Nepi Rockcastle raises R5.2bn

• Property group raises R5.2bn in book-build and says funds will be invested in two assets in Eastern Europe

Nepi Rockcastle, the eastern European property powerhouse, has raised a staggering R5.2bn, well ahead of its R3bn initial target, as the company continues to attract South African investors.

Nepi Rockcastle, the Eastern European property powerhouse, has raised a staggering R5.2bn, well ahead of its R3bn initial target, as it keeps attracting South African investors.

The company will partly be invested in two offshore assets.

“The South African listed property sector has raised roughly R35bn this year. This is the first raising by the new Nepi Rockcastle structure,” said Ahmed Motara, a portfolio manager at Stanlib.

Nepi Rockcastle co-CE Alex Morar said: “In the light of strong demand”, the amount of equity to be raised was increased to about R5.2bn. At this level, the book was oversubscribed.

On Tuesday, Nepi Rockcastle closed 3.59% down at R177.50 a share and has a market capitalisation of R95.6bn.

The funds will be used partly to refinance the acquisition of the Serdika shopping centre and office property in Sofia, Bulgaria, and Arena Plaza shopping centre in Budapest, Hungary.

Nepi Rockcastle co-CE Spiro Noussis said the group had positioned itself well in central and eastern Europe’s eight largest economies: Poland, Romania, Slovakia, Czech Republic, Hungary, Bulgaria, Croatia and Serbia.

“We got more than what we were looking for in this raise. We were surprised by the demand. We are now firmly positioned in eight economies in central and eastern Europe.

“We will continue to invest in shopping centres, but will look at expanding and refurbishing our existing centres where appropriate,” said Noussis.

The 66,000m² Arena Plaza shopping centre in Budapest was acquired for €275m. It is the second-largest retail centre in the Hungarian capital. The acquisition was the first deal closed since New Europe Property Investments (Nepi) and Rockcastle merged.

Noussis said his team had been evaluating the Hungarian market for a long time.

Even though Hungary’s population of just below 10-million was about a quarter of that of Poland and half of Romania, Budapest itself was the secondmost populated city in central and eastern Europe.

Noussis said Hungary’s economy was recovering, with its GDP forecast to grow 2.8% in 2017 and 2.9% in 2018, which was well ahead of the 1.4% and 1.5%, respectively, forecast for the EU as a whole.

Neil Stuart-Findlay, portfolio manager at Investec Asset Management, said that the Arena Plaza acquisition represented a sizeable move for Nepi Rockcastle. “While this is Nepi Rockcastle’s first foray into Hungary, it is a territory which they have been evaluating for some time.

“The country has enjoyed a solid economic revival of late and the retailer base is familiar to them from their broader CEE [central and eastern Europe] portfolio.

“The acquisition should be enhancing to the bottom line given the company’s favourable cost of capital, with further opportunity for asset management activities to drive additional value into the medium term,” he said.

The Serdika Center and Serdika Office together comprise the Serdika complex located in Sofia. It was acquired for €207.4m.

Sofia is the capital of Bulgaria and has a population of 1.32million. Morar said it was the economic and cultural centre of the country.

“During the last couple of years, Bulgaria’s economy has shown robust growth, with GDP growth of 3.6% in 2015

WE WILL SEE A SPATE OF ACQUISITIONS IN DUE COURSE, WHICH WILL RESULT IN GREATER INTEREST IN THE SHARE

and 3.3% in 2016,” Morar said. According to European Commission forecast data, growth is expected to be 2.9% and 2.8% for 2017 and 2018, respectively, said Morar. Nepi Rockcastle was formed out of the merger of Nepi and Rockcaslte Global Real Estate in July 2017. The two companies had grown tremendously premerger, with Nepi originally listing in July 2009 and Rockcastle in July 2012.

Ron Klipin, a senior analyst at Cratos Wealth, said there was likely to be strong upside in Nepi Rockcastle’s share price.

“I believe the upside still has strong potential. Once euro trackers become more active, they will put life into Nepi Rockcastle’s price.

“We will see a spate of acquisitions in due course, which will result in greater interest in the share,” he said.