Serdika Center, one of six central and Eastern European malls acquired by Nepi Rockcastle. Picture: FABRYECE SERDIKA CENTER
Serdika Center, one of six central and Eastern European malls acquired by Nepi Rockcastle. Picture: FABRYECE SERDIKA CENTER

Nepi Rockcastle, which owns malls in nine countries in central and Eastern Europe, says it has beaten its distribution guidance in its year to end-December, citing the rapid growth in consumer spending in the areas in which it operates.

The group, which is the largest listed property stock on the JSE with a market capitalisation of close to R74bn and €6.3bn (about R102.5bn) worth of assets, saw its total distribution per share rise 6.6% to 56.33 euro cents, slightly higher than the 6.5% growth the company had expected, with the group reporting that many of its tenants were reporting increased footfall and higher sales.

Commenting on the results, some analysts said the stock was primed to be among the top performing real estate investment trusts largely because it promised income growth in euro.

The sector on average was expected to return zero income growth in 2020, Keillen Ndlovu, head of listed property at Stanlib said.

The company was formed in July 2017 out of the merger of two companies — Romanian New Europe Property Investments and Poland-focused Rockcastle Global Real Estate.

“It is difficult to comment specifically on share price performance but it does warrant a premium to its peers and continues to be one of few property companies delivering constant long-term sustainable earnings growth,” Ryan Eichstadt, head of research at Meago Asset Management said.

The share price fell to as low as R99.14 in November 2018 from a high of R217.50 in December 2017.

In 2018 the group, along with companies in its stable at the time — Resilient, Fortress and Lighthouse Capital — was embroiled in allegations of share manipulation that resulted in a loss of more than R100bn of their market value. The companies had similar directors, shared founders and there were instances of cross-ownership.

Some asset and hedge-fund managers released reports in which they alleged the companies’ share prices and dividends had been manipulated by insider trading and related party deals.

The Financial Sector Conduct Authority (FSCA), SA’s foremost financial market regulator, investigated the allegations in 2018 and 2019 and cleared the four companies.

The only outstanding investigation into allegations that market participants manipulated the Resilient share price, is continuing.

Nepi Rockcastle’s share price has slowly recovered over this period to R125.71.

The group reported that its net rental and related income grew almost 16% to €400m (R6.5bn) in the reporting period, as consumer spending in countries such as Slovakia, Poland and Romania catches up with Western Europe.

Real GDP was expected to average 3% in Eastern Europe between 2019 and 2024, compared with 1.6% on a European level, the company said.

Real personal disposable income is expected to grow at twice the rate as countries such as France, Italy, Germany or the UK over this period.

Ndlovu said Nepi Rockcastle was a proxy for the central and East European retail property market. It continued to defy the general negative perception or scepticism around the region as well as retail in general.

“It has a successful track record of over 10 years supported by a growing region and remains one of our favourite property stocks on the JSE,” he said.

“It scores well in many departments including a high occupancy rate, high collection rates, strong tenant sales, strong like-for-like income growth, a conservative loan-to-value ratio and great management,” he said.

The company said it expected distributable earnings per share for its 2020 year to grow 6%.

“Twelve years since inception and three since the successful merger, our assets continue to outperform,” said CEO Alex Morar.

“Solidly growing footfall and retail sales are driven by our continued asset management efforts, focused on delivering locally optimal tenant mixes and customer experience,” he said.