Redefine grows stake to 40% in EPP bookbuild

Redefine Properties has taken its stake in EPP — the Polish property group formerly known as Echo Polska Properties — to just over 40%, after supporting a R700m bookbuild, which EPP will use to help buy the King Cross Marcelin shopping centre in the Polish city of Poznan.

While a bookbuild is generally open to the public, Redefine was the only buyer as per an arrangement with EPP, which first announced the acquisition in May.

In terms of their deal, Redefine agreed to underwrite the cash call at a price of R19.26 a share, taking a further 36.4-million shares in the eastern European property group.

CEO Hadley Dean said that EPP "didn’t want to stress the market and when we negotiated the price it was fair for us and Redefine", calling it "fortunate" that the company had an anchor shareholder that was able to back the €91.1m King Cross purchase.

King Cross Marcelin marks EPP’s first retail acquisition in Poznan, one of Poland’s oldest cities and home to some 540,000 residents. The centre, according to EPP’s May statement, is 99% let to retail tenants and was acquired at an initial yield of 7.3%.

Dean said the deal would "materially increase" EPP’s value in two to three years’ time.

In June, EPP iced a planned bookbuild for a five-year corporate bond citing "adverse market conditions".

In that case, EPP had looked to raise over €400m to diversify its funding sources.

In deciding not to go ahead, it said that "current pricing levels" did not "make economic sense".

As it stands, all of EPP’s debt is secured and Dean said "we thought it prudent to look at diversifying our funding, but not at any price. Unfortunately, when we built the book the pricing just wasn’t there."

EPP’s cost of capital is 2.14% and the group was not under any pressure to issue the bonds, said Dean.

EPP’s shares have struggled to gain traction on the JSE since listing at R23 in September 2016. It closed unchanged at R18.50 on Tuesday.

talevig@businesslive.co.za