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NEPI ROCKCASTLE PLC - Business update

Release Date: 20/11/2019 10:00
Code(s): NRP     PDF:  
 
Wrap Text
Business update

NEPI Rockcastle plc
Incorporated and registered in the Isle of Man
Registered number 014178V
Share code: NRP
ISIN: IM00BDD7WV31
(“NEPI Rockcastle” or “the Company” or “the Group”)


BUSINESS UPDATE


NEPI Rockcastle’s strategic aim, to be the premier retail investor in Central and Eastern Europe (CEE), was
facilitated during the third quarter of 2019 (Q3) through a continued focus on asset management and the
development pipeline, targeting further high-quality properties. Key metrics, including sales, footfall and
vacancy, have further improved. Significant work on greenfield sites, extensions and refurbishments
continued, with over 300,000m2 gross lettable area (GLA) under development and 56,800m2 GLA opened
during this period or by the time of this announcement.

PORTFOLIO PERFORMANCE AND FINANCIAL HIGHLIGHTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2019

   -   Net operating income (NOI) of €300 million, 19.2% higher compared to the corresponding period in
       2018.
   -   6.3% NOI growth for the retail portfolio on a like-for-like basis.
   -   240 million visits, representing a 5.4% increase from the corresponding period of the previous year
       and 1.3% increase on a like-for-like basis.
   -   Tenant turnover on a like-for-like basis increased by 7.6% (excluding hypermarkets).
   -   Turnover per m2 increased by 7.2% on a like-for-like basis (excluding hypermarkets).
   -   Collection rate remained at 99.9%, with only €440,000 bad debt expense recognised in the period.
   -   EPRA occupancy rate across income-producing portfolio was 97.6% as at 30 September 2019,
       excluding GLA under refurbishment in Shopping City Buzau and Forum Liberec Shopping Centre.
   -   Total assets of over €6.9 billion, with property portfolio of €6.2 billion, including the Romanian office
       portfolio held for sale and excluding carrying value of right-of-use asset recognised as per IFRS 16.
   -   97% of property portfolio located in European Union investment-grade countries.
   -   Loan-to-value ratio (LTV) of 31.4%, below the Group’s 35% strategic target and comfortably within
       the 60% unsecured debt covenant.

ADDITIONAL HIGHLIGHTS

   -   The new team has over 450 professionals across 11 jurisdictions, combining asset, development,
       finance, leasing and investment expertise in an integrated approach.
   -   Environmental, Social and Corporate Governance (ESG) risk rated as low (16.4/100) by Sustainalytics,
       a leading, independent, global ESG ratings agency. NEPI Rockcastle is committed to further
       improvement.
   -   Silver Prize awarded after the first year of EPRA membership, as a recognition of the Group’s
       commitment to transparency in reporting and compliance with best practice recommendations.
   -   The disposal of the Romanian office portfolio is underway, with the exclusivity granted to AFI Europe
       extended until mid-December 2019.

OPERATING ASSETS UPDATE

   -   Arena Centar (Zagreb, Croatia): Peek & Cloppenburg launched a multi-brand store, with the latest
       fashion offering. Hugo Boss and Ted Baker also opened shops, along with a T-Mobile concept store
       and Croatia’s first Body Shop.
   -   Arena Mall (Budapest, Hungary): Several new retailers, including Hugo Boss and Tommy Hilfiger
       opened mono brand stores, while online-first perfumery Notino launched its first Hungarian store.
   -   Focus Mall (Zielona Gora, Poland): Reserved extended existing store, almost doubling its size.
   -   Forum Liberec Shopping Centre (Liberec, Czech Republic): Burger King, Pizza Hut and the
       region’s first Starbucks opened in refurbished food court, while Terranova launched its latest concept
       store, Dracik, and bookshop Luxor opened its largest regional shop.
   -   Galeria Warminska (Olsztyn, Poland): Xiaomi opened a shop and Deichmann launched a large
       flagship store.
   -   Karolinka Shopping Centre (Opole, Poland): CCC, Cropp and Sinsay opened new and refurbished
       flagship stores.
   -   Mega Mall (Bucharest, Romania): Burger King re-entered Romania, opening a concept fast-food
       restaurant in the recently remodelled food court.
   -   Paradise Center (Sofia, Bulgaria): Hippoland, the toy retailer, opened a sizeable playground,
       strengthening the recently remodelled underground level. CCC opened their largest Bulgarian store,
       Humanic launched a new shop and Notino opened its first Bulgarian physical store.
   -   Serdika Center (Sofia, Bulgaria): Ginger Layout opened a 330-seat restaurant, out of which 110
       seats are located in a spacious perennial garden. Multinational sporting goods brand ASICS opened a
       concept store.
   -   Solaris Shopping Centre (Opole, Poland): New tenants, including HEBE, JustGym and PEPCO,
       opened sizeable stores.

DEVELOPMENT HIGHLIGHTS

Promenada Mall Sibiu (Romania)
This 42,200m2 shopping mall opened on 14 November 2019 after 16 months of construction. The centre
is fully let, and houses 140 tenants, including Altex, Bershka, Cine Gold, Gant, Guess, H&M, Hervis,
Inditex, KFC, LPP, Mango, Massimo Dutti, New Yorker, Sinsay, Tommy Hilfiger, US Polo and Zara.
Promenada Mall Sibiu is located in walking distance from the vibrant touristic historical city centre and
next to the train station. The mall has an open-air green terrace, three floors of retail and leisure and three
levels of parking. The dining and entertainment area comprise 18% of GLA, aligned with the Group’s
strategy of increasing leisure footprints. Promenada Mall Sibiu hosts an eMag showroom (the largest
online retailer in Romania) and the first Kaufland supermarket located in a shopping center.

