A consortium of Johannesburg-listed Redefine Properties, US investment firm Pimco and New York-listed Oaktree Capital has agreed to acquire a portfolio of 28 retail assets in Poland. The portfolio was sold by funds managed by Ares Management, AXA Investment Managers – Real Assets and Apollo Rida for around €1 bn.
The buying consortium, named Chariot Top Group and co-managed by Griffin Real Estate, plans to complete the purchase and subsequently divest €692 mln of non-strategic assets in the portfolio to Echo Polsksa Properties (EPP), the REIT-like listed vehicle that is transitioning to a pure retail property player in Poland.
The deal was first reported by Europroperty, part of the PropertyEU group, in July. Last month Europroperty also brokered the news of the EPP acquisition.
'We had a unique opportunity to acquire a highly diversified and attractive portfolio of assets,' commented Maciej Dyjas, managing partner at Griffin Real Estate. 'On the other hand managing and further developing the assets – without making any adjustments to the composition of the portfolio – would represent an enormous challenge due to their non-uniform nature. The transaction was however structured in such a way, that we had no choice but to acquire the entire package.'
Under the first agreement, Chariot Top Group will acquire a 704,000 m2 portfolio of 28 real estate assets consisting of nine M1 shopping centres, 12 hypermarkets, four retail parks and three stand-alone DIY stores as well as a 285-hectare landbank. The acquisition will be partly financed with €635 mln of bank debt.
The subsequent sale to EPP will be divided into three phases. In a first phase worth €359 mln, EPP will acquire four M1 centres located in Czeladz (52,800 m2 of GLA), Cracow (49,600 m2 ), Zabrze (52,800 m2) and in Lódz (38,400 m2) and generating a net operating income of €35 mln. The takeover of the four properties will be completed at the same time as the Chariot Top Group acquisition.
The second phase worth €222 mln is expected to close within 18 months and will include three more M1 centers in Radom (37,000 m2), Czestochowa (29,900 m2), Bytom (28,200 m2) and three retail parks: in Kielce (35,700 m2), Olsztyn (32,500 m2) and in Opole (20,700 m2).
Two additional assets - an M1 centre in Poznan (45,400 m2) and a retail park in Tychy (22,700 m2) - will be acquired in a subsequent tranche by mid-2020 for €111 mln.
The 12 properties in total, known as the M1 portfolio, are located in regional cities across Poland and feature 620 retail units across a total of gross leasable area (GLA) 450,000 m2. They are all subject to a master lease from Metro which expires in April 2024.
EPP
EPP described the previously announced acquisition of the 12 assets from Chariot Top Group as a 'game-changer' that will transform EPP into 'the leading shopping centre landlord' in the market.
'The acquisition is perfectly in line with our long-term strategy: to build a national retail champion,' said Hadley Dean, CEO of EPP, commenting on the deal. 'This deal trebles our portfolio catchment area and increases our annual footfall by 61%.'
The acquisition of the entire portfolio by EPP would not make much sense, he added. 'We have acquired all of the shopping centers. The remaining assets are single retail units and therefore they do not fit our investment strategy.'
Dean said that the deal was based on a 'up to 30 minute drive time' measurement, and would treble EPP's portfolio catchment to 34% of Poland's total population, increasing to 39% after Mlociny in Warsaw is opened. The transaction will also boost EPP’s annual portfolio footfall 61% from 76 million to 122 million. 'These stats speak to EPP becoming a derivative of Poland's burgeoning consumer market,' Dean added.
Upon the completion of the deal, which is believed to reflect a 7.1% yield, EPP will own a €2.4 bn portfolio of commercial properties. The transaction with Chariot Top Group will double EPP's retail GLA and expand the company's presence in Poland's strong regional cities. Law firm Dentons advised EPP in the transaction.
Read EPP's full statement on the transaction
'The volume of this transaction once again shows the high attractiveness of Poland and its economy,' commented Rafal Nowicki of Apollo Rida. 'The outstanding fundamentals, the stability and the size make Poland the leading economy in the CEE region, while its real estate market still offers high yields and growth potential.'
Griffin Real Estate is owned by funds managed by Oaktree Capital Management, Pacific Investment Management Company and Redefine Properties. It owns a €5 bn portfolio.
EPP was created in 2016 around the Polish cash-generating assets of CEE developer Echo Investments. Listed in Warsaw, Echo Investments is controlled by Polish company Griffin Real Estate, Pimco and Oaktree. Redefine acquired a 75% stake in EPP and subsequently reduced its holding to 50% by selling shares to other South African companies.
On launch, EPP owned office, retail and logistics real estate. But CEO Hadley Dean announced earlier this year that the company would sell its office holdings to focus exclusively on retail.
The company's €1.6 bn portfolio at end-June this year comprised of 13 shopping centres, two retail developments and nine office properties. EPP sold three of its offices to Griffin Premium RE for €160 mln.
