Echo Polska Properties (EPP) plans to sell its office holdings to become a pure retail property landlord in Poland by 2019.
EPP is currently reviewing its 176,000 m2 office portfolio and will appoint a property advisor to sell the assets, CEO Hadley Dean (pictured) announced during EPP's results presentation for Q1 2017.
The company's portfolio of 10 retail and nine office properties, with 17 buildings, and two Warsaw-based retail development sites was valued at €1.5 bn at end-March 2017. The office segment is valued at around €400 mln.
'We are on track to become a pure retail property fund with an acquisition strategy focused on retail assets in strategic locations, enabling us to further leverage our portfolio and platform with retail tenants,' Dean said.
EPP was created in 2016 from the spin-off of the standing assets of Polish listed developer Echo Investments and the entry of co-investor, Redefine of South Africa.
The new company is a dual-listed Dutch real estate investment company that follows the REIT formula, with listings in Luxembourg and South Africa. In June Echo Investments sold 40 million shares in EPP for €49 mln in a move to focus on maximising returns from development. Echo Investment remains a partner with EPP on some ongoing projects.
Results
EPP announced distributable earnings 3,2% ahead of budget at €16 mln for the first three months of 2017. Net asset value (NAV) totalled €679 mln with NAV per share at €1.16. Footfall in the retail portfolio increased 4.6% while sales were up 7.5% year-on-year. Vacancies across the portfolio reduced declining to 1.26% in the retail portfolio and to 3% in the office portfolio.
Dean said that solid macroeconomic fundamentals in Poland as well as measures such as the new state child allowance were impacting positively on purchasing power and stimulating retail growth. 'We are delighted with our Q1 performance which was in line with, or in some cases ahead of, expectations, he said.
He also noted that Polish shopping centres are about 'much more than shopping' as there are very much meeting places for the community both during the day and the evening.
Expansion
During the first quarter, EPP advanced its expansion strategy aimed at major underserved cities.
Acquisitions during the period included two development sites which pave the way for EPP's entry into the under-serviced Warsaw retail market. One of these, Galeria Mlociny was concluded post-period end and is already 55% pre-let and on track for completion in Q2 2019. The 82,000 m2 development is located in a strategic transport hub in a large growing residential district, serving 40,000 people a day.
Other acquisitions included the €53 mln purchase of the Zakopianka shopping centre in Kraków, A4 Business Park Phase III in Katowice; and the post-period end conclusion of the €142 mln acquisition of Galeria Twierdza in Klodzko, Galeria Twierdza in Zamosc and Galeria Wzorcownia in Wloclawek.
'We continued to unlock value in our existing portfolio with a number of extensions and enhancements,' Dean said.
Recently, EPP raised €150 mln of new equity in an oversubscribed capital raise.
