EPP’s interim distributable income up 9% y/y

6th September 2019

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed EPP’s distributable income earnings for the six months ended June 30, increased by 9% year-on-year to €52.6-million.

The company also recorded distributions of €0.058 a share, in line with market guidance.

EPP reduced its loan-to-value ratio to 49.8%, while its net operating income increased by 8.5% to €72-million, with distributable income of €52.7-million.

Net property income was up 8.5% to €71.8-million.

With the addition of five retail assets to the EPP portfolio during the six months to June 30, the company’s average gross lettable area (GLA) per asset was now almost 40 000 m2, signifying the scale and dominance of the asset base.

CEO Hadley Dean attributed the solid interim results to significant strategic gains made during the period, specifically growing and enhancing the quality of EPP’s retail portfolio, selling office properties and implementing its capital recycling strategy and boosting the balance sheet strength.

EPP successfully acquired its second tranche of the M1 portfolio for €224-million, which boosted its retail portfolio by 141 000 m2 of GLA and expanded its retail footprint into Radom, Bytom, Częstochowa and Poznań.

The acquisition was partly funded by an oversubscribed R1.45-billion capital raise in April.

In May, the flagship Galeria Młociny development in Warsaw, 70% owned by EPP, opened.

The 85 000 m2 centre is at the heart of a transport hub that serves 24-million commuters a year.

EPP also formed a joint venture with Henderson Park, the pan-European private equity real estate platform, in June, by disposing of a 70% interest in three office projects located in Poznan, Lodz and Krakow to Henderson Park.

EPP retains a 30% stake in the assets, as well the asset and property management responsibility for the offices. The deal further recycles EPP out of offices and into retail opportunities, and a portion of the sales proceeds was used to reduce debt.

With five new assets and 220 000 m2of GLA added to its retail portfolio during the period, EPP now has a portfolio of 24 shopping centres spanning 900 000 m2 of GLA, complemented by six high-quality office properties with a combined 147 000m2 of GLA and the landmark mixed-use Towarowa 22 development site in Warsaw.

Retail vacancies remain very low at below 1%.

The solid performance of EPP’s portfolio of dominant shopping centres in strong catchment areas is supported by the robust Polish economy, with retail spend driven by with low unemployment and high disposable income.

“Despite Poland’s Sunday trading ban, and as expected, consumers’ habits have adapted to the change and EPP’s footfall was up 2% but, more importantly, retail sales in the EPP portfolio increased by 6%,” noted Dean. 

By the end of 2020 EPP expects to own 28 shopping centres post the conclusion of the final tranche of the M1 transaction.

Dean indicated that the company’s focus was on integrating the recent acquisitions into the portfolio, exploring value-adding asset management opportunities and continuing to recycle assets.

“Driven by the compelling Polish macro-economy, favourable property fundamentals and strong prospects, EPP is on track to deliver on its prospects of flat or better full-year distribution per share.”

The EPP board of directors remains confident that EPP will deliver on its previously stated full-year distribution per share guidance of flat or better.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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