NEPI Rockcastle achieved a 13.5% increase in net operating income (‘NOI’) in the first half of 2024 (H1) to €274 million (H1 2023: €241 million). On a like-for-like (‘LFL’) basis, NOI was 10% higher in H1 2024 than H1 2023, excluding the impact of developments completed after 30 June 2023 and industrial property sold in January 2024. Distributable earnings per share were 30.12 euro cents for the six months to 30 June 2024, 5.6% higher than in H1 2023. The Board has declared a dividend of 27.11 euro cents per share for H1 2024, corresponding to a 90% dividend payout ratio.
The Group delivered a strong performance across all key metrics. Tenant sales were 8.7% higher than in the same period in 2023 and the average basket size increased by 8.2%. It signed 73% of new leases with international retailers, attracted by the higher growth potential its CEE markets offer. The Company’s rents grew above the rate of inflation which helped drive a valuation gain of €134 million, up 2% on portfolio value on 31st December 2023, and its loan-to-value ratio remained stable at 32.2%. NEPI Rockcastle maintains a strong liquidity position. Available cash and a €387 million syndicated loan with the IFC means it has sufficient funds to repay a €500 million bond maturing in November 2024 – the only significant debt maturity until October 2026.
Rüdiger Dany, NEPI Rockcastle’s CEO, said: “We continue to perform strongly amid clear signs that the economic outlook for our core Central and Eastern European markets is stabilising and consumer confidence is improving. Tenant sales increased across all retail categories in our shopping centres, underlining the attractiveness of our locations and the resilience of the CEE consumer. Base rents and turnover rents are going up while recoveries of operating costs and the occupancy cost ratio remain sustainable.
Strong underlying rental growth resulted in higher NOI forecasts and, in turn, higher valuations. NEPI Rockcastle’s portfolio was valued at €7 billion, contributing to a conservative loan-to-value ratio well below our strategic 35% threshold. We continue to be very prudent in our liability management and secured the resources to repay the bond maturing in November 2024 almost a year in advance.
This sound financial position enables the Company to continue distributing 90% of earnings as dividends and the better-than-expected results led us to upgrade our guidance for this year’s growth in distributable earnings per share from 4% to 5.5%.”
NEPI Rockcastle is making good progress with its development activities with all projects on time and within budget. The extension at Promenada Bucharest in Romania is scheduled to open in Q4, 2026 and it expects to receive the building permit for its 60,500 sqm GLA greenfield development at Plovdiv, Bulgaria later this year. It is expanding its residential development activities, after the success of its Vulcan Residence project in Bucharest, Romania with two further schemes planned on land the Company owns adjacent to its retail properties in Brasov and Craiova, Romania.
The first phase of an ambitious green energy project, the installation of photovoltaic panels in 27 retail locations in Romania is now complete and has already produced revenues of €4 million in H1 2024 (on a total investment of €34 million). The second phase, involving the roll-out of the same concept in 24 locations owned by NEPI Rockcastle outside Romania, for a total investment of €15 million, is under various stages of permitting.
In addition, the Group plans to invest approximately €100 million in greenfield, ready-to-build photovoltaic projects in several new locations in Romania, to expand its green energy generating capacity and increase the coverage of electricity consumption needs of its tenants. The first installations are expected to become operational by the end of 2026 and contribute an additional 159 MW of power to the Group’s production capacity. This ambitious project will provide coverage for 80% of the Romanian portfolio energy consumption while reducing the carbon footprint by 36%.
In July 2024, the Group entered into a binding agreement to sell its only retail asset in Serbia, Promenada Novi Sad, for a consideration of €177 million (book value: €145.6 million) payable on the completion date. The difference between the transaction value less transaction costs (including tax effect) and the book value represents a premium on disposal (estimated 18% premium to book value).
