Morgan Stanley Real Estate Investing (MSREI) is to swap its stake in Orco Germany for an interest in the parent company, Orco Property Group, in a deal which will make it the largest shareholders in the Euronext-listed CEE real estate developer.

Orco Property Group said on Friday that it has reached an agreement with funds advised by MSREI for the acquisition of the US investor's stake in Orco's German property arm as well as the Endurance real estate funds. Orco will pay for the shares with the issue of roughly 3 million new shares to be subscribed by MSREI which will become Orco's largest shareholders, with a stake of 18.7%.

As a result of the operation, Orco will increase its interest in Orco Germany to around 87.3%, while its share in the Endurance Residential and Office funds will reach 14.8% and 27% respectively.

'Orco Property Group has set in motion its strategy of reinforcing its control over an Orco Germany portfolio focused on its Berlin investment properties,' said CEO Jean-Francois Ott. 'This is part of Orco's strategy to focus on its core business in the four cities of Berlin, Prague, Warsaw and Budapest with the aim to simplify the group's structure.'

The sale of Orco's assets in Russia is the next step of this strategy, he added. Orco's Russian portfolio includes the 92,000-m2 Moscow Molcom logistic portfolio as well as the Pokrovka suite hotel within the inner ring of Moscow.

Launched in 2005, the Endurance privately-owned closed-end funds invest in Central and Eastern European real estate. The office fund raised equity of EUR 154 mln, while the residential vehicle has a target equity volume of EUR 200 mln and exposure to Germany, the Czech Republic, Hungary, Poland and Russia.