Nepi Rockcastle in Polish deal
Analysts expect annual dividend growth of at least 15% and share price rise as company reaps benefits of merger
Last week, Nepi Rockcastle became the second JSE-listed property company to announce a multibillionrand deal in Poland, the largest economy in central and east Europe. The R98bn company will acquire Serenada shopping centre and the adjacent Krokus shopping centre, in Kraków, Poland, for an aggregate purchase consideration of about R3.9bn.
Last week, Nepi Rockcastle became the second JSE-listed property company to announce a multibillion-rand deal in Poland, the largest economy in central and eastern Europe.
The R98bn company will acquire Serenada shopping centre and the adjacent Krokus shopping centre, located in Kraków, for an aggregate purchase price of €249.4m.
This was the second deal in Poland by a South African-listed group last week, after Echo Polska Properties announced an R11bn retail property acquisition on Wednesday.
Serenada will open later in October with a gross lettable area of 41,170m². Krokus shopping centre has a gross lettable area of 27,728m².
Nepi Rockcastle will make future payments of about €212m, dependent on the completion of an extension that will result in an integrated shopping centre with a gross lettable area exceeding 100,000m².
Co-CEO Spiro Noussis said the malls were dominant in their catchment area in the northern part of Kraków.
“These centres fit our investment criteria and strategy. The combined mall will be one of the largest centres in Poland. We want to hold this kind of centre over time.
“Kraków is the secondlargest city in the country. Footfall and trading densities are rising in the city,” said Noussis.
Following the deal, Nepi Rockcastle’s Polish portfolio will be worth about €1.9bn.
Poland is one of Europe’s fastest-growing economies and its encouraging macroeconomic environment supports growth in consumer spending, which in turn is driving its retail market.
The company already owns shopping centres in the eight largest economies in the region: Poland, Romania, Slovakia, the Czech Republic, Hungary, Bulgaria, Croatia and Serbia.
Fayyaz Mottiar, the head of listed property at Absa Asset Management, said Nepi Rockcastle had become a major player in the central and eastern European region and was ably competing with foreign real estate companies.
“This is a top deal for Nepi Rockcastle. I can see them now delivering dividend growth of at least 15% each year. They are the biggest player in east Europe and have lots of room to manoeuvre. They have gearing of 24%, which is much lower than many other funds.
“We are seeing the benefits of scale which Nepi Rockcastle have gained from the merger of New Europe Property Investments and Rockcastle Global Real Estate,” he said.
Ron Klipin, a senior analyst at Cratos Wealth, said there was likely to be strong upside in Nepi Rockcastle’s share price.
“We are seeing a spate of acquisitions, which results in greater interest in the share,” said Klipin.
Including the Serenada and Krokus deal, Nepi Rockcastle has spent just more than €1bn on acquisitions across eastern Europe so far in 2017.