Warsaw-based real estate investment fund Echo Polska Properties (EPP) on Tuesday started trading on the main board of the JSE under the name PolskProp.
EPP’s portfolio comprises six office and ten retail projects across the European country, with a gross lettable area (GLA) exceeding 424 216 m2. Poland boasts a large, stable and liquid real estate market that has become increasingly attractive to foreign investors over the last few years.
The fund is jointly owned by Poland’s largest developer Echo Investment and South Africa’s Redefine Properties, which holds a 49.9% interest.
Speaking to Engineering News Online on the sidelines of the listing celebration, Redefine CEO Andrew Konig said Poland held significant growth opportunities for the company.
As part of the listing, EPP, through a heavily oversubscribed initial public offering, raised €100-million. “To raise this amount is extremely exciting and we are happy to have received this support from local investors who are buying into the long-term prospects of Poland, the property portfolio and EPP,” he highlighted.
Konig further explained that Redefine’s 49.9% stake in EPP will continue to be diluted as more capital is raised. “We are happy to hold about 30% over the long term, remaining a strategic investor, but bringing in more investors to enable expansion in Poland,” he noted.
Through the investment, Redefine will also seek to expand its footprint in central Europe. It already owns 18 properties, with about 70% centred around retail, in Poland. “We will end up with a bigger business in a growing market, with huge expansion opportunities.”
Konig explained that the company would remain biased towards retail, as the Polish economy was growing - at a gross domestic product rate of about 2.5% to 3.5% a year - amidst a flat European growth rate, with .
“Poland has a highly educated population, fantastic properties that are well-located, with very little unemployment. It ticks a lot of boxes,” Konig added.
EPP CEO Hadley Dean added that the country also held significant back office opportunities, particularly in light of the UK’s decision to exit the European Union, resulting in a number of companies exiting the UK.
“The success of the private placement demonstrates investors’ confidence in our growth strategy. We are very happy about the strong interest shown in EPP and [it] serves as an endorsement of the unique investment opportunity we believe Poland represents. Proceeds from the capital raise will be used to accelerate and fund acquisitions,” Dean added.
Already the largest listed Polish yielding property company, EPP’s goal is to become the dominant retail landlord in Poland while targeting sustainable double digit annual growth in dividends a share in the short to medium term through a combination of organic and acquisitive growth.
The company is banking on growth opportunities that are already built into the EPP portfolio including filling of vacancies in newly developed properties; 22 000 m2 of retail extensions to two of the company’s existing retail centres that are currently under way; a 25% stake in ten assets subject to a right of first offer and a 70% stake in an 110 000 m2 retail development in Warsaw.
EPP will remain focused on acquiring further high-quality, well-located office assets with strong international and domestic tenants in major Polish cities.
“EPP will also closely monitor the logistics and fulfilment centre sectors, which are in many respects derivatives of the dynamically growing retail sector,” Dean added.
The company anticipates further growth in the warehouse sector, in part given the increasingly close relationship between retail and logistics arising from e-commerce.
“We will also look to trade assets where appropriate to ensure our portfolio remains balanced and competitive in the long term, while maintaining a weighted average unexpired lease term in excess of four years,” Dean pointed out.