the Czech Republic.
Although Ott did not have any experience in the real estate business, his company thrived in the 1990s thanks to the unsaturated market here.
Soon Prague started to seem too small for the young Frenchman, and his company eventually started expanding to neighbouring countries. The value of his properties reached EUR 2.7 billion according to statistics from mid-2008. Before that Orco gained some of the assets of the closed down bank IPB through a consolidation agency. For CZK 417 million, it bought IPB Real the top flat construction company in the Czech Republic.
Besides its own projects, such as the planned construction in Prague’s Bubny, the company also took lucrative commissions. Recently, for example, Orco completed the construction of the “bullet proof” Radio Free Europe building in Prague’s Hagibor. It also operates the hotel chain MaMaison.
One disaster after another
But along with the declining economy at the end of last year, Orco also began to experience problems.
Banks stopped giving the company loans for new project, the management experienced disagreements, and some managers even left the company. Orco was last autumn one of the first major local developers to decrease prices because of falling demand.
Ott, moreover, lost a significant portion of his shares. Last November he was still the biggest shareholder, holding 12.3% of the company shares. But banks took a way a significant portion of that. Ott had used his shares as securities for his own failed private ventures, and banks where he forfeited his shares ended up selling them.
Ott was thus left with 1.6% of the shares, and, according to the latest information, the biggest share – more than 5% – belongs to Prosperita, a Czech investment company.
For now, Ott is not giving up the battle and trying to save what he can. He is cutting costs wherever possible, and he plans on closing down a couple of offices.
“I believe that within two years, things could improve,” he said a few days ago. Since then, he has stopped communicating with the media.
