JSE-listed retail landlord EPP, formerly known as Echo Polska Properties, on Thursday announced that it’s Warsaw-based shopping centre, Galeria Mlociny, which spans 84 400 m2, is on schedule to open during the second quarter of this year.
The flagship development is about 96% pre-leased, with several retailers to make their Poland debut in the shopping centre.
CEO Hadley Dean described the development as a “transportation hub”, owing to its close proximity to the metro lines, which carry about 24-million passengers in a year.
Additionally, the flagship development will combine a fashion hub with a food hall and will boast 8-m-high glass facades on the first floor, which Dean believes will become the dominant floor of the centre.
“Mlociny will be the crown jewel of our portfolio and, from a financial standpoint, the project is already a success, having realised €100-million in value,” Dean said.
EPP’s property portfolio grew by 54% in 2018 and now spans 684 000 m2, with vacancies of less than 1%.
The JSE-listed company also released its financial results for the year ended December 31, 2018, which saw the company celebrating three consecutive years of growth.
Currently, EPP has about 100-million people visiting its shopping centres a year, despite Poland having implemented a Sunday trading ban last year.
The trading ban is to be implemented in phases over a three-year period, with the first year (2018) forcing shops to stay closed on Sunday with only the first and last Sunday of each month as an exception.
The second year (2019) will see this reduced to only the last Sunday of each month, and, in the third year (2020), the law will allow for Sunday shopping only seven times a year.
Despite the ban, EPP is expecting its visitor count to increase to about 120-million by 2020, Dean told media on Thursday.
EPP reported distributable earnings of €96-million, representing a 26% increase from the prior year. The company also announced a dividend of €11.60, up 6.7% from 2017.
The company’s total assets of €2.5-billion increased by 27% during the reporting period.
Net profit for the 12 months amounted to €124.2-million, and distributable income totalled €96.3-million.
Total net asset value (NAV), excluding deferred tax, amounted to just over €1.1-billion, equating to a NAV a share of €1.35.
The net loan-to-value (LTV) ratio stood at 51.9% at the end of the period, with an average cost of debt of 2.33%.
According to Dean, EPP will focus on lowering its LTV costs, but expects that by June this year, the figure will most likely show growth. At worst, the figure will remain flat, Dean said.
In October 2017, EPP reached an agreement to acquire the M1 portfolio of retail properties for a combined consideration of €692.1-million.
During the first half of 2018, EPP successfully completed the first tranche of the M1 portfolio transaction, which consisted of four properties for €359-million.
The acquisition of the remaining properties is conditional upon fulfilment of outstanding conditions.
The second tranche portfolio, which comprises a further six properties, at an aggregate purchase consideration of €75.2-million and a June 2019 completion date, and the third tranche portfolio, comprising two properties, at an aggregate purchase consideration of €44.1-million, are expected to be completed by June 2020.
The delay in completing the second and third tranche acquisitions is to enable the seller to implement various contracted asset management initiatives, to align those acquisitions with EPP's investment requirements and strategy, the company explained in a statement on Thursday.
On July 27, 2018, EPP concluded the acquisition of the second phase of Symetris Business Park.
Also, in July 2018, EPP successfully placed over 36.4-million new shares with Redefine Properties at a price of €1.24, equal to about R19.26 a share, to partially fund the acquisition of the King Cross Marcelin Shopping Centre.
As at December 31, 2018, EPP manages a portfolio of 19 retail centres and six offices located in the majority of regional cities in Poland. In addition to these income-generating properties, EPP also has two developments in Warsaw, Poland’s capital, namely Towarowa 22 and Mcoliny.
By the end of 2020, the company expects to own 28 shopping centres post the conclusion of the M1 transaction.
Looking ahead at the rest of this year, the company’s core portfolio is expected to perform well, with net operating income expected at between 2% and 3% for the year ending December 31, 2019, on a like-for-like basis.
This forecast assumes that a stable global and Polish macroeconomic environment will prevail, and that no major tenant failures will occur, EPP said.
Post period-end, however, Andrew König will retire as director and board member upon conclusion of EPP’s next annual general meeting, which is expected to be held during June.
Pieter Prinsloo has been nominated for appointment as nonexecutive director of EPP.