Bonarka City Center (Krakow, Poland)
The first phase of this extension, refurbishment and re-leasing is complete with further redevelopment
expected. Monki opened its first Polish store, while several other fashion brands, such as Reserved and
Peek & Cloppenburg increased their store size. Zara doubled its GLA and is the country’s first store to use
the brand’s latest logo and fully-automated, online order collection.

Promenada Mall Bucharest (Romania)
Planning permission was obtained in October 2019, and the building permit is estimated to be obtained
during 2020. Procurement has commenced and the updated schedule includes an estimated completion of
the retail extension in H1 2022 and the office component in H2 2022. The extension of the centrally located
mall will add a multiplex cinema, a hypermarket and a selection of trendy restaurants and fashion stores.

Promenada Mall Craiova (Romania)
The Group is constructing a 56,500m2 GLA modern retail and entertainment destination in Craiova, one
of Romania’s major cities. An inner-city development, with more than 300,000 inhabitants, the shopping
mall will host a diverse tenant mix, including regional and international fashion and beauty brands, leisure
and entertainment areas and over 2,500 parking bays. Planning permission is pending and opening is
scheduled for Q3 2021.

OTHER DEVELOPMENTS

The Company completed the 8,600m2 Krusevac Retail Park in Serbia, at the end of September 2019. It is
fully occupied, with 17 well-known national and international brands.

Construction is ongoing on several other projects:
   -   Shopping City Buzau, Romania: 17,900m2 GLA refurbishment scheduled for completion in Q2
       2020;
   -   Focus Mall, Zielona Gora, Poland: 15,900m2 extension and refurbishment scheduled for
       completion in Q4 2020;
   -   Forum Liberec Shopping Centre, Czech Republic: refurbishment scheduled to be completed in Q2
       2020;
   -   Karolinka Shopping Centre, Opole, Poland: 2,700m2 GLA, six screen cinema, scheduled for
       completion in Q4 2020;
   -   Shopping City Sibiu, Romania: Cineplexx Cinema scheduled for completion in Q1 2020;
   -   Shopping City Targu Mures, Romania: 40,000m2 GLA mall scheduled for completion by Q2 2020;
       and
   -   Vulcan Value Centre, Bucharest, Romania: KFC Drive Thru scheduled for completion in Q1 2020.

Other projects awaiting planning permission:
   -   Arena Mall, Budapest, Hungary: zoning changes for the adjacent plot are approved; construction
       works for the extension will commence when the building permit is received; and
   -   Promenada Mall Plovdiv, Bulgaria: zoning approved and building permit pending; the mall’s
       opening is scheduled for Q3 2021.

CASH MANAGEMENT AND DEBT

The Group has a strong liquidity profile, with €301 million in cash, €400 million in available unsecured
revolving facilities and €69 million net listed securities (which comprises a portfolio of listed securities
less related debt) as at 30 September 2019. NEPI Rockcastle’s gearing ratio (interest bearing debt less
cash, divided by investment property, including investment property held for sale, plus listed securities)
was 31.4%, below the 35% strategic target. The reported gearing ratio (LTV) excludes the impact of IFRS
16, which is considered immaterial (€32.2 million in right-of-use assets and lease liabilities as at 30
September 2019).

The average interest rate, including hedging, was 2.5% for the nine months ended 30 September 2019. All
interest rate exposure related to long-term loans is hedged (excluding revolving facilities), with a
remaining weighted average hedge term of 3.5 years.

In October 2019, after a roadshow with European fixed-income investors, NEPI Rockcastle issued €500
million of unsecured, seven-year Eurobond, carrying a 1.875% fixed coupon, with an issue price of
98.927%. This was the second bond issue during the year, increasing the total amount raised in 2019 from
European investors to €1 billion, and enabling the Company to compete more effectively long-term, in
CEE real estate markets. The proceeds of this second issue were used for liability management, including
refinancing of secured loans and the repurchase of €200 million nominal value of the bonds due in
February 2021. Further to this bond issue, the estimated average debt maturity term increased to over four
years.

During October 2019, shareholders representing approximately 61% of the Group’s share capital elected
to receive the distribution for the six months ended 30 June 2019 as a return of capital, by way of an issue
of new shares. This marks another success in the Company’s equity capital markets activity, with equity
of €104 million issued at 2% premium to NAV.

OUTLOOK

Distributable earnings per share for 2019 are expected to be approximately 6.5% higher than 2018. The
variance to February’s guidance is positively impacted by the extended disposal process of the Romanian
office portfolio, partly offset by a stronger scrip dividend take-up than initially forecast. This guidance is
based on the assumptions that a stable macroeconomic environment prevails, no major corporate failures
occur, and developments remain on schedule. This forecast has not been audited or reviewed by NEPI
Rockcastle’s auditors and is the Board of Directors’ responsibility.

FINANCIAL SCHEDULE

 20 February 2020                         Publication of 2019 Audited Consolidated Annual
                                          Financial Results

 17 March 2020                            Publication of the 2019 Annual Report

 20 May 2020                              Business Update

 21 August 2020                           Publication of the Reviewed Consolidated Financial 
                                          Results For The Six Months Ended 30 June 2020

 19 November 2020                         Business Update


For further information please contact:


NEPI Rockcastle plc
Alex Morar/Mirela Covasa                              +40 21 232 1398

JSE sponsor
Java Capital                                          +27 11 722 3050

Media Relations
Brunswick Group LLP                                   nepirockcastle@brunswickgroup.com
                                                      +44 20 7404 5959

20 November 2019

Date: 20/11/2019 10:00:00
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