Boom time for SA Investors with Polish retail property exposure

Hadley Dean, Ceo of EPP, says Poles enjoy going to shopping centres during their leisure time and due to a combination of things including harsh weather and small living spaces, this is likely to continue into the future.

South Africans invested in Polish retail property are well positioned to benefit from the country’s growing consumer spend and the popularity of mall shopping among Poles.

A key statistic that came out of the latest holiday sales goes a long way in explaining why Poland’s retail property sector paints a more positive picture for investors than many other sectors in South African and abroad, which had a rough year in 2018.

“It comes down to where people shop,” explains Hadley Dean, Ceo of EPP (formerly Echo Polska Properties), Poland’s largest owner of shopping centres, which is listed on the stock exchanges in Johannesburg (JSE) and Luxembourg (Euro MTF).

“This is very different between Poland and the United Kingdom. A common mistake business people make when evaluating the markets here in Poland is to compare them and at the same time lump the statistics together with the United Kingdom or the United States,” points out Dean.

Research shows that in the United Kingdom, 80% of total retail is on high streets. This is in stark contrast to Poland, where there is no high street tradition. In fact, over 70% of retail spending in Poland takes place in malls. The total lack of high streets throughout Poland is a strong indicator that this will not change any time soon. 

“Poles enjoy going to shopping centres during their leisure time and due to a combination of things including harsh weather and small living spaces, this is likely to continue into the future,” notes Dean.

A survey carried out by IBRiS on behalf of Bank Millennium estimated that total Polish household spending for Christmas 2018 would reach US$6.3 billion, an increase of 8.6% compared to 2017.

This is because of growing consumer spending across Poland on the back of growing income, record low unemployment, a positive financial outlook and consumer optimism.

EPP’s Perfomance

EPP got off to a rocky start when it made its debut on the JSE three years ago. In the first six months the stock slumped 25% from its listing price.

Back then, SA investors were clearly not yet buying into the Polish growth story.

But there appears to have been a marked turnaround in investor sentiment since last year. 

In 2018, the company posted an equally impressive set of results, with dividend growth up 12% in euro for the six months to the end of June — against the average 4%-6% dividend growth (in rands) that investors now have to be satisfied with from SA-focused property stocks.

Redefine Properties increased its stake in EPP to just over 40% last year, after supporting a R700m bookbuild, which EPP used to help buy the King Cross Marcelin shopping centre in the Polish city of Poznan.