NEPI Rockcastle generated the highest distributable earnings per share in its history in 2023, exceeding the previous record set in 2019. This marks not only a complete recovery from the effects of the COVID-19 pandemic but also a sustainable step-up in performance determined by continuing investments in its portfolio. Throughout the year, the Company updated its earnings guidance to the upside as management took note of the strong results coming in. Even so, the 17.1 percent increase in recurring DEPS achieved (9.3 percent on a nominal basis) exceeded its latest update.
“NEPI Rockcastle has delivered remarkable results in 2023. The markets that we operate in are forecast to have some of the strongest GDP growth in Europe in 2024, which bodes well not only for consumer confidence and the performance of our tenants but also for NEPI Rockcastle’s continued growth,” says Rüdiger Dany, CEO, NEPI Rockcastle.
The bedrock of the results is the operational performance of the property portfolio. Several factors explain the jump in NOI by 21 percent year-on-year to €491 million. The acquisitions made in late-2022 contributed significantly to performance as did a 13 percent increase in like-for-like NOI. Inflation protection through the indexation clauses embedded in lease agreements has served NEPI Rockcastle well during the high inflationary environment in CEE over the past two years. Active asset management achieved rental uplifts averaging 8 percent above indexation on new lettings and renewals. The growth in turnover rents and short-term income outpaced that of base rents in 2023. The recovery of operating expenses through tenant contributions improved, leading to lower unrecovered costs than in 2022.
NEPI Rockcastle’s robust results were underpinned by strong sales from tenants and a confident CEE consumer. The Company saw a significant improvement in all key trading data, with tenant sales up 12.6 percent and consumer spending per basket rising 7.8 percent, while footfall was 4.6 percent higher. The strong trading performance has helped to maintain the balance between the Company’s and its tenants’ results, reflected in a stable occupancy cost ratio of 12.2 percent. The drop in vacancy to 2.2 percent further proves the appeal of the Company’s properties for retailers.
NEPI Rockcastle continued to strengthen its balance sheet to protect against macroeconomic risks and ensure the resources for future growth. To this end, shareholders were offered the option for scrip dividends, which increased liquidity and reduced the Company’s loan-to-value ratio to 32.2 percent, well below the upper threshold of 35 percent. NEPI Rockcastle also contracted a €387 million unsecured green loan from the International Finance Corporation to enable the redemption of bonds maturing in November 2024 irrespective of the conditions in the capital markets. The strong operating performance of its properties led to a valuation uplift of €165 million, overcoming a negative shift in market yields.
Sustainable growth remains a key focus for NEPI Rockcastle. In 2023 the Company delivered Promenada Craiova in southern Romania, the largest new retail scheme to open in CEE in 2023, and completed the Group’s first residential project, both on time and on budget. Sustainability lies at the core of operations and developments and significant progress is being made to reduce emissions and increase the energy efficiency of our assets, as part of a comprehensive sustainability strategy launched in 2022. The shining example of NEPI Rockcastle’s progress in this area is the fact that it is now producing solar energy at 27 of its Romanian properties.
