Although bearish sentiments about the dearth of attractive real estate investments have emerged from property companies in recent months, Romania-focused New Europe Property Investment (Nepi) seems to be the anomaly.
The counter is fast-becoming an appearance on the radar of income-chasing investors for its acquisition and development clout.
Just on Monday, Nepi announced an oversubscribed equity raise of R2 billion. Nepi, with a market capitalisation of R40 billion, issued 14.8 million shares at R135 – a 4.5% discount from Friday’s close of R141.30.
Its freshly-raised capital will be deployed to conclude its recent acquisition of the 44 730 square metre Auchan Titan Shopping Center in Bucharest, Romania.
Recently-appointed CEO Alex Morar says the retail centre is located in the most densely populated district of Bucharest – making for a strong investment case.
The deal, worth €86 million (R1.3 billion), will see Nepi grow its exposure in a region where it already dominates. This acquisition adds to the redevelopment of Nepi’s shopping centres – an exercise worth €565 million (R8.6 billion), of which €139 million (R2.1 billion) was spent by June 30.
Some of its retail asset extensions are at; City Park where 20 000 square metres will be added to the existing 29 284 square metre centre; adding more tenants at Shopping City Deva, Promenada Mall, Severin Shopping Center and more.
Beyond its exposure in Romania, it also owns two malls in Slovakia and one in Serbia. The sector head for property at Investec Asset Management, Peter Clark, says Nepi continues to see attractive investment opportunities in Romania where there is a high spread between investment yields and cost of capital.
“Nepi is now the largest investor in the retail sector in Romania and has built a high-quality team in excess of 200 people that delivers a full range of services in-house.
“The strong team, along with the relative ease of raising capital in both the debt and equity markets, allows Nepi to continue to expand and build on its already dominant position,” says Clark.
Nepi, assembled by JSE-listed Resilient Property Income Fund, which owns 9.28% of the company, is looking for more opportunities outside Romania, specifically in Eastern Europe.
Further supporting Nepi’s capital position is its share price, which is trading at a significant premium to net asset value with gearing that is below 15%, says Grindrod Asset Management chief investment officer Ian Anderson. “Then it makes sense to keep raising equity capital,” he says. Nepi recently raised about R190 million through a dividend reinvestment option for shareholders.
Investors placing their bets on Nepi have been coining it. The company’s stock was the third-best performer in 2014 on the JSE’s more than R500 billion real estate sector, after Fortress Income Fund B units and Rockcastle Global Real Estate. Figures from Catalyst Fund Managers show that for the first six months of the year, Nepi clocked up 22.77% in total returns.
In recent years, offshore funds have performed well relative to SA-focused funds, as the appetite for earnings in hard currency among investors is seemingly growing. Ten years ago, SA’s listed property sector had no offshore exposure, but now makes up just over 25% of the SA listed property index.
Says Stanlib’s head of listed property funds Keillen Ndlovu: “…increasing offshore property exposure or diversifying portfolios into offshore property markets has become a trend and a theme in the sector.”
He expects offshore exposure to go above 30% in the next six to 12 months.
Nepi was down 4.2% on Monday to R137.10.