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EPP encouraged by strengthening & recovery of retail portfolio

CEO of EPP- Tomasz Trzósło.
CEO of EPP- Tomasz Trzósło.

Poland’s biggest retail landlord, JSE-listed EPP, has issued a market update for 2020 revealing an encouraging recovery for retail and the continued strengthening of its operational resilience.

Poland has emerged from a three-week lockdown which commenced on the 28th of November. This has produced a robust return to shopping at EPP’s centres with footfall for December to date recovering to 76% of 2019 levels. This supports EPP’s strong and steady operational recovery. Nearly 90% of the portfolio’s gross lettable area (GLA) is currently trading and average tenant turnover from July to October returned to the level of 90% for the same months in 2019. December 2020’s turnover looks set to reach 90% or more of December 2019’s levels.

The company’s average portfolio occupancy remains stable at the pre-lockdown level of 96%. From June to end-September, EPP extended its weighted average lease term by GLA from 4.7 years to 5.4 years. All lease negotiations applied for by tenants have been concluded with rental collection rate over 95% of the discounted rental levels for an average of four months before November’s lockdown (July to October 2020).

EPP also secure new store openings from some of the biggest retail names including Sephora, Hebe, 50 Style and Martes Sport, among others. The tenant base comprises of an almost equal split of international retailers and Polish retail chains. Tenants in EPP’s portfolio have a track record of outperforming average sales on the Polish market.

The second three-week lockdown has been much less severe for the company than the first which lasted for several weeks between the 14th of March and the 3rd of May 2020. It was shorter and not as restrictive, with roughly 10% more GLA allowed to remain open in November. Polish shopping centres were able to reopen after three weeks of the country’s second lockdown because they have proven to provide safe, sanitised environments for shoppers and employees alike. EPP’s strict sanitary and safety regimes go well beyond this. The Polish government has allowed malls to open in time for the critical trading period which has become even more important for the retail industry this year given the significant impact of the pandemic.

Tomasz Trzósło, CEO of EPP, says the company is pleased with the recent reopening of the shopping centres in Poland and they are happy to confirm that, as a result, EPP remains on track to deliver full-year earnings of €4.75 – €5.25 cents per share in line with previously provided guidance.

We look forward to the busy end-of-year retail season and are optimistic that the vaccination programs that will be made available to the public in Europe in early 2021 will help to efficiently defeat the virus and enable the return of a stable operating environment next year and beyond.”

The Polish government has also provided various support programmes, topping €70 billion, some directed at retailers including cost subsidies. Additional support has been provided with added trading Sunday. Retailers in Poland would normally only trade on two Sundays before Christmas, but this year trading has been increased to three Sundays in December to support retailers and enable safer shopping across more days.

Even though Poland, like most European countries, has experienced relatively high rates of new Covid-19 cases in the recent weeks, it is expected to be one of the least impacted economies in Europe in the next twelve months. With forecasts estimating that Poland will be among the few European economies to show positive average GDP growth for the years 2020 and 2021.