NEPI Rockcastle, a leading investor and developer of premier shopping centers in Central and Eastern Europe, reported that its tenant sales (excluding hypermarkets) in Q1 2022 were 53% higher than Q1 2021, and in February and March exceeded Q1 2019, indicating a return to pre-pandemic levels.
All product categories recorded increased sales Q1 2022 compared to Q1 2019, except for Fashion (-12%) and Entertainment (-25%). The best performing categories were Health and Beauty (+19%) and Electronics (+20%). The complete recovery in sales up to, and beyond, 2019 levels was driven by a strong increase in average basket size (+26% Q1 2022 versus Q1 2019), according to the Group's financial report for the first quarter of this year.
During Q1 2022, NEPI Rockcastle signed 297 leases for over 48,500m2 (2.4% GLA), of which 38% are new. International tenants accounted for 40% of newly leased GLA. As of 31 March 2022, the Group had a very strong liquidity profile, with €397 million in cash and €620 million in undrawn committed credit facilities.
“Operational results for the first few months of 2022 indicate an almost complete recovery from the effects of the Covid-19 pandemic. Customers returned as soon as trading restrictions lifted, and we are impressed that most tenants achieved turnovers similar to 2019. However, during this period, new challenges emerged, specifically a devastating military conflict in neighbouring Ukraine and rising inflation. Fortunately, the business suffered no direct negative impacts, but we will continue to monitor the situation closely” Rüdiger Dany, Chief Executive Officer (CEO) stated.
During Q1 2022, driven by high inflation and much greater energy costs, property operating expenses increased over 47% compared to Q1 2021. This trend is expected to continue throughout 2022, especially if the war between Russia and Ukraine is not resolved quickly. One company’s action to mitigate rising energy prices is the photovoltaic plants programme that should produce green energy at thirty Romanian shopping centres by the end of 2023 and requires an investment of €37 million.
Last month the Group celebrated an important corporate milestone, with shareholders voting resoundingly in favour of its migration from the Isle of Man to the Netherlands, via Luxembourg. Both moves received over 99% approval from voting shareholders. As a result, the Group has, with effect from 10 May 2022, established its registered office and place of effective management and central administration in Luxembourg as a public limited liability company (société anonyme). The subsequent Netherlands migration remains subject to the fulfilment of certain conditions precedent and should be completed by September 2022. Shareholders will be kept updated.
The Company reaffirms the guidance released in February 2022 that distributable earnings per share for the year will be at least 24% higher relative to the 2021 distributable earnings per share.
NEPI Rockcastle’s shares are listed on the Johannesburg Stock Exchange (“JSE”), Euronext Amsterdam (“Euronext”) and A2X. The Group voluntarily distributes at least 90% of its distributable earnings on a semi-annual basis.