EXCLUSIVE: Atrium's Lavine: 'Our priority is growth'

Atrium European Real Estate's CEO Rachel Lavine talks to PropertyEU about the company's H1 earnings and outlines her long-term strategy.

‘For us the priority is growth and this will be achieved in three ways: by working on our portfolio, through acquisitions and via new developments,’ Lavine said, commenting on the company's first-half earnings.

Atrium achieved an operating margin of 95.2% for the six-month period, ahead of the company’s expectations for the full year. ‘We think that a long-term sustainable range is between 92% to 94% and this year we should be at the high end of this range,’ chief financial officer David Doyle said.

The company is looking to increase its loan to value, currently at 12.5%, to about 35% in the long term. In the first half Atrium raised €350 mln through the placement of an unsecured seven-year Eurobond bearing a 4.0% fixed coupon. The bond was over-subscribed 3.7 times.

‘It was the right time to do the placing because the interest swap rates were very low,’ Lavine said. ‘Also, the placing confirmed the investor community’s confidence in the business.’

The company still has a €200 mln war chest available for investment, she added. ‘We are looking for A+ shopping centres in our regions, where we feel that the investment market is opening up after a long stall in 2012.’

Atrium, which owns a €2.2 bn portfolio of shopping centres in Central and Eastern Europe and Russia, invested €152 mln in June in the acquisition of the Galeria Dominikanska shopping centre in Wroclaw, Poland. Closing of the deal is expected for September this year.

The acquisition was in line with the company’s aim of acquiring prime, income-producing shopping centres in its core markets. ‘Our strategy is to expand in all our markets with the exception of Russia, where we are not going to start greenfield developments but will continue to focus on existing projects with limited risk,’ Lavine said. The company currently has three extension projects under way in the country.

In the half year ended June 30, Atrium made progress with the construction and pre-letting of its 75,000 m2 Atrium Felicity centre in Lublin, Poland, which is on schedule to open in March 2014. The centre is over 90% pre-leased with an average lease length of approximately six years.

The company has also recently signed agreements with the general contractor for the second phase of the redevelopment of its Atrium Copernicus centre in Torun, Poland, with construction works under way this month. Together with the first phase, comprising a multi-level car park expansion, the extension will add an additional 17,300 m2 of GLA and a further 640 parking spaces to the centre by late 2014.

Lavine said she is ‘cautiously optimistic’ about the market in CEE, where the economic slowdown appears to have started bottoming out in recent months.

‘Hungary is still struggling but it represents only a small part of our portfolio, about 3%, while the rest of the market is showing modest growth and has a good economic outlook for next year.’ Optimism is being fuelled by the general recovery in retail sales and consumer confidence, which started in the second quarter of the year as a result of particularly good weather conditions.

The company's investment portfolio reported a +€11 mln increase in value in the first half, versus €56 mln a year before. The main driver of the revaluation was Russia, which showed a 6% increase in portfolio value due to rising rents as a result of asset management.

Lavine: ‘We have seen only a small correction in values in Hungary and Czech Republic. By the end of the year, I hope we will not see any devaluations in the investment portfolio.’ Atrium’s development and land portfolio, however, showed a small drop in value of €4 mln in H1, versus €24 mln in the same period a year before.