Countries in the central and eastern European regions are enjoying healthy growth post the pandemic and JSE-listed Nepi Rockcastle wants to upgrade its current malls and also invest in new ones.
February 23 2023
Nepi Rockcastle, the JSE-listed landlord which owns malls in central and eastern Europe (CEE), said during the release of its financial results for the year to end-December, that it would expand its already impressive €6,6bn (R128bn) portfolio which includes more than 50 retail centres. Nepi Rockcastle owns assets in Romania, Poland, Hungary, Slovakia, Bulgaria, Croatia, Lithuania, Serbia and Czechia. It has market capitalisation of R65bn.
The group said that it had €677m of development projects including retail and mixed-use assets.
CEO Rüdiger Dany said that in the reporting period, the group spent €154m on developments and capital expenditure. Its ongoing development projects were on schedule. These included the Promenada Craiova mall and its adjacent retail park in Craiova, Romania and Vulcan Residence, which was an apartment block in Romania’s capital, Bucharest. These would be completed in 2023.
Nepi Rockcastle reported that it acquired two retail properties in Poland in 2022. These were the Forum Gdansk Shopping Center, which had a gross lettable area of 63,500m2 and Copernicus Shopping Centre, which had gross lettable area of 48,000m2, for a total transaction value of €377m in December 2022.
The two assets would consolidate Nepi Rockcastle’s position in the Polish retail property market and significantly contribute to the group’s net operating income growth starting 2023.
The company also acquired its joint venture partner’s 50% stake in Ploiesti Shopping City, for a consideration of €55.5m which was calculated as net cash outflow, adjusted for working capital items, less cash and cash equivalents acquired, amounting to €37m.
The European Public Real Estate Association (EPRA) defined occupancy increased to 97.3%, compared with 96.0% in 2021. The company’s company collection rate also recovered to pre-pandemic levels with 98% of 2022 reported revenues collected as of December 31 2022, increasing to 99% by the end of January 2023. Covid-19 trading restrictions in CEE were lifted during the first quarter of 2022, and the Nepi Rockcastle GLA has been fully operational since the end of March 2022.
Dany said he was pleased with Nepi Rockcastle’s results.
“Nepi Rockcastle’s net operating income surged to a record level last year, driven by strong tenant turnover and base rental growth. This was underpinned by the resilience of CEE consumers and their willingness to spend on average, greater
amounts per visit, coming out of the pandemic. The performance was even more remarkable as it was achieved against a challenging economic background, marked by high inflation, rising interest rates and the energy crisis triggered by the war in Ukraine,” he said.
“Despite the opaque economic outlook, we do not anticipate the momentum of NEPI Rockcastle’s growth slowing this year. The major investments we made in 2022, particularly the acquisition of the high-performing, dominant, Forum Gdansk and Copernicus shopping centres in the Polish market, will significantly contribute to operating income in the months ahead. The completion of our development projects scheduled for this year will also generate additional income,” Dany said.
He explained that consumers had a strong preference for visiting shopping centres in CEE, which generally play a much more important role in local economies and communities than in Western Europe, where high street retail is more present. This also tends to mean inflation has less of an impact on spending in our CEE shopping centres than in malls in other European regions.
Nepi Rockcastle’s liquidity position as at December 31 2022 was €671m, including €251m in cash and €420m in undrawn committed credit facilities. The decrease of cash balance during 2022 was mainly the result of investments made in the fourth quarter.
The group’s loan-to-value (LTV) was 35.7%, a level comfortably within its debt covenants. It wanted to reduce this LTV to below 35%, its strategic threshold,
within the upcoming 12 to 18 months.