NEPI Rockcastle has published its Q1 2024 business update, reporting a 12.7% uplift in net operating income (NOI) to €135 million during the first quarter versus Q1 2023. On a like-for-like basis, NOI was up 9.4%, driven by higher base rents and tenant turnover, as well as tight management of operating costs.
Tenant sales increased by 10.% in Q1 2024 versus the comparative period in 2023 with footfall up by 2.1%.
“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. 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,” comments Rudiger Dany, CEO of NEPI Rockcastle.
The Group’s retail vacancy was 2.2% on 31 March 2024, similar to the level as of 31 December 2023, confirming the strong demand for retail space. Rent collection for Q1 2024 was over 96% (100% for the full year) as of 30 April 2024. NEPI is in a strong liquidity position with €1.4 billion in cash and available committed credit facilities as of 31 March 2024 which includes a draw-down of €387 million, the first tranche of the green unsecured sustainability-linked loan facility syndicated by the IFC in December 2023. In April 2024, NEPI signed a €58 million increase to this facility bringing the total to €445 million. This facility is part of a strategic effort to support its sustainability initiatives in Romania and Bulgaria, and to prepare for the repayment of a €500 million bond maturing in November 2024. Apart from this bond, the Group has no other significant debt due in 2024.
The value of its investment portfolio was €7 billion as at 31 March 2024 (including Novi Sad in Serbia, classified as ‘held for sale’), marginally higher (+0.2%) compared to December 2023 due to investments in developments made during Q1 2024. No property valuations were done during the reporting period.
Footfall was 2.1% higher in Q1 2024 compared to Q1 2023 with the pace of year-on-year growth accelerating slightly compared to the second half of 2023.
Tenant sales (excluding hypermarkets) in Q1 2024 increased by 10.5% compared to Q1 2023. All product categories recorded higher sales, except ‘Sporting Goods’ (-2.3%) with the best performing categories ‘Health & Beauty’ (+19%) and ‘Services’ (+18%). 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 m2 (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.
Works at development projects under construction are on schedule and within budget. The extension of Promenada Bucharest is scheduled to open in Q4 2026. Lease terms were agreed for 52% of the additional GLA. The redevelopment of Bonarka City Center is 68% complete and will be finalised in Q2 2025. The 5 900m2 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.
Permitting is ongoing for Promenada Mall Plovdiv, a 60 500m2 GLA retail project in Bulgaria’s second largest city. Construction is expected to start in Q4 2024 with an estimated completion in Q4 2026. Preliminary retailer interest strong.
NEPI Rockcastle’s development pipeline under construction, or permitting, totals over €650 million, of which €206 million had been spent by 31 March 2024.
The Board reaffirms its guidance released in February 2024 that distributable earnings per share for the year will be approximately 4% higher than 2023 distributable earnings per share, with no change in the Company’s current 90% dividend payout ratio.
NEPI’s LTV was 31.5% as of 31 March 2024, comfortably below the Company’s 35% strategic threshold. The reported gearing ratio excludes the €55.3 million rights-of-use assets and equal amount of lease liabilities related to long-term land concessions associated with part of the Group’s properties located in Poland.
