A Game-Changing Transaction On The Polish Retail Market

EPP becomes the leading shopping center landlord with €692.1 mln acquisition.

Echo Polska Properties announced the acquisition of 12 major shopping centers and retail parks (M1 portfolio) in three stages over the next three years. The purchase from a consortium (owned 25% by Redefine Properties), totals €692 million and forms part of a more significant 28 property portfolio that has been acquired by the consortium. Upon completion of the transaction in mid-2020, EPP’s portfolio will comprise at least 27 modern shopping centers containing almost 1 million square meters GLA.

The M1 portfolio comprises 12 major retail properties with a total of 446,500 m² GLA and over 620 stores located in densely populated catchments which are complementary to EPP’s existing assets:

•  Eight M1 regional shopping centers with GLA varying from 30,000 m² to 55,000 m² which draw more than 40 million annual visitors, and
•  Four retail power parks with GLA varying from 20,000 m² to 35,000 m².

All the properties are single level and completely leased, grocery-anchored and are situated on massive motorway fronting sites which total over 195 hectares. All of the centers are anchored by Auchan Hypermarkets as well as a variety of global and domestic names such as MediaMarkt and fashion retailers, TK Maxx, H&M, and C&A. The ordinary rental rate beyond the portfolio is a low €9.10 per m² per month, and the average rent to sales ratio is under 9%. The whole portfolio is subject to a master lease from Metro AG which expires in April 2024.

“This deal is based on an ‘up to 30 minute drive time’ measurement, which will treble our portfolio catchment to 34% of Poland’s total population, increasing to 39% after Młociny in Warsaw is opened,” says Hadley Dean, SEO of EPP. The transaction will also boost EPP’s annual portfolio footfall 61% from 76 million to 122 million. “These stats speak to EPP becoming a derivative of Poland’s burgeoning consumer market.”

The transaction will be finished in 3 tranches:

Tranche 1 (January 2018)
€358.7 million GAV is comprising M1 Czeladź, M1 Kraków, M1 Łódź and M1 Zabrze totaling collectively 194,400 m² GLA and NOI of €25.1 million.
Tranche 2 (June 2019)
€222.5 million GAV including M1 Bytom, M1 Czestochowa, M1 Radom, PP Kielce, PP Olsztyn and PP Opole collectively 184,000 m² GLA and NOI of €16.3 million
Tranche 3 (June 2020)
€110.9 million GAV is comprising M1 Poznan and PP Tychy together 68,100 m² and NOI of €7.6 million.

Hadley Dean concludes “this acquisition fits perfectly with our strategy. The M1 portfolio has substantial expansion opportunities which we will develop over time and which will serve to grow the NOI further and strengthen each property’s competitive position”.