ACROSS: WHICH INDUSTRY TOPIC WERE YOU PARTICULARLY CONCERNED ABOUT IN 2024?
RÜDIGER DANY: A big concern at the start of the year was inflation and how this would relate to the level of interest rates. As the year progressed inflation began to decline, fortunately, and central banks reacted to that and interest rates stabilised over the course of the year. This was important for NEPI Rockcastle as we were planning to grow the company through major acquisitions; by investing in our development pipeline and our renewable energy programme.
To fund these growth plans we were looking at refinancing a €500 million-plus green bond that was expiring at the end of this year, as well as examining the possibility of a large equity raise. The prevailing ‘mood’ of the capital markets, whether they were negatively impacted or stabilising, played an important role of course in these financing decisions. Real estate is principally an asset class that investors invest in when they see a positive economic future.
There was also a lot of market interest in NEPI Rockcastle’s growth story in 2024 with a wider appreciation of our prudent financing strategy and the fact that we have a very strong and stable balance sheet. That very postive market response has been reflected in our stock price moving to NAV (net asset value), from a previous discount, although NEPI Rockcastle was already trading at a much smaller discount than our main European listed retail real estate peers.
ACROSS: WHAT DEVELOPMENTS HAVE SURPRISED YOU THIS YEAR?
DANY: We were very concerned towards the end of 2023 about a potential escalation of conflicts in the Middle East, which would have had much wider global geopolitical repercussions and impact on capital markets this year, but the stand-off between the two main sides was perhaps
more constrained than feared.
More recently, I was surprised and concerned by the first-stage win of a far-right candidate in the Romanian presidential election, apparently due to political meddling on TikTok, a result which was subsequently annulled by the Romanian constitutional court. NEPI Rockcastle is the largest retail real estate owner and operator across Central and Eastern Europe and Romania is our largest market accounting for 36% of the portfolio. Our success as a company has been driven by the fact that these CEE countries are part of the EU and it has been encouraging that both Romania and Bulgaria recently joined the border-free European Schengen Area and that we have seen rising levels of foreign investment in our markets.
We believe that the success of the CEE economies and the growth in our markets is closely linked to membership of the EU and associated organisations such as NATO, which is our security shield.
ACROSS: WHAT ARE CURRENTLY THE BIGGEST CHALLENGES AND WHERE ARE THE FUTURE OPPORTUNITIES OF THIS ASSET CLASS?
DANY: Political stability at the heart of Europe is a concern, with governments in France and Germany falling apart. There is also a big difference in the poor economic performance of northern European countries — ‘Old Europe,’ compared with the growth rates we’re seeing in the CEE markets and in Southern Europe — like Spain and Greece.
We’ve also seen a turnaround in real estate with more positive investor sentiment towards the asset class, notably in the retail property sector. I think there are great opportunities for investors in the retail segment in terms of shareholder returns over the next 12 to 24 months, where we expect to see yield compression. There will be more money coming back into our business because investors are increasingly understanding that competition from e-commerce or Covid couldn’t kill us and that retail real estate is doing really well, especially in CEE, but also Southern Europe.
The outlook for bricks and mortar retail is very positive, not only for NEPI Rockcastle, but for the industry as a whole. We need to go into the market and buy now, as we’ve recently done with two very large shopping centre acquisitions in Wroclaw and Katowice in Poland.
ACROSS: SO, WHAT WERE THE MOST IMPORTANT LESSONS LEARNED?
DANY: The beauty of our business is that we permanently need to adapt to the changing trends in the retail markets. There is a tendency across European retail markets towards a greater concentration of market share among larger retailers and we need to act accordingly to what these clients want, understand their business models and provide them with what they actually need.
For example, the first location that Inditex chose for its Lefties value brand outside Spain was at NEPI Rockcastle’s new Craiova shopping centre development in Southern Romania. They also want to optimise the retail real estate portfolio around their cornerstone Zara brand and we’ve been investing alongside Inditex to realise this strategy at our locations by reducing the number of their stores and creating fewer larger ones, which produce more turnover per square metre even with an overall bigger GLA.
ACROSS: WHAT MUST BE THE KEY TOPICS IN 2025?
DANY: We first have to integrate the two large acquistions we’ve recently done, with Magnolia Park in Wroclaw and Silesia City Center in Katowice, into our portfolio and everything is prepared within our asset management team to support the growth of these assets in 2025 and beyond. We also have to ensure that our big development projects at the Promenada Mall extension in Bucharest and at Plovdiv in Bulgaria are kept on schedule. Our other priority is to continue to rollout our renewable energy programme, with a 50 MW solar field due to be completed in Romania by year-end and another 100 MW development in the pipeline.
ACROSS: YOU WERE RECENTLY REWARDED WITH THE LIFETIME ACHIEVEMENT AWARD: WHAT ARE ACCORDING TO YOU THE MAIN FACTORS OF SUCCESS IN RETAIL REAL ESTATE?
DANY: Success in retail real estate investment is not about the individual; it is about the talented team you have around you that can deliver on the vision. At NEPI Rockcastle, I can honestly say we have an outstanding senior management team in all areas of the business, and they have been the drivers of the company’s notable investment and operational success for our investors in the past three years.
Rüdiger Dany
Rüdiger Dany is CEO of NEPI Rockcastle
