NEPI Rockcastle maintains annual guidance after first quarter

The dividend payout ratio of the JSE’s largest property stock, of 90%, was also expected to remain unchanged. File picture: James White

The dividend payout ratio of the JSE’s largest property stock, of 90%, was also expected to remain unchanged. File picture: James White

Published May 16, 2024


NEPI Rockcastle, the JSE-listed REIT that owns and operates shopping centres across nine countries in Central and Eastern Europe (CEE), said yesterday that its guidance in February 2024 of lifting annual distributable earnings a share by about 4% remains in place after the first three months of trading.

The dividend payout ratio of the JSE’s largest property stock, of 90%, was also expected to remain unchanged, although the group did warn that the forecast did not consider the impact of greater political instability in the region or major economic disruptions.

Its shopping centres valued at €6.8 billion (R135.2bn) as at June 2023 generated a 12.7% uplift in net operating income (NOI) to €135 million in the first quarter to March 31 versus the same period in 2023.

“We continue to generate robust growth, off strong tenant performance and active asset management across our portfolio in (CEE). The strength of our markets can be seen in the positive trajectory of consumer spend, which translated into double-digit growth in retailers’ sales,” CEO Rudiger Dany said in a statement.

On a like-for-like (LFL) basis, NOI was up 9.4%. The growth was due to higher base rents and tenant turnover, as well as tight management of operating costs, the group directors said in an update yesterday.

Tenant sales increased 10.5%, “a very strong result” continuing an upward trend seen in the last two years, they said. Footfall was up 2.1%, while the average basket size increased 8.8%, despite markedly lower inflation.

Demand for space, especially from international retailers, remained “very strong,” as indicated by a high number of new leases signed and “industry leading” occupancy rate. Operating expenses decreased.

A renewable energy production initiative contributed to the results. A top-up to a sustainability-linked loan facility syndicated by the IFC provided additional resources for short-term refinancing needs and further enhanced the group’s green credentials.

Retail vacancy was 2.2% on March 31, similar to the level as of December 31, 2023. Rent collection was over 96% – 100% for the 2023 full year.

The liquidity position was strong with €1.4bn in cash and available committed credit facilities. This included a drawdown of €387m, the first tranche of the green unsecured sustainability-linked loan facility syndicated by the IFC in December 2023. In April, NEPI Rockcastle signed a €58m increase to this facility.

The facility is to support sustainability initiatives in Romania and Bulgaria, and to prepare for the repayment of a €500m bond maturing in November. No other significant debt was due in 2024.

The group signed 272 new leases and lease renewals in the first quarter, for more than 3.4% of total lettable area, of which 42% by lettable area were new leases, while international tenants accounted for 76% of newly leased area.

The first phase of the company’s green energy project, which involved installing photovoltaic panels across 27 locations in Romania, was almost complete.

The investment to date was €34m with total installed power capacity of 38MW. Procurement for the second stage of this project, involving a roll out of the programme across other markets, had started.

Chief financial officer Eliza Predoiu said “the unsecured green loan by the IFC reinforces our commitment to strengthening our operations and development pipeline in a sustainable way, with higher energy efficiency and lower emission factors. The support of the IFC together with leading international commercial banks and investment managers is a powerful statement of trust in our business strategy…"