NEPI Rockcastle achieves targeted results in competitive market

NEPI Rockcastle, commercial property investor and developer in Central and Eastern European (CEE) retail markets, achieved its targeted results in a competitive market in the year to December 31, chief executive Alex Morar said on Friday.

“Twelve years since inception… our assets continue to outperform. Solidly growing footfall and retail sales are driven by our continued asset management efforts, focused on locally-optimal tenant mixes and customer experience,” he said at the release of the annual results on Friday.

The share price was trading 2.6 percent higher at R124.69 on the JSE late Friday afternoon, before closing at R125.71.

The retail portfolio had further increased and remained the largest in the CEE.

Liquidity was strong and the development pipeline was growing and being delivered upon, he added.

Distributable earnings per share for the second half of 2019 came to €27.31 (R444.45), which with the interim distribution of €29.02, produced an annual distribution of 56.33 euro cents.

Distributable earnings were 6.6 percent higher than 2018 (€52.86c), slightly above previously issued guidance of 6.5 percent.

Distributable earnings per share for 2020 were expected to be about 6 percent higher than the 2019 distribution, assuming acquisitions were concluded as planned, developments were delivered as scheduled, a stable macroeconomic environment and no major corporate failures occur.

Net rental and related income (NOI) in the 12 months was up 16 percent to €401 million, compared to €346m in 2018.

The NOI increase for the retail sector was 6.2 percent on a like-for-like basis, with total rent increasing 4.9 percent, driven by lease revisions and vacancy reduction.

The properties had 325 million visits, a 5.9 percent increase compared to 2018 and a 1.5 percent increase on a like-for-like basis. There were no significant retail failures.

The European Public Real Estate Association (EPRA) vacancy rate across the income-producing portfolio was 2.1 percent as of December 2019, excluding 14 000m² under refurbishment.

Portfolio valued was at €6.3 billion, compared to €5.9bn at the end of 2018.

EPRA net asset value per share came to €7.32.

Liquidity stood at €861m, including cash, unused revolving facilities. and a €77m net listed securities portfolio.

Loan-to-value was comfortably below 35 percent strategic target and well within the 60 percent unsecured debt covenant.

The fastest growing segments in the groups retail centres were fashion complements (jewellery, cosmetics, perfumeries, eyewear and fashion accessories) and electronics, illustrating a change of shopping habits and an increase in disposable income across

CEE, said Morar.

Food service had the third biggest growth, highlighting an increase in socialising and leisure activities.

Furnishing and DIY account for 6.5 percent of the total retail letting area. Here a turnover decrease was due to the replacement of Agata Meble with an entertainment operator, Helios Cinema, in Karolinka Shopping Centre.

The group’s retail strategy is to own dominant malls in prime locations within the EU’s fastest-growing economies, in unsaturated markets.

Ninety-seven percent of the portfolio is located in cities with catchment areas of over 150 000 inhabitants, while 45 percent is located in capital cities (and Krakow, considered similar to a capital city).

During 2019, the group enlarged its portfolio through developments and extensions completed in Romania, Poland, Croatia and Serbia. Expansion was ongoing with 9 projects totalling more than 280 000m².