Redefine focuses on Poland after bleak outlook in SA

REDEFINE Properties, the JSE-listed real estate investment trust, wants its Echo Polska Properties unit to double its Polish shopping centre portfolio in the next three years, chief executive Andrew Konig said in Warsaw.

The fund would seek to expand via opportunistic purchases of established malls to avoid the risk of overheating markets, he said.

Redefine was a latecomer to the Polish property market in 2016, as it sought to diversify its portfolio overseas because of political unrest in South Africa.

The fund created and remains the biggest shareholder in the Luxembourg-based vehicle that took over completed buildings from Poland’s biggest real-estate developer, Echo Investment.

It also invested in two mall projects in Warsaw, seeking to benefit from strong domestic demand while sidestepping the country’s recent clashes with the EU.

“We are long-term investors and we see the Polish retail segment as very attractive, despite the political noise we are now witnessing,” Konig said.

“The reason that many developers came to Poland is the country’s openness to trade with the EU. Any signals that Poland may quit the EU would be a red flag for us. But we feel comfortable, we don’t see that as imminent.”

With Polish retail sales growing at the fastest pace since 2012, and the country’s biggest tenants such as LPP and CCC among Warsaw’s best stock performers this year, Redefine will seek to avoid stoking the market too much by targeting existing malls in bigger cities.

Imbalance Its strategy echoes a recent central-bank report pointing to growing imbalances in commercial property markets due to floor-space oversupply.

“We are aware, taking into consideration our experience in South Africa, that overheating may happen with too many openings of shopping centres leading to cannibalisation and fragmented footfall,” Konig said.

The fund plans to maintain “a sound relationship” with Griffin Real Estate as a local partner that advises on property selection, he said. It has no plans to invest in other central European countries.

Poland aside, Redefine will keep investing in the UK and Australia, because it expects South Africa’s political risk to remain elevated until December’s election of a new head of the ANC.

Overseas assets amount to about 20 percent of the fund’s $6.2 billion (R82.7bn) of assets, with Poland representing 4 percent.

South Africa “is now at a crossroads and there is lack of visibility on what economic and political directions may be taken”, Konig said. “Many businesses, not only in property, will continue to deploy their capital to other locations, to seek other opportunities.”

Redefine also believes its growing presence in Poland may bring retailers from South Africa, such as Shoprite Holdings and Mr Price Group, to the country, Konig said.

Some are already present: Pepkor Holdings is expanding its Polish network of non-food discount stores. “We hope that our established relations with retailers in our home country may help us to help them here,” he said.