Nepi Rockcastle foresees rebound as lockdowns ease in Eastern Europe
Nepi Rockcastle, the largest landlord in Eastern Europe with assets in nine countries worth €6.3bn (R124bn), says it is seeing green shoots from its assets as lockdowns ease.
“The recent easing of restrictions led to a significant increase in the group’s activity, and the first signs are encouraging,” it said.
The group released a business update for the first quarter of 2020 on Wednesday saying that effects of the Covid-19 pandemic on its assets had been well managed so far this year.
“Covid-19 had limited impact on revenues during the first quarter, with social-distancing measures causing closure of most shops starting mid-March,” CEO Alex Morar said.
He said there had been a low rate of Covid-19 infections in Central and Eastern Europe, which had allowed trading restrictions in eight out of nine countries to be significantly relaxed and most shops located in Poland, Bulgaria, Slovakia, Hungary, Croatia, Czech Republic, Serbia and Lithuania had reopened.
Entertainment facilities were expected to open by the end of June, increasing footfall and turnover — except in Hungary.
He said that in the past few weeks, a large proportion of retailers resumed their operations and 63% of the group’s gross leasable area is open.
“As we begin to collect post-reopening operational data, we are confident that our high-quality portfolio, robust balance sheet and strong liquidity together with our unparalleled know-how of the CEE (Central and Eastern Europe) region remain key strengths for weathering this storm well,” he said.
Net operating income for the three months ended March 2020, after Covid-19 losses of €4m, was €101m, 4% higher compared with the first quarter of 2019.
The losses in the first quarter were mainly due to rent and service charge relief imposed by the Polish government during its lockdown.
Until February 29, like-for-like turnover increased 8.5% and footfall grew 4.3%. However, the closure of most of the stores since mid-March had led to a 15% decrease in the first quarter of 2020’s sales compared with the first quarter of 2019.
The landlord said there had been no major tenant insolvencies to date.
Nepi Rockcastle’s loan-to-value (LTV) ratio sat at 32%, below its 35% strategic target. SA fund managers tend to prefer LTVs to be below 40%.
Morar said despite the successes in weathering the pandemic so far, it was not clear how it would affect Nepi overall.
He said Covid-19 had changed the global economic outlook for 2020 and there was significant uncertainty about its effect on his company’s operations.
Nepi Rockcastle decided to withdraw its 2020 earnings guidance, as announced on April 1 2020.
Nepi Rockcastle's share price was down 0.93% to close at R84.90.