Rand hedge property stock Nepi Rockcastle has bought its first shopping centre in Hungary, which means the company will now have a presence in eight of Central and Eastern Europe’s largest markets.
Management on Tuesday announced the acquisition of the 66,000m² Arena Plaza in Budapest for €275m, the second-largest retail centre in the Hungarian capital. This is the first deal closed since New Europe Property Investments (Nepi) and Rockcastle merged just more than two months ago to form what is now the JSE’s largest real estate listing by market capitalisation (R99.9bn).
Nepi Rockcastle co-CEO Spiro Noussis said on Tuesday that the company had been evaluating the Hungarian market for a long time. Though Hungary’s population of just below 10-million is about a quarter of that of Poland and half of Romania, Budapest itself is the second most populated city in Central and Eastern Europe.
Noussis noted that Hungary’s economy was on a recovery path, with GDP forecast to grow 2.8% in 2017 and 2.9% in 2018, which is well ahead of the 1.4% and 1.5%, respectively, forecast for the EU as a whole.
“We are very pleased with this entry point since the Arena Plaza was our number one target in Hungary. There are other potential acquisitions in Hungary, which we will hopefully be successful in concluding.”
Arena Plaza is centrally located in the eastern part of the city, close to the country’s main international railway station. Since it opened in November 2007 annual footfall has grown to more than 10-million. The centre is fully let and turnover growth exceeded 7% a year over the past two years.
Major tenants include H&M, IMAX Cinema City, KFC, Massimo Dutti, McDonald’s, Media Markt, New Yorker, Peek & Cloppenburg, Bershka, Pull & Bear, Sports Direct, Starbucks, Stradivarius, Tesco and Zara.
Noussis said Arena Plaza presented opportunities for a number of asset management initiatives including major improvements to the leisure and entertainment offering and the introduction of more international tenants, which would further strengthen the centre’s dominant market position.
Neil Stuart-Findlay, portfolio manager at Investec Asset Management, said the Arena Plaza acquisition represented a sizable next step in Nepi Rockcastle’s plan to execute on its Eastern European pipeline. “Hungary has enjoyed a solid economic revival of late and the retailer base is familiar to Nepi Rockcastle given their presence in the broader … region.”
Nepi Rockcastle is the largest listed shopping centre owner in Central and Eastern Europe. Its €4.7bn portfolio spans Romania, Poland, Slovakia, Croatia and Czech Republic among others.
Nepi Rockcastle’s share price touched R188.50 in late afternoon trade on Tuesday, 1.6% higher than the previous day’s close. The stock is up 6% since the new merged entity listed on the JSE and Euronext Amsterdam on July 12.