Echo Polska Properties SBG Investor Conference Cape Town Hadley Dean CEO 5th December 2016 www.echo-pp.com
Contents • Introduction, Overview & Long Term Goals • Growth and Prospects • Why Poland? Polish Macro Economic Indicators & Real Estate Activity • Portfolio Locations • Polish Retail Dynamics • EPP Retail Strategy & Portfolio • Polish Office Dynamics • EPP Office Strategy & Portfolio • Summary & Q&A • Appendices SBG Conference, Dec. 5 2016
3 EPP at a glance AT-A-GLANCE 526,000 21 GDAŃSK SQUARE METERS PROPERTIES SZCZECIN GLA € 1.4B € 0.8B TOTAL GAV MARKET WARSZAWA CAPITALIZATION KALISZ 7.5% 13 ŁÓDŻ YIELD CITIES IN WROCŁAW POLAND KIELCE 25 82 PROJECTS EMPLOYEES KATOWICE UNDER IN POLAND MANAGEMENT EPP 2017 STRATEGIC PLAN
EPP’s goal is to create a national champion by becoming Poland’s leading cash-generating platform of well-performing retail, office and industrial assets that will deliver consistently high returns to our shareholders SBG Conference, Dec. 5 2016
Growth and prospects Acquisitions through Combination of: ORGANIC GROWTH from retail STRATEGIC RELATIONSHIPS ORGANIC GROWTH extensions, filling up of and EXPERIENCED ACQUISITIVE GROWTH vacancies and ACTIVE ASSET MANAGEMENT TEAM MANAGEMENT Focus on acquiring retail LEVERAGE PORTFOLIO and Targeting sustainable assets in STRATEGIC LOCATIONS platform with retail tenants DOUBLE DIGIT ANNUAL GROWTH IN DPS Pursue STRATEGIC Acquire further HIGH QUALITY, PRO-ACTIVELY TRADE ASSETS DEVELOPMENT OPPORTUNITIES to ensure balanced portfolio WELL LOCATED OFFICE (development profits will be (maintain WAULT of >4 years) ASSETS with STRONG reinvested) TENANTS SBG Conference, Dec. 5 2016
Why Poland? • 8 th biggest EU economy by GDP POLISH MACROECONOMICS 2014 2015 2016e 2017e • 51% of GDP public debt burden vs EU ave 88% Private consumption (%, YoY) 2,6 3,0 4,1 4,0 GDP growth (%, YoY) 3,3 3,5 2,5 2,6 • -0.6% current inflation rate Inflation (%) 0,1 -0,7 - 0,6 2,0 Unemployment (%) 9,0 9,8 6,2 5,5 • Low unemployment rate at 25-year low: ~ 5.7% Source: Central Statistical Office, National Bank of Poland, Oxford Economics, Eurostat • Robust, well-capitalised banking sector FORECAST GROWTH IN GDP PER CAPITA FOR A SELECTION OF EU COUNTRIES Nominal GDP per capita ( € ‚000, 16E) 10.9 11.2 8.8 15.8 14.7 6.3 5 4,4 GDP GROWTH (%) 4 3,5 3,5 3,4 3,4 3,3 3,2 3,1 3,1 3 3 2,8 2,7 3 2,6 2,6 2,4 2,3 2,3 2 1 0 Poland Hungary Romania Czech Slovakia Bulgaria Republic 2016E 2017E 2018E Source: EIU SBG Conference, Dec. 5 2016
Why Poland? • High skilled, well-educated workforce & one of the • Anticipated growth in jobs and consumption will most attractive markets for professional services continue due to FDI and new investment • Relatively low cost of doing business (wages and • Post Brexit, Poland’s well placed as companies in rents lower than most of EU) the UK consider transferring part/all operations • Geographical proximity to Western Europe & • Solid economic growth fundamentals should be Germany, Poland’s biggest trading partner, ~ reflected in the real estate market 27.1% of all Polish exports & 22.9% of all imports • The probability of yield compression in line with (2015) convergence with developed Europe will provide an • Special Economic Zones enabling tax exemptions opportunity to increase asset values • Growth in manufacturing, services sector, business process outsourcing (BPO), shares services centres (SSC) SBG Conference, Dec. 5 2016
Why Poland? (CONTINUED) • One of the largest countries and consistently • High consumer confidence and continued fastest growing economies in Europe. increases in average household income has spurred robust growth in private consumption which • 2007 - 2015 Poland experienced 28% growth in is expected to reach 4.1% in 2016. GDP and 45% growth in exports. • OECD education ranking – 11th in the world and • Largest economy in Central Europe, accounting for 5th in Europe (ahead of Britain and the US) 44% of the region’s nominal GDP. • The largest EU development fund beneficiary: • Poland is the only EU country to avoid recession EUR105.8 billion allocated 2014 through 2020 during the GFC. • Liquid and growing real estate market supported by increasing consumer spending driven by consistent growth in employment and stable inflation levels SBG Conference, Dec. 5 2016
