Nepi Rockcastle, a real estate investment trust (Reit) that has been a consistently strong performer since it was formed by the merger of New Europe Property Investments and Rockcastle Global Real Estate nearly four years ago, has been unable to evade the devastating effects of the Covid-19 pandemic.
The company, which is the largest landlord in Central and Eastern Europe, owning a €5.8bn (R104bn) portfolio of more than 50 retail centres including large malls and strip malls, saw its distributable earnings per share fall 31.8% in the year to December 2020 compared with a year ago.
Retail specialist landlords have been hardest hit by the lockdown restrictions used to curb the spread the spread of Covid-19. Governments throughout Central and Eastern Europe only allowed shops selling essential goods and services to operate when hard lockdowns were in place. This meant many shops needed landlords such as Nepi Rockcastle to give them rental cuts and payment holidays.
As a result of the rental relief paid to tenants, Nepi Rockcastle's board chose to declare a dividend of 16.88 euro cents per share for the second half of 2020, corresponding to 90% of the distributable earnings per share for this period.
This decision was in line with Nepi Rockcastle’s policy of distributing at least 90% of its distributable earnings. In previous years the company has paid 100% of its distributable earnings as a dividend each financial year.
The company did not declare an interim dividend for the six months to June 2020.
CEO Alex Morar said that by retaining earnings, the company could retain adequate capital as reserve, given the challenging macroeconomic environment.
The distribution would be paid in cash during March 2021.
Nepi Rockcastle, which is the largest listed Reit on the JSE with a market capitalisation worth €3.19bn (R57.5bn), had declared a dividend of 56.33 euro cents for its 2019 financial year, meaning its dividend for the 2020 year was 70% lower.
“The group went through the most challenging period in its history in 2020. The Covid-19 pandemic took the world by surprise and upended the way people everywhere live, work, learn, travel, socialise and shop,” Morar said.
“The business of operating shopping and entertainment centres has been one of the most affected by the restrictions implemented to combat the pandemic. Most of the tenants in our properties had to close their shops to the public for long periods of time, first during the [northern hemisphere] spring and then, to a lesser extent again in quarter four,” he said.
Nevertheless, he said that occupancy had held strong at 95.7% across the portfolio.
“The collection rate for the year, thanks to the quality of our tenant mix and the efforts of our team, was 95% as at year end and grew higher since,” Morar said.
Morar said 2021 was expected to be a better year for Nepi Rockcastle.
“The pandemic in Central and Eastern Europe countries has recently started to abate and the ongoing vaccination programme will accelerate over the next few months. The EU approved a significant support plan that will start producing effects in 2021,” he said.
The company successfully opened a new shopping centre in Târgu Mureș, Romania sized 40,200m2 and completed extension and refurbishment works in Shopping City Buzau also in Romania.
Keillen Ndlovu, head of listed property funds at Stanlib, said Nepi Rockcastle’s results were relatively strong despite its challenges.
“Its balance sheet remains relatively strong and this is supported by the ability to pay out 90% of its earnings as dividends. Having a dominant retail portfolio that is diversified across Central and Eastern Europe will help it to show better growth in the medium term as vaccination roll out plans improve,” he said.
The company's share price was 0.84% up on Thursday by 2pm at R91.31 and down 1.5% year to date.
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