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Rüdiger Dany, CEO of NEPI Rockcastle. /// credit: NEPI Rockcastle
Rüdiger Dany, CEO of NEPI Rockcastle. /// credit: NEPI Rockcastle

NEPI Rockcastle Starts 2024 With Double Digit Growth In Net Operating Income And Tenant Sales

NEPI Rockcastle achieved a 12.7% uplift in net operating income (NOI) to 135 million euros in the first quarter (Q1) of 2024 versus Q1 2023. On a like-for-like (LFL) basis NOI was up 9.4%. This solid growth was driven by higher base rents and tenant turnover as well as tight management of operating costs across its retail property portfolio, the largest in Central and Eastern Europe, reveals NEPI Rockcastle in its latest Q1 2024 business update.

The company´s tenant sales increased by 10.5% in Q1 2024 versus the same period a year ago (LFL excluding hypermarkets), a very strong result continuing the upward trend seen in the last two years. Footfall was up by 2.1% (LFL), while the average basket size increased 8.8%, despite markedly lower inflation.

“We continue to generate robust growth, on the back of strong tenant performance and active asset management across our high-quality portfolio in Central and Eastern Europe,” says Rüdiger Dany, CEO of NEPI Rockcastle. “The strength of our markets can be seen in the positive trajectory of consumer spend which translated into double-digit growth in retailers’ sales. Demand for space, especially from international retailers, remains very strong, as shown by the high number of new leases signed and NEPI Rockcastle’s industry-leading occupancy rate. The operating expenses decreased from previous period, while the recovery of operating costs has improved. We continue to look for additional sources of growth, such as our renewable energy production initiative which is already positively contributing to our results. A top-up to the sustainability linked loan facility syndicated by the IFC provides additional resources for short-term refinancing needs and further enhances the Company’s green credentials.”

Retail vacancy was 2.2% on March 31, 2024, similar to the level as of December 31, 2023, confirming the
strong demand for retail space from occupiers, while rent collection for Q1 2024 was over 96% (100% for the 2023 full year) as of the end of April 2024.

Short-Term Refinancing Needs Met Through New Facility And Ample Liquidity

The company reports a very strong liquidity position with 1.4 billion euros in cash and available committed credit facilities on 31 March 2024. This includes a draw-down of 387 million euros, the first tranche of the green unsecured sustainability-linked loan facility syndicated by the International Finance Corporation (IFC) in December 2023. In April 2024, NEPI Rockcastle signed a 58-million euro increase to this facility bringing the total to 445 million euros. The facility is part of a strategic effort to support the company’s sustainability initiatives in Romania and Bulgaria, and to prepare for the repayment of a 500 million euro bond maturing in November 2024. Apart from this bond, the Group has no other significant debt due in 2024.

“Sustainability is a strategic priority for NEPI Rockcastle – it lies at the core of our operations and the way in which we finance our business,” adds Eliza Predoiu, NEPI Rockcastle’s Chief Financial Officer. “The unsecured green loan arranged 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, solid financial standing and proven track record of delivering industry-leading performance in the CEE retail market.”

NEPI Rockcastle´s loan-to-value ratio was 31.5% as of 31 March 2024, comfortably below its 35% strategic threshold.

The value of the company´s investment portfolio was 7 billion euros as of March 31, 2024 (including Novi Sad in Serbia, classified as held for sale), thus marginally higher (+0.2%) compared to December 2023 due to investments in developments made during Q1 2024. In the first quarter of 2024, no property valuations were done. These can be expected in NEPI Rockcastle´s half-year and year-end financial reports in the form of two independent valuations.

Operating Performance

The company reports a footfall 2.1% higher in Q1 2024 compared to Q1 2023 (LFL). The pace of year-on-year growth has also accelerated slightly as compared to the second half of 2023.

LFL tenant sales (excluding hypermarkets) in Q1 2024 increased by 10.5% compared to Q1 2023. A
positive trend for the year is emerging, with February and March showing higher year-on-year growth
than January. All product categories recorded higher sales, except Sporting Goods (-2.3%). The best
performing categories were Health & Beauty (+19%) and Services (+18%), while Fashion, the largest segment, saw sales increase by 9%.

In Q1 2024, the Group signed 272 new leases and lease renewals, for more than 72,700 sq m (3.4% of total GLA), of which 42% by gross lettable area (GLA) are new leases. International tenants accounted for 76% of newly leased GLA.

Significant new leases signed in Q1 2024 include Half Price and Focus Hotel (Forum Gdansk, Poland),
Reserved (Arena Centar, Croatia and Arena Mall, Hungary), New Yorker (Alfa Centrum Bialystok,
Poland), Action! by Apollo (Galeria Mlyny, Slovakia), JD (Serdika Centre, Bulgaria), dm (Pitesti Retail
Park, Romania), Adidas (Mega Mall, Romania), Fressnapf (Mammut Shopping Centre, Hungary).

NEPI Rockcastle´s Current Developments

Works at the company´s development projects under construction are on schedule and within budget, reports NEPI:

  • The extension of Promenada Bucharest is scheduled to open in the fourth quarter (Q4) 2026, while lease terms were agreed for 52% of the additional GLA.
  • The redevelopment of Bonarka City Center is 68% complete and will be finalised in the second quarter (Q2) 2025.
  • The 5,900 sq m extension of Ploiesti Shopping City is due to open in Q4 2024, with lease terms agreed for 79% of the additional GLA.
  • Works on the refurbishment of Arena Mall Budapest started in April 2024 and will be completed in Q2 2028. Lease terms were agreed for 62% of the refurbished GLA.

Additionally, permitting is ongoing for Promenada Mall Plovdiv, a 60,500 sq m GLA retail project in Bulgaria’s second largest city. Construction is expected to start in Q4 2024, with an estimated completion in Q4 2026. The preliminary retailer interest is reported to be very strong.

The first phase of the company’s green energy project, which involves installing photovoltaic panels across 27 locations in Romania, is almost complete. The investment to date is 34 million euros with a total installed power capacity of 38 MW. Procurement for the second stage of this project, involving a roll out of the program across other markets, has started.

As for NEPI Rockcastle´s outlook for the rest of 2024, the company´s Board of Directors expect distributable earnings per share to be approximately 4% higher than 2023´s distributable earnings per share, with no change in the company’s current 90% dividend payout ratio.