CEE shopping centre owner Atrium European Land saw earnings per share slip 6% in 2016 following a 15% decline in net rental income (NRI) from the company’s Russian operations.
However, NRI on a like-for-like basis was only 2% lower following moves to focus the portfolio on higher-quality assets. Pre-tax profit came in at €72.6 mln following a loss of €30.9 mln the previous year. The increase was primarily driven by a €14.5 mln revaluation compared to a €105 mln devaluation last year, mainly due to the Russia portfolio.
While Poland and the Czech Republic remain the company’s strongest markets and the focus of much of new development activity, the economic situation in Russia has continued to impact the overall performance during the year, Atrium’s new CEO Liad Barzilai conceded. ‘Nevertheless, I’m pleased to say that there is a growing consensus that Russia’s economy is improving and some expectation that it will exit recession next year.’
Excluding Russia, EPRA like-for-like NRI for the year was up by 1.8% to €123.4 mln, he added.
Repositioning the portfolio
In recent years, Atrium has taken step to reposition its portfolio to have a stronger weighting in Slovakia as well as Poland and Czech. In 2016, the company sold approximately €130 mln of assets including a portfolio of 10 retail assets in the Czech Republic for €102.6 mln in February of that year. The company also sold three Polish assets for €17.5 mln and exited Latvia in October after the sale of its only asset in the country for €12.5 mln.
Despite the repositioning, Russia is still the second-largest source of rental income after Poland with an 18% share. Poland remains by far the biggest market with a share of 54% while Czech Republic ranks third with 15%. In terms of value, however, the Czech portfolio is in second place with a share of 20%, ahead of Russia at 11% and Poland at 58%.
The company claims it reached a major milestone earlier this month with a framework agreement signed to resolve the vast majority of its Austrian legacy issues with a maximum related payment of €44 mln and an increase in the provision by approximately €32 mln.
New extensions
The company has also taken steps to add 70,000 m2 of new GLA to its portfolio by 2020 with a focus on Warsaw. In October, Atrium added 7,600 m2 to the Atrium Promenada (pictured) in the Polish capital.
The second stage of the redevelopment project which comprises a remodelling and renovation of an additional part of the shopping centre is ongoing and is expected to complete in the first quarter of 2018.
In addition to the redevelopment at Atrium Promenada, the redevelopment and 8,600 m2 extension of Atrium Targowek in Warsaw has also commenced.
‘Our redevelopment and extension programme is progressing well and we have a healthy pipeline of opportunities that will help us to deliver higher quality and sustainable income in future years,’ Barzilai said.
‘Furthermore, the significant progress made towards resolution of our legacy issues and the associated cost reduction, together with cost savings from improved operational efficiencies will add approximately €10 mln of EBITDA annually and put us in a position to look forward positively to the years ahead and creating further value for our shareholders.’
