JSE-listed EPP, the largest retail landlord in Poland, says its exposure to Eastern Europe’s largest economy has helped it weather the pandemic better than competing property groups.
The distributable earnings per share of the group, which owns assets worth €2.6bn (R51.7bn) including 25 malls, declined to €2.38c in the six months to June, a 59% fall from €5.80c, in line with guidance. This was as cinema operators, restaurants and other non-essential retailers could not trade during the hard lockdown.
Polish malls could not operate properly during the lockdown, which lasted from March 14 to May 7. During the lockdown Polish landlords were forbidden from charging rent and only 21% of EPP’s malls by gross lettable area were operating.
But CEO Tomasz Trzósło said shoppers are returning to EPP’s malls and the company is clawing back losses on rental discounts to tenants during lockdown.
Independent economic research shows that Poland’s economy is set to grow at 1.1% this year while other European countries are in for GDP contractions, with the EU-UK average expected to be a 0.3% contraction, Trzósło said.
The country has been supported by EU donor funds as it continues to house a thriving business outsourcing sector for Western Europe.
In the first seven months of the year, Poland received €11.78bn in EU funds and paid €3.41bn to the EU.
Polish companies received about €70bn, 15% of its GDP, in stimulus from the private and public sector in response to the pandemic.
Its unemployment rate is expected to fall from about 6% to 3.5% by the end of 2021.
Covid-19 cases have also eased in Poland, one of the European countries with fewer cases than many others. Up to Monday, there were 18,524 active cases in the country compared with 27,380 in Germany, 415,405 in France and 50,323 in Italy. Poland’s total reported cases of Covid-19 so far in 2020 is about 89,962.
Since July rental collections have been at more than 90% on discounted rentals, while average rental collections from March to June were at 79%.
“In line with EPP’s strategy, discounts or deferrals were offered to tenants with the aim of extending lease periods and increasing long-term rentals. The company has not and will not entertain turnover-only based rentals,” EPP said.
Trzósło said EPP, which is also listed in Luxembourg, will put a hold on new acquisitions for a year to eighteen months and is unlikely to raise capital in 2021. The company aims to shorten the 20% discount to net asset value at which its share price is trading.
Its board elected not to distribute a dividend for the first half of the financial year to December and will assess the payment of a second-half dividend to December when finalising its full-year results, which is expected in March 2021.
Net property income fell to €52.7m in the six months to end-June. Distributable earnings per share fell to €2.38c.
Occupancy remained at 97.3% while footfall was at 69% of that in 2019 by end-June while it had improved to 85% up to September.
EPP’s loan-to-value (LTV) ratio increased from 50% to 51.7% over the period, however it remained well within covenant levels of 68%. EPP aims to decrease the LTV to below 40% within the next 18 months, largely through asset sales.
The share price gained 2.08% to close at R4.90 for a market capitalisation of R4.4bn.
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