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HSBC mega-loan shows faith in Polish retail

The bank has provided a €635m debt facility to fund one of the largest-ever real estate portfolio deals in the country.

Against a backdrop of rising consumer spending in Poland, UK bank HSBC has financed the €1 billion acquisition by a consortium of investors of a retail portfolio in the country.

The bank provided a €635 million loan – implying a conservative loan-to-value of 63 percent – to Netherlands-registered vehicle Chariot Top Group.

In December 2017, Polish investment manager Griffin Real Estate, with backing from US private equity firm Oaktree Capital Management, US investment manager PIMCO and REIT Redefine Properties, agreed to buy the portfolio from Ares Management, AXA Investment Managers – Real Assets and Apollo Rida.

The portfolio comprises 28 retail properties, including nine shopping centres, 12 hypermarkets, four retail parks and three standalone DIY stores. It has a total gross leasable area of about 704,000 square metres.

Supported by a record low level of unemployment and wages rising at their fastest pace in years, private consumption in Poland rose by 4.8 percent in Q3 2017 year-on-year, according to official data. The strong rise in consumption, together with the rapid increase in GDP, up to 4.9 percent, the highest since Q4 2011, is attracting investor interest in retail assets.

In Q3 2017, investment in Polish real estate hit €2.4 billion, of which more than 50 percent was recorded in the retail sector, according to CBRE. Prime retail yields stood at 5 percent.

“We had a unique opportunity to acquire a highly diversified and attractive portfolio of assets,” said Maciej Dyjas, managing partner at Griffin, after announcing the transaction last month.

The deal, which is one of the largest-ever real estate portfolio transactions in Poland, contributes to the consolidation of the Polish retail market, according to Savills World Research.

“Investment vehicles purchase property portfolios in order to build large-scale platforms which enable them to achieve their strategic goals,” Tomasz Buras, managing director at Savills Poland, wrote in the firm’s latest country report, dated December 2017.

Alongside the portfolio acquisition by Chariot Top, the resale – planned in three tranches from 2018 to 2020 – of 12 of the portfolio properties to Echo Polska Properties was announced. Through the deal, Echo will become one of the largest retail property owners in the region.

The Polish market has heated up over the past year – South African fund Rockcastle purchased two retail schemes in the country in 2017 and Deutsche Asset Management’s RREEF European portfolio invested in three retail outlet centres.