Russia propels rental income and occupancy improvements at Atrium

Russia accounted for the biggest rise in gross rental income at Atrium European Real Estate last year, according to the company's annual report released last week. Lower discounts, new rental agreements and indexation and higher turnover rent lifted gross rental income on a like-for-like basis by 22% to EUR 45 mln.

Poland accounted for the second-biggest increase, or 5% to EUR 54 mln. Overall, the group which develops and operates shopping centres in Central and Eastern Europe, reported gross rental income increased on a like-for-like basis by 14% to EUR 172 mln in 2011. Including the addition of three new malls in Poland and the Czech Republic, net rental income increased by 15% to EUR 155 mln while net profit rose 29% to EUR 143 mln.

In terms of occupancy levels, Russia also generated the biggest increase in percentage points, rising to 97.2% from 93.5%. Overall, occupancy levels increased to 97.6% from 95.5%. Russia now accounts for a quarter of total rental income after Poland with a share of 42%. Czech Republic generates 17% with Slovakia (7%), Hungary (5%) and Romania (4%) making up the remainder. Latvia accounted for a mere 0.2%. Atrium no longer has any operations in Turkey following the sale of its stake in Forum Trabzon last year.

Atrium's CEO Rachel Lavine said the Russian market had improved ‘dramatically’ in the past year whereas Romania and Hungary were still lagging. She does not expect these markets to recover in the current year. Nevertheless, for 2012, Lavine aims to 'maintain the momentum' of the past year. 'To supplement organic growth we will continue to seek opportunities to acquire high quality income producing assets in tier one cities of our target markets, such as those we successfully acquired in 2011. In addition, we will maintain our cautious approach to development, focusing on extensions to existing assets and developments in core locations with high levels of pre-leasing.'

Atrium is working on 10 development projects, of which seven are located in Poland and three in Russia. Within these 10 priority projects three are either under development or have anticipated construction start dates during 2012. These developments are all in Poland and include the 75,000 m² Atrium Felicity shopping centre in Lublin; Phase II of Atrium Galeria Mosty in Plock and a 5,000 m² stand-alone box pre-leased to Media Markt in Gdynia. The other seven developments involve lower risk extensions to existing assets, Lavine said. She added that the developments would lead to a total incremental spend of approximately EUR 210 mln over the next three to four years.

Over 90% of Atrium’s development portfolio by value, and 85% by size, is now concentrated in Poland, Russia and Turkey. The company’s long-term target for the development pipeline is no more than 10% to 15% of total real estate assets.

Given the growing importance of the Polish market in Atrium's overall portfolio, it would not come as a surprise if the company pushes ahead with its plans to seek a listing on the Warsaw exchange. A Warsaw listing would boost its capital base in Poland where pension funds are not allowed to take more than a 5% stake in companies listed outside the country. Lavine conceded that the plans for a new listing are still on the table, but said a timetable has not been set. 'We are thinking about it, but it really depends on what happens in the market.'

Atrium already has a listing on the exchanges in Vienna and Amsterdam.