Poland – real estate investment activity CEE – RETAIL INVESTMENT VOLUME (H1 2015 VS. H1 2016 CEE – RETAIL INVESTMENT VOLUME H1 2016 1000 Others 900 25% 800 700 600 MILLIONS ( € ) Turkey 2% 500 Poland 50% 400 Russia 300 1% 200 Baltic Region 100 5% 0 Poland Czech Baltic Region Turkey Russia Others Czech Republic Republic 17% H1 2015 H1 2016 Source: Knight Frank on the basis of RCA SBG Conference, Dec. 5 2016
EPP Property Locations CITY PROPERTIES CITY PROPERTIES Park Rozwoju Stage I and II (Office) Galaxy (Retail) WARSAW SZCZECIN Warsaw retail development (Retail) Outlet Park (Retail) Pasaz Grunwaldzki (Retail) Oxygen (Office) WROCLAW West Gate (Office) Malta Office Park (Office) POZNAN Sagittarius (Office) Galeria Amber (Retail) KALISZ Nobilis Business House (Office) Tryton Business House (Office) GDANSK KATOWICE A4 Business Park Stage I and II (Office) LODZ Symetris Business Park I (Office) A4 Business Park Stage III (Office) Symetris Business Park Phase II (Office) Libero (Retail) BELCHATOW Galeria Olimpia (Retail) KRAKÓW O3 Business Park I (Office) Centrum Echo Belchatow (Retail) O3 Business Park II (Office) JELENIA GORA Galeria Sudecka (Retail) O3 Business Park III (Office) PRZEMYSL Centrum Echo Przemysl (Retail) Retail KIELCE Galeria Echo (Retail) LOMZA Galeria Veneda (Retail) Office Astra Park (Office) SBG Conference, Dec. 5 2016
Polish Retail Dynamics • Total modern retail stock reached 11.112m. m² incl. 486 projects (H12016) • Numerous extensions of existing schemes (constituted 25% of new supply) • Robust investment activity in 2016 including € 431 of • Low levels of vacancy rates not exceeding 3.3% in major Polish cities (H12016); Warsaw – 1.6% total investment deals • Tenant base internationalising ~ 25 new • Warsaw has a structural shortage of retail; the international brands debuted in Poland (2015) market saturation is 640 sqm/1000 inhabitants which makes Warsaw still underserved bar with • Retail sales growth in real terms of 6.5% in June biggest spending power (year-on-year) • Average rent-to-sales ratio of c.11% SBG Conference, Dec. 5 2016
EPP retail strategy and portfolio • Focused on leading Polish cities with large/high RETAIL LEASE EXPIRY PROFILE density catchment areas - ranging from 142,000 – By GLA (%) By rental income (%) 730,000 people within a 30 minute drive Vacant 1,7% 0,0% 2016 3,7% 6,1% • Dominant location in each city 2017 6,9% 7,9% 2018 5,0% 7,9% • Modern properties 2019 5,8% 7,0% 2020 10,5% 11,0% • Diversified tenant base of leading retailers with 2021 & after 2021 66,3% 60,1% international brands representing c. 61% Total 100,0% 100,0% TENANT PROFILE By GLA (%) By rental income (%) A. Large international and national tenants, large listed tenants and government or smaller tenants in respect of which rental guarantees are issued. A 70% 65% B. Smaller international and national tenants, smaller listed tenants, major B 25% 29% franchisees and medium to large professional firms. C 4% 6% C. Smaller national tenants. SBG Conference, Dec. 5 2016
European Retail Trends Extensions Leisure & Entertaiment a shift away from building ‚ retail only ’ centres to expected to 40% of the total new supply in 2017 compared to 24% in H1 2016 creating leisure & entertaiment centres Technology Social hub of the community merging brick and mortar and e-tailing retail notable increase in the number of mixed-use closer together; embracing digital tech with properties where they serve as an urban hub for convenience feature such as apps, click & collect the local communities. and free WiFi equaling increased dwelling time SBG Conference, Dec. 5 2016
Polish Office Dynamics • • High level of construction activity in Warsaw, At the end of Q2 2016, the total office stock (in nine major cities) was estimated at 8.5 million m² Wroclaw and Krakow • Strong business services and outsourcing industry • Regional business centres have started expanding rapidly. Katowice, Poznań , Gdansk, Łódź and Tri- in Poland generating significant demand for office space. City becoming preferred destinations for business process outsourcing and shared service centres • BPO sector employs 240k people and it is growing industry 50% a year • During 2015, developers completed over 587,400 m² of office space. Warsaw is the largest office market in Poland with 47% of 2015 new supply SBG Conference, Dec. 5 2016
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