Monday, 15 August 2016 23:36

Poland’s real estate market gets thumbs up ahead of Echo Polska Properties listing as retail sales continue to impress

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Echo Polska Properties (EPP), in which South Africa’s Redefine Properties (JSE: RDF) holds a strategic 49.9% investment, lists on the JSE in September during a particularly exciting time for real estate in Poland.

Hadley_Dean

Total retail stock reached 10.9 million square metres, including 9.3 million square metres in shopping centres by the end of 2015. Activity continues to be driven by 6.5% year-on-year real growth in retail sales in June.

According to CEO of EPP, Hadley Dean, who is currently in South Africa together with core managers of his team, says the listing on the JSE – which follows a listing on the Euro MTF market of the Luxembourg Stock Exchange (LuxSE) in August - comes at a good time for South African  investors seeking to diversify by gaining exposure to offshore property. 

According to Dean, increased investment activity is taking place among foreign retail centre operators and investors, as they seek out new and attractive markets.

“The tenant base is becoming more international too – in 2015, approximately 25 new international brands debuted in Poland,” he says.

Brands like Jacadi and Dairy Queen entered the market in 2015, while expansion outside of Warsaw took place by the likes of Sportisimo and Esprit Bodywear. “These are all good portents for the growth potential of the sector, as is the fact that vacancy rates remained low – not exceeding 4% in major Polish cities in 2015,” says Dean. 

Currently, EPP owns 10 retail and 6 office properties with a gross leasable area (GLA) totalling 446,400 square metres. It also has a 25% development profit participation in and has also secured the right of first offer from Echo Investments to purchase another 10 properties (known as ROFO projects) with a total GLA of approximately 200,000 square metres. The ROFO projects are at various stages of construction and are set to be completed between 2016 and 2018.  

This is why Redefine’s CEO Andrew Konig calls the upcoming listing of EPP a “powerful strategic move” to generate growth and development in an exciting offshore jurisdiction.” He says EPP’s future pipeline holds significant potential. 

While the decision by the UK to exit from the EU has sent shockwaves through many markets across Europe – Poland’s real estate market stands out as a strong growth avenue for investors.  

Professor Marek Belka (Independent non-executive director of EPP), former Prime Minister and Finance Minister and until recently the President of the Polish Central Bank, says with relatively low cost of occupation and a highly skilled labour force, Poland is a beneficiary of a trend by European companies to transfer operations to cheaper locations.

“This is anticipated to accelerate post Brexit,” he says.

He says the increase in economic activity and infrastructure development will continue to drive prospects in the real estate market. 

“Economic activity in Poland continues to expand. Rising employment and wages, higher social transfers and low energy prices are expected to support faster consumption growth, which in turn drives the growth potential of the retail property market,” he says. 

According to Dean, office space in Poland is almost 60% cheaper than in London, and international banks are already using Brexit as a reason to accelerate their take up by snapping up this cheaper space.

The value of EPP’s initial portfolio as at 30 June 2016 was EUR 1.2 billion, with retail properties comprising 77% of the initial portfolio by market value. 

The dual listings on the JSE and in Luxembourg are anticipated to provide EPP, with significantly improved access to expansionary capital with about R1.5 billion expected to be raised. 

Further information on the capital raise and placement of shares to be undertaken by EPP to coincide with its listing on the JSE will be available during an investor roadshow in August. The opening date of the private placement is expected at the end of August and the closing date of the private placement in early September. The listing is then expected by mid-September, subject to final approvals.

Last modified on Tuesday, 16 August 2016 11:58

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