Nepi Rockcastle, the largest shopping centre owner in Romania, is primed to emerge from the ashes of the 2018 listed property scandal, as it benefits from the country’s economic boom.
The JSE-listed property group was part of the Resilient group of companies that shared common founders and had cross shareholdings. Nepi Rockcastle, Resilient, Fortress and Lighthouse Capital suffered a mass sell-off in 2018, losing more than R100bn of their combined market value, after allegations by asset and hedge fund managers of share price manipulation, insider trading and using related party transactions to boost profits.
Nepi Rockcastle and two of the other companies have since been cleared by the Financial Sector Conduct Authority of all allegations in its investigation. The only outstanding investigation into allegations that market participants manipulated the Resilient share price, is still ongoing.
The clearing of Nepi Rockcastle has brought confidence back to the stock and it stands out among some of its offshore peers, Jay Padayatchi, executive director at Meago Asset Management said.
Offshore stocks could cushion some weaknesses in the performance of South African stocks that are aligned to SA’s economy, he said
Nepi Rockcastle stood out among JSE-listed property stocks with exposure to Eastern Europe, particularly Romania, including the likes of diversified Romanian landlord MAS Real Estate.
“I agree with the sentiment that Romania will be strong again this year; fundamentals are solid,” said Padayatchi.
More than 45% of the listed property sector by market value is offshore. The exposure is primarily in Eastern Europe and the UK.
Over the past decade SA commercial property executives have pushed capital into Eastern Europe because the region has shown strong economic and consumer spending growth post the 2008/2009 recession.
Nepi Rockcastle, which is the largest listed property stock on the JSE with a market capitalisation of R73bn, was formed in July 2017 out of the merger of two companies — Romanian New Europe Property Investments and Poland-focused Rockcastle Global Real Estate.
It owns 17 retail assets and four offices in Romania, the second largest economy in Eastern Europe, making it the largest listed retail landlord in that country. It owns 12 retail assets in Poland, the largest economy in Eastern Europe and centres in the Czech Republic, Croatia, Bulgaria, Serbia, Slovakia, Hungary and Lithuania.
Nepi Rockcastle’s share price peaked at R217.50 on December 27 2017. But it went into free-fall after investors started flogging its stock along with that of Resilient, Fortress and Lighthouse Capital in the first quarter of 2018. Nepi Rockcastle’s share price closed at R113.00 at the end of 2018, down 47% in a year.
In 2019 it closed 9.6% higher at R123.83. Including dividends, Nepi Rockcastle delivered a return of 17.6%, Nesi Chetty, senior fund manager at Stanlib said.
Catalyst Fund Managers portfolio manager Mvula Seroto said Romania’s commercial real estate markets look poised to outshine those of the likes of the UK in 2020.
“We continue to see strong economic growth in the former and anticipate muted growth and further volatility in the latter,” he said.
Nepi Rockcastle offers a dividend yield of 7.6% and is expected to deliver an average of 7.5% euro-denominated dividend growth over the next three years.
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