Poland-focused retail real estate owner EPP's board of directors has decided that, to facilitate a restructuring to bolster its balance sheet and reduce the company's gearing, it would be in the best interests of the company to seek a delisting of its shares from the JSE and the Luxembourg Stock Exchange (LuxSE).

Further, real estate investment trust Redefine Properties has proposed potentially acquiring all EPP shares it does not already own through a share swap at a ratio of 2.70 Redefine shares per EPP share to be acquired.

Redefine already owns about 45% of EPP's shares.

EPP shareholders who do not wish or are unable to accept the Redefine offer will be entitled to retain their direct investment in EPP, albeit in an unlisted environment.

The proposed Redefine offer will be made as part of a series of integrated, inter-conditional transactions to give effect to the delisting and an internal reorganisation of EPP, whereby EPP will conclude two joint venture (JV) transactions with third-party investors.

The JV transactions will inject about €191-million into EPP.

Following the delisting and the implementation of the JV transactions, Redefine will own all of the EPP shares in issue except for those held by EPP shareholders who do not accept the Redefine offer.

Further, EPP's loan to value (LTV) will be 37.4%, compared with an LTV of about 55.6% as at June 30, this year.

EPP will own eight direct properties, comprising six prime retail properties and two power parks, valued at €1.35-billion; a 30% interest in Henderson Park, which owns three office properties; a 53.74% interest in Towarowa 22, a development property in the centre of Warsaw; a 51.2% interest in EPP Community Properties, a JV which will own 12 community retail and three office properties valued at €640.3-million and which will have an LTV of 58.1%; and a 50% interest in M1 Holdco, a JV which will own 11 shopping centres valued at €739.1-million and which will have an LTV of 53.1%.

EPP states that, since its listing in 2016, the company has been unable to achieve meaningful liquidity in its shares or maintain an investment rating comparable to what was achieved at listing.

Further, EPP remains relatively highly geared and has various short- and medium-term liquidity requirements related to refinancing or repayment of debt maturing in 2022 that need to be met.

As at June 30, it had total bank borrowings of about €1.44-billion. It also faces significant loan maturities, with €879-million maturing by December 31, 2022, and €369-million maturing during 2023.

EPP's efforts to dispose of assets to help refinance or repay maturing debts have not yielded the desired results.

"Given the deep discount at which its shares trade to net asset value and highly constrained liquidity in the Polish property market, particularly post the onset of the Covid-19 pandemic, the proposed delisting and related transactions present an accelerated and effective solution to EPP’s balance sheet challenges.

"Accessing affordable equity capital on an efficient basis was one of the central motivations for EPP seeking a listing on the JSE and LuxSE. However, the nature and dynamic of equity capital markets, particularly in South Africa, has changed significantly since 2016. The listed equity market no longer presents EPP with a viable or conducive market on which to raise significant equity capital," EPP notes.

It says that, accordingly, the company is effectively precluded from raising cash to fund acquisitive growth or to repay debt by issuing shares, given the depressed price of its equity and the dilutive consequences of a capital raise for EPP shareholders.