September 8 2023
Poland is still on the radar of many South African property investors.
Numerous listed property funds have bought properties directly in Poland or bought into listed funds which own assets there. Redefine, the group formed and later listed by Marc Wainer, was one of the first SA funds to invest there. Wainer had met a Polish businessman in a bar during the 2015 Rugby World Cup. he was looking for offshore investment opportunities and the Pole began to convince him that Poland was the market of choice. He turned down a Spanish deal in favour of Poland.
Redefine Properties, the second largest property landlord in SA by assets, which also has exposure to Poland, recently held an investor call for the year to end-August, where CEO Andrew König said the east European market still stands out because of seemingly unstoppable fundamentals and an exciting future.
Redefine first invested in east Europe’s largest economy back in 2016 when it and Polish groups formed EPP. Today EPP is the largest owner of shopping centres in Poland and is a subsidiary of Redefine.
Redefine also has a Polish logistics arm as it looks to benefit from demand from tenants who need to store goods for online retail for example.
As an example of its efforts to realise growth and upside for shareholders despite market uncertainty, Redefine is unlocking opportunities in the retail, logistics and self-storage market segments in Poland, said König.
“We remain confident about the potential in the Polish market,” said König.
“Our exposure to Polish retail and logistics provides stability; recovery of the shopping centre performance in that market is well on track, with positive retail sales forecast for the next two years,” he said.
The update noted that rental rates continue to rise in the logistics market segment, particularly in sought-after locations and buildings with modern technologies and ESG solutions.
“The self-storage market in Poland represents an emerging asset class with untapped potential. Poland has significantly fewer facilities than other European markets and demand is underpinned by robust micro business needs, representing 48% of overall users, which is above the EU average of 29%,” he said.
König said conditions were improving for Redefine locally.
“Notably, the upward trajectory of inflation is tapering, with early signs of cooling-off, which brings with it more predictable interest rate expectations. Meanwhile, the government and business’s plan to remove obstacles to inclusive economic growth and job creation through priority interventions is expected to restore much-needed confidence,” said König.
“We are encouraged by the fact that real estate fundamentals are beginning to build positive momentum that is expected to translate to future upside potential,” he said.
“This has provided us with a renewed sense of optimism. However, we know that risks like geopolitical tensions, elevated inflation, high interest rates, rising energy prices and ongoing load shedding require an unwavering commitment to fostering strategic resilience as we look to pursue growth and deliver sustainable value,” he said.
This was while SA’s economy battled to grow.
Redefine’s loan-to-value (LTV) at the end of May 2023 increased to 42.3% compared with 40.9% at the end of February 2023. Redefine expected the LTV to moderate towards its internally set medium term target of 38% to 41% during 2024. LTV is used to measure the health of a property company. It is calculated from the ratio of a fund’s debt to the value of its assets. Analysts tend to prefer for LTV to be below 40%.
Redefine’s distributable income per share (DIPS) were expected to be in line with guidance of between 48 cents and 52 cents for the year to end-August 2023.
alistair@propertyflash.co.za
