Firm improves offer for Poundland
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.
‘By the time the shopping centre is built, there will be 1 million square metres of offices.’
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 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 significant 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. STEINHOFF has improved the terms of its agreed takeover of Poundland, saying its £610.4 million (R10.6 billion) offer was final. The increased offer follows a move by US hedge fund Elliott to up its stake in Poundland to 17.5 percent, making it the firm’s second-largest investor after Steinhoff. Elliott has a track record of getting bidders to increase their offers. It was among activist investors that last month helped secure an improved offer from Anheuser-Busch InBev for SABMiller. Steinhoff said it was now offering 227p in cash for each Poundland share, comprising an offer price of 225p and a final dividend of 2p. The revised offer price represents an increase of 5p per share over the 220p offer announced on July 13, which together with the dividend valued the British firm at £597m. “The 5p rise in the Steinhoff bid for Poundland is a pretty modest victory for shareholder activism,” independent retail analyst Nick Bubb said. All other terms and conditions of Steinhoff ’s offer remain unchanged from last month’s deal. Steinhoff ’s chief executive, Markus Jooste, said: “By offering Poundland shareholders an improved cash offer we aim to bring certainty to the transaction recognising the strength and value of the business and its management team.” The Poundland deal should be third time lucky after it failed to secure Britain’s Home Retail. Steinhoff shares increased 0.11 percent to close at R88 on the JSE yesterday. – Reuters
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