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Echo Polska Properties beats distribution target

Polish office and shopping mall owner Echo Polska Properties (EPP) beat its prelisting dividend forecast by 2.2% in the four months to December 2016.

The company, which owns assets worth about €1.4bn, released its maiden annual results on Thursday after listing in September 2016.

Although distributable earnings of €34m were marginally below the €34.3m forecast in its prelisting statement, EPP achieved a clean-out distribution per share for the period to end August that was 0.5% ahead of forecast at 2.44 euro cents. Its dividend for the four months to December 31 of 3.14 euro cents was 2.2% ahead of forecast.

EPP can grow to own €3.5bn in assets by 2022, according to CEO Hadley Dean.

EPP’s net asset value (NAV) of €683m translated into NAV per share of €1.16, growing 12% in six months.

At the end of 2016 EPP owned 19 properties, comprising 10 shopping centres in Poland’s major regional cities and nine office parks.

EPP has secured a 70% stake in a retail project under development in central Warsaw, the Polish capital.

Including this project, retail accounted for 74% of portfolio value and 70% of lettable space.

“The high occupancies across the portfolio bear out EPP’s expansion strategy aimed at major underserved cities in Poland. Retail occupancy levelled out at 98.3% and office occupancy improved to 95.7% for the period,” said Dean.

Dean said the company would make three acquisitions a year in Poland until 2022.

“We are building a national champion that leverages its scale and relationships to provide a leading cash-generating Polish property group with a weighted focus towards retail properties in key locations, supported by strategic office sites,” said Dean.

“Europe as a whole is currently navigating a period of uncertainty. This may have a positive impact on Poland as it highlights the country’s attractiveness as an investment and business destination,” he said.

During the period EPP unlocked further value from its portfolio with extensions of Galaxy and Outlet Park in the city of Szczecin. These are expected to be completed in the fourth quarter at an initial portfolio-enhancing yield of 8.5%.

Since listing EPP has acquired the 110,000m² Towarowa mixed-use development on the last available retail site in Warsaw’s city centre.

Garreth Elston, a portfolio manager at Alternative Real Estate Capital Management, said EPP had made a strong investment case.

“We view the company as one of the best available investment vehicles for gaining exposure to Eastern European property. We like their focus on a single national market, backed up by a deeply experienced management team. Their strategic partnership agreements with [developer] Echo Investment and [private equity group] Griffin are also positive,” said Elston.

He said EPP’s push towards greater investment in Warsaw was “the correct path to follow and should be highly accretive”.

“EPP has thus far delivered on their strategy and we believe the company will continue to deliver solid results,” he said.

EPP lowered its loan-to-value ratio to 52.7% during the period and aims to cut it to 50%.

“We are glad they have significantly lowered their loan to value, but we believe there is still a way to go on this front.

“Poland is set to be a long-term beneficiary of Brexit,” Elston said.

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