Warsaw mall development to underpin EPP's growth

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EPP, which listed on the JSE in September, will acquire the property, which includes plots on 22 Towarowa Street, Warsaw, from Griffin Real Estate, a Polish property fund.

Its partner in the acquisition, Echo Investment, will develop a large retail centre that will be EPP's flagship property. The mall is due to open in 2021.

Warsaw is a rapidly growing city that houses many backoffice processing and call centres used by German and multinational businesses.

The Towarowa property consists of a number of plots acquired through five separate transactions. The property is the single biggest commercial area in the centre of Warsaw, with a total area of about 6.5ha and development capacity of more than 100,000m² to let.

EPP says it can benefit from a growing middle class and expanding economy in the Polish capital. Poland, which has the largest economy in central Europe, was the only country in Europe to avoid recession during the 2008 global crisis. It achieved 25% compounded GDP growth in 2007-15. Second in Europe during this period was Sweden, with 11% growth.

"The new retail scheme will deliver the highest modern standards of shopping, dining and entertainment for Warsaw's inhabitants," said EPP CEO Hadley Dean.

"This part of Warsaw was destroyed during the Second World War. It is now being gradually revitalised with new office and residential schemes.

"There are around a million square metres of offices being constructed in the vicinity of the plot and residential development plans include projects accommodating 85,000 residents. On top of that, our development will restore this part of Warsaw's city centre."

EPP will acquire a 70% interest in a special purpose vehicle that owns the property, with Echo Investment acquiring the remaining 30%.

EPP's largest shareholders are developer Echo Investment and SA's Redefine Properties.

Several South African fund managers have praised EPP over the past few months.

"We see [EPP] as an attractive and cheaper entry point into Polish real estate, compared with several of its South African listed peers, with retail assets that should yield good asset management opportunities for future growth. [EPP] does also have significant office assets which have benefited from the growth of the business process outsourcing industry," said Anas Madhi, an executive director at Meago Asset Management.

He said EPP would be able to achieve double-digit distribution growth over the foreseeable future partly because the Towarowa property would raise its retail exposure.

Source: Business Day