MAS Real Estate, which owns shopping centres in Central and Eastern Europe, expects earnings for the financial year ending June 30 to range between 9.40 euro cents and 10.10 euro cents per share, in line with previously announced guidance.
Management expects tenants to absorb the inflationary effects on rentals and service charges without significant pressure on occupancy costs, the company said in a trading update and pre-close statement on Thursday.
“The current macroeconomic environment points to a recession starting to take hold in Europe, and likely to lead to a contraction in consumption, affecting discretionary income and affordability in the group’s markets.”
JSE-listed MAS said there is still uncertainty about the length and severity of further measures and incentives aimed at reducing demand and diversifying energy supply, measures to reduce inflationary pressure on economies to be adopted by European governments and central banks, and other macroeconomic disruptions.
However, it is expected that Central and Eastern Europe, especially long-term consumption growth in Romania and other countries in the region, will remain robust and outperform growth in Western European countries for the foreseeable future.
MAS owns retail assets in Romania, Bulgaria and Poland. It also benefits from exposure to high-quality commercial and residential developments via the joint venture with developer and general contractor Prime Kapital.
With Covid-19 social distancing restrictions affecting operations now lifted, for the first five months of the financial year all countries in Central and Eastern Europe reported robust footfall and tenant sales.
As at November 30, like-for-like retail sales exceeded pre-pandemic levels by 19%, both in enclosed malls (16% increase) and in open-air malls (22%).
Occupancy cost ratios excluding supermarkets, DIYs, entertainment and services decreased slightly from 11.1% in June to 10.9% as a result of strong tenants’ sales performance despite higher total occupancy costs due to increased rentals and service charges. Occupancies rose slightly from 96.3% in June to 96.4%.
MAS said the implementation of tenant mix changes at Flensburg Galerie in Germany, which is earmarked for sale, has resulted in occupancies rising from 81.5% in June to 88%. Footfall and tenant sales rose 11% and 9%, respectively, outperforming the same five months in 2021.
Flensburg Galerie and the Arches Street retail units in the UK are undergoing competitive sales processes. The disposal of the Langley Park development land (UK) to a local property developer was completed effective December 21.
The extension of value centres in the Romanian cities of Baia Mare and Roman is now complete, and the additional 7,700m2 of gross lettable area complements the centres’ existing retail offering and secures dominance in their catchment areas.
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