Johannesburg - Echo Polska Properties (EPP), the Poland retail property-focused fund in which listed Redefine Properties has a 49.9 percent shareholding, plans to raise about €100 million (R1.5 billion) through a private placement prior to listing on the JSE’s main board next month.
The company will have a dual listing and also list its current €1.2bn of property portfolio assets comprising six and 10 retail assets on the Luxembourg Stock Exchange this month.
Maciej Drozd, EPP’s chief financial officer, said yesterday that EPP would have a market capitalisation post listing in excess of €800m.
Double-digit growth
Hadley Dean, the chief executive of EPP, said EPP was already the largest property fund in Poland and its financial mission was to deliver sustainable double digit annual growth in distributions a share.
Dean said they were forecasting €64m in distributable income in 2017, which would be at a forward yield of 7.5 percent. He said EPP planned to achieve this growth through acquisitions and organic growth, including retail extensions and a reduction in vacancies.
Dean said it would be difficult to deliver double digit distribution a share growth if EPP did not take on some co-developments, but it had a strong partner in Echo Investments, which was a 25 percent shareholder in EPP.
He said EPP had acquired 25 percent of Echo Investment’s development pipeline of 10 projects for €23.4m, had right of first offer on all of them and had elected to buy four of them.
Dean said the reason for the €100m private placement in South Africa was to allow them to expand the value of the portfolio to €1.4bn through the acquisition of these four additional office properties and to take advantage of a retail development opportunity.
“We are planning to buy a shopping centre development on a 6 hectare site on the fringe of the CBD in Warsaw. It is probably the most exciting retail development in any capital city in the next five years in Europe and is targeted for completion by 2020.
“By the time the shopping centre is built, there will be 1 million square metres of offices used by 100 000 people within a 15 minute walk of the centre. There will also be 85 000 local residents within a 15 minute walk of the centre,” he said.
Drozd said the construction cost of the Warsaw retail development was about €400m and EPP’s expected return on that was €34m, with yield conservatively of 5.5 percent, resulting in a potential uplift in value of more than €100m.
Dean said 70 percent of EPP’s portfolio would comprise retail asset and 30 percent offices.
He said EPP had a loan to value ratio of 56.7 percent and its entire debt would be hedged for more than five years by September 1, which was significant in terms of risk.
Marek Belka, the former Polish finance minister, prime minister and governor of the national bank of Poland, is a non-executive director of EPP.
Belka highlighted the strength of the Polish economy, adding it grew by 28 percent between 2007 and last year compared with the 10 percent economic growth achieved by Sweden, the country in Europe with the next best economic performance in this period.
BUSINESS REPORT