Echo pockets Galeria Młociny

The companies will pay almost EUR 42 mln (including the liabilities of the SPV company that is the subject of the transaction) for the project, which is already under construction. EPP and Echo Investment will hold 70 pct and 30 pct stakes in the new project respectively. Furthermore, after the completion of the construction work EPP will be the asset manager of Galeria Młociny, while Echo Investment is to complete the construction work and will be responsible for the leasing and marketing of the mall. Following the launch of a shopping centre development on ul. Towarowa 22 in Warsaw, this is the second joint project to be developed by the two companies.

Other parties involved in the transaction include: Broomfield Investments, Catfield Investments, Powell Real Estate International, Taberancle Limited, Taberancle Investments Limited and Elsoria Trading Limited. The financing for EPP’s share in the purchase (EUR 29 mln) has been provided by Powell Real Estate International, Elsoria Trading Limited, Taberancle Limited and Taberancle Investments Limited. Echo Investment, on the other hand, will pay EUR 12.4 mln for 30 pct of Rosehill Investments’ shares. However, the total purchase sum of Galeria Młociny by EPP and Echo Investment will amount to EUR 104.5 mln which includes also liabilities of Rosehill Investments. App. EUR 63.1 mln for the purchase is also to be provided by private equity funds in the form of mezzanine financing.

The estimated yield for the transaction is app. 7.1 pct; however, the partners expect the project to generate higher profits in the future. Hadley Dean, the CEO of EPP, emphasises that the acquisition provides EPP with an earlier entry into the under-serviced Warsaw retail market, ahead of the completion of the Towarowa development.

Galeria Młociny is a 81,900 sqm mixed-use development (of which 71,000 sqm is retail, restaurant and entertainment space). It will comprise a modern cinema, a fitness centre, an extensive food court area, as well as a medical centre. The construction of the first phase started in October 2016, and is on track for completion in Q2 2019. The development is app. 60 pct pre-leased, with most of this space accounted for by the food court, entertainment area and by key fashion groups and brands, including Inditex, Van Graaf and H&M. “This has been our seventh retail acquisition since our entry onto the stock exchanges in Luxembourg and Johannesburg. Such a strategy enables EPP to leverage our scale and provide tenants with a comprehensive and varied offer on the Polish market,” declares Hadley Dean.

In 2014, Rosehill Investments announced the purchase of a 5 ha site from Coimpex for the development of the shopping centre. The company obtained a EUR 46 mln in financing from Griffin Property Finance II to buy the plot. Construction work started last year with Erbud as the general contractor in a contract worth PLN 534.6 mln.