Nepi Rockcastle, owner of premier shopping centres in Central and Eastern Europe, is positive about the next 12 months and is eyeing expansion into Western Europe.
During the investor roadshow in February, newly appointed CEO Rüdiger Dany spoke to Business Day about the company’s focus on maintaining stability and growing the business.
The JSE-listed company, which acts as a rand hedge for SA investors who want exposure to European commercial real-estate, has assets in nine countries in Central and Eastern Europe with a portfolio valued at €5.8bn (R98bn).
Its shareholders include Fortress Reit, the Public Investment Corporation (PIC), State Street Bank and Trust Company with more than 60% comprising institutional and private investors.
Dany joined the company in July 2021 and was appointed COO in August. In January, he was named Alexandru Morar’s successor as CEO, a position he assumed on February 1.
He has more than 30 years’ experience in retail, commercial real estate, leasing and asset management and has worked in countries including Germany, Poland, Slovakia, Czech Republic, Greece, Turkey, Lithuania, Serbia and Romania for big international retail and real-estate companies, including ECE, Atrium and Multi Corporation.
Dany has extensive experience in strategy setting, business transformation, asset development, greenfield projects, optimisation of operating assets, support of M&A, and team leadership for regional organisations and the country.
Give us a snapshot of the company
We are retail specialists, owning and managing 56 shopping centres in Central and Eastern European countries including Romania (35%), Poland (24%), Hungary (11%), Slovakia (9%), Bulgaria (8%), Croatia (5%), Czech Republic (3%), Lithuania (3%) and Serbia (2%). Nepi’s valuations are stable and our balance sheet remains solid. We have a very low loan-to-value [ratio] of 31% with great potential to grow.
How will the Russian invasion of Ukraine affect your operations?
As a European citizen, I am concerned about what is happening; as a CEO of Nepi, I am not as much concerned. We are not expecting an immediate fallout for our portfolio as we don’t have assets in Ukraine or even close to the Ukrainian border. We are concerned about our neighbours, and currently there is no telling what will happen next and how the current situation will affect European and global economies and markets.
What are the key priorities for 2022?
To maintain stability of our balance sheet and remain liquid as well as grow the business through developments and acquisitions. We’ve set aside €610m for retail, mixed-use and refurbishment projects scheduled for completion in 2025. These include three retail projects and the Vulcan Residence [apartments for sale] all located in Romania, the refurbishment of Bonarka City Center in Poland and the development of a new mall, Promenada Plovdiv, in Bulgaria.
On acquisitions, we are actively seeking well-priced assets in Central and Eastern Europe and we think it’s time for Nepi to look to Western Europe.
What assets are you potentially looking to acquire in Western Europe?
The Western Europe real-estate fundamentals are very different from Central and Eastern markets, and so we will not only focus on retail investments — there is potential to buy mixed-use projects, residential, offices and hospitality, for example.
What is the rationale for relocating from the Isle of Man to the Netherlands?
We are essentially relocating the parent company to an economically and politically stable EU jurisdiction to enhance the long-term sustainability of the business and position us for growth. The move gives us better exposure to European real- estate investment markets and it is a natural fit for the group, which is already listed on Euronext Amsterdam. Nepi operations will continue as normal as the relocation does not entail any dissolution or liquidation. The process is expected to be completed in September 2022.
What is the current situation with the €30m penalty imposed on Nepi for ending the sale agreement of the Serenada project in Poland?
There has been an ongoing arbitration case on the planning of this development and Nepi terminated the deal in January 2019 when the seller failed to meet certain sale conditions.
The arbitral tribunal granted the ruling on January 31, ruling in favour of the seller, and ordered Nepi to pay €30m in contractual penalties plus accumulated interest and arbitration expenses, which amounts to a total of €37.3m. The tribunal consisted of three arbitrators giving their opinion on the case with two voting in favour of the seller.
After our board reviewed the ruling, we are willing to challenge it and have a legal possibility to appeal it in a Polish court; this could take two years. Another option would be to come to an agreement with the seller but, obviously, this would not be favourable for Nepi. In light of this ruling, by the end of the financial year 2021, we had made provisions for this amount, which is clearly a one-off non-recurring effect.
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