Tomasz Trzósło

18 March 2021

EPP is the largest owner of retail real estate in Poland. The company's current portfolio consists of 29 shopping centers, 6 office locations and 1 development project, with a total value that amounts to approx. 2 billion euro and a leasable area of over 1,000,000 square meters. Tomasz Trzósło was appointed CEO of EPP in June 2020.

You took over leadership of EPP in Poland at a very interesting time, just as the global pandemic started. What were your thoughts at the time?

Indeed, I found myself in a very interesting circumstance. I was making a decision on this at the end of 2019 when the pandemic was not a big concern yet, there were some distant news here and there about Wuhan but nobody understood the extent to which other countries would be affected. So I was relying on different assumptions when evaluating what the job would be about.

The actual start date for me was mid-March, just when borders started to close and lockdowns to be implemented across Europe. So quite a shocking start, in a very dynamic environment that pushed me figure out what needs to be done in the short term but also what would benefit the company in the long run.

So what were the first ideas you turned to in order to stabilize the business in the short term?

As background it is worth mentioning that in 2020 the Polish government passed a law to release retail tenants from paying rent and service charges if they had been forced to close, without compensation to landlords. It was obviously a one-sided support to tenants.

Even so, we made a decision to provide additional discounts to tenants who, based on their turnovers and financial situations, required some support. But we did so in return for meaningful extensions of their leases. So we accepted that something atypical was going on and financial results will be impacted, but we kept in mind a long term, strategic view.

Looking at EPP's business more broadly, considering of course the present circumstances, what is the vision you are proposing?


My vision for EPP is to remain a retail-focused company because we are talking about a field that involves a lot of specialization and very specific skills (marketing, interacting with local communities, focus on end customers not just tenants, etc.). The fact that we already hold this know-how is extremely valuable.


But this doesn't mean we don't want to invest a portion of our funds in other assets classes. We have offices and we are open to new elements such as residential projects. To be clear, we are not considering a big scale change of direction, rather we are using the opportunities that exist in our portfolio and keep an open mind towards diversification where it makes sense.

Your present portfolio includes one development project - will you tell us more about it?

It's a fantastic plot right in the city center of Warsaw. Our initial idea was to build a big dominant shopping center there but this plan is now changed. Together with our JV partner we are thinking of a mixed-use project involving offices and residential for sale as well as residential for rent. We believe this is better tailored to the current market demand, and also easier to finance: a big shopping center needs to be financed in one block, whereas a multifaceted project can be done in phases, hence you can recycle the capital.

Another idea we are considering is that of selling the respective land. One of our strategic goals is to lower our loan-to-value ratios, and in order to achieve that we will be recycling some assets. It might be a strategic long-term investor that will buy a percentage stake in some select assets. We may also sell the land for this new project which currently isn't generating revenue but has a high value. The options are under consideration but the decision will only be made closer to the end of 2021 or in 2022.

EPP is listed on the stock exchange in South Africa, which I found intriguing. What is the opportunity you associated with that part of the world?

We noticed in the wider CEE region, a significant interest from various South African funds in investing here. This capital was looking for diversification opportunities outside of Africa, and Central Europe appealed to them because of its scale and also its better return rates compared to Western Europe.

EPP was structured initially as a venture with a majority stake taken by a South African REIT. Because there was a lot of additional interest from South African pension funds it made sense to list EPP in Johannesburg, creating an easy way for them to place their money here. Now we have a truly diversified investor base coming from South Africa.

Speaking of REITs, Poland does not have this model implemented despite efforts that have been made in this direction. We know that EPP is a REIT-like company, what attracts you to this model?

Correct, the government has been working on this legislation but the process has been protracted. There was an effort last year, stopped by the pandemic, but the idea is now back on the decision makers' table. If the right legislation is passed this is an area we will be looking at in terms of a possible second listing in Warsaw, in addition to our primary listing in Johannesburg. It would open up the possibility for people to invest via the Warsaw Stock Exchange so we are looking at this closely.

Switching our focus to the future, what are some key objectives you are pursuing? Where do you expect growth to come from?

Where we see most opportunity is with big dominant shopping centers that offer sufficient leisure elements, so places where people can shop but also spend their time. A reasonable expectation is that shopping centers will need some time to recover, because they are associated directly with people's confidence and comfort in being in crowded areas.

In the long term I simply don't believe that people can be happy sitting at home, working digitally, ordering food online and watching Netflix in the evening. Even in a nice, comfortable apartment you are still restricted to the same space and I'm absolutely sure, as soon people feel safe, there will be a big social bounce back for restaurants, cinemas, theaters etc. As a business we want to be ready for this comeback.

One other element is the density of shopping centers in Poland, satisfactory in terms of square meters but not "overcooked". Of course not every shopping center might be a winner, some casualties may occur, the saturation is bigger in some cities and there are malls that haven't been built well enough. My take is that if managed well, shopping centers will continue to attract. Maybe more marketing functions will be required but their importance will remain strong.

What about the market at large, are you optimistic about its evolution in the coming 2-3 years?


The structure of the Polish economy provides good prospects for recovery. Manufacturing is strong and there are also numerous global BPO/SSC players that are presently employing about 350,000 people in Poland. The messages we hear from these companies is that they are looking to add even more jobs to their Polish base, shifting them from places like India which proved too distant under the recent travel restrictions.


Referring specifically to our industry, in the short term rents are under pressure and owners have debt that typically increased during the pandemic, so the pressure on revenues is higher. It will take some time, a few years maybe, to rebuild and regain the same financial position. But overall the fundamentals are strong and recovery is just a matter of time. We have to be patient.

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