Redefine Properties significantly expands offshore footprint following record setting 1.2 billion euro Polish commercial property deal

Posted On Tuesday, 01 March 2016 16:47 Published by
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South African Real Estate Investment Trust (REIT) Redefine Properties is significantly broadening its offshore footprint via an initial 75% investment into a 1.2 billion euro high-yielding commercial platform comprising 18 properties in the rapidly-expanding and exciting Polish market.

 Galaxy

The deal, which will be financed via debt and equity at a proposed 60% gearing at the property level, is the largest ever real estate investment transaction in Poland. It is also the largest ever single transaction of income generating real estate assets in Central Eastern Europe.

Echo Investment is a recognized market leader in the Polish and Central and Eastern Europe commercial and residential property development and investment space, having completed over 115 real estate projects in 37 cities and 4 countries.

Redefine’s executive Chairman Marc Wainer calls the deal “a game-changer” for Redefine.

“It significantly advances our international strategy – it has the scale, the right partners and the ability for growth to take a major part of our business to the next level. The 18 properties tick all the boxes from an investment perspective and allows us to take advantage of what will be positive yield carry,” he says.

The return profile is attractive generating total distributable income of 46 million euro.

“These are all high quality properties with average portfolio occupancy rate of 95% and a large share of modern and sizeable properties,” says Wainer.

Poland is the largest country and market in Central and Eastern Europe with a population of around 38m and GDP growth of about 3.5% a year.  Importantly, it has a large, stable and liquid real estate market which has become increasingly attractive to foreign investors over the last few years due to its high growth potential and scalability.

A significant benefit of the agreement – which is still subject to the approval of the European Commission, is further complemented by a right of first offer on over €500m worth of newly developed properties from the large retail and office development pipeline of Echo, with more than 80% of the projects expected to be delivered within the next 2 years.

Furthermore, Redefine’s 25% participation right in these developments gives it access to the exciting growth potential of a pipeline of properties via profit share if these properties are sold to third parties.

“This provides us with a unique path to the leading pure play Polish commercial real estate platform with significant further growth and value upside potential,” says Wainer.

The deal was made possible after Echo made a strategic decision to split its high yielding platform from its development and residential business and to find a buyer for the commercial real estate platform in which it will retain a 25% stake.

“This deal moves the needle as economic growth is driving demand for office space in Poland and opportunities in retail are even more exciting as disposable incomes have improved in lock-step with economic growth,” says Wainer.

With rand weakness persisting and inflation on the rise in South Africa, Redefine believes offshore driven tail winds are anticipated to offset the domestic head winds. The low interest rate environment in certain overseas markets will be exploited by taking advantage of the positive yield spreads that are currently available.

Apart from the Polish deal, the company is also in the process of establishing an investment presence in Spain and diversification into student accommodation in Australia.

“Although 2016 is proving to be a tenant’s market across all domestic sectors, it is not all doom and gloom for us at Redefine as our geographic diversification now really begins to work for us,” concludes Wainer. 

Last modified on Wednesday, 02 March 2016 11:45

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