Nepi Rockcastle N.v · JSE:NRP
Nepi Rockcastle — H1 2020 Earnings Presentation
59 slides from Nepi Rockcastle's earnings presentation, June 2020
Slide 1: Results Presentation June 2020
RESULTS PRESENTATION June 2020
Slide 2: Agenda
H1 2020 Highlights page 3 Adapted asset management page 23 NEPI Rockcastle today page 36 Financing page 42 COVID 19 - Accounting and valuation EXCELLENCE. INNOVATION. EXPERIENCE. page 47 2020 outlook page 54 Appendix page 56 2 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020
Slide 3: H1 2020 Highlights
Promenada Novi Sad, Serbia H1 2020 Highlights 3 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020 1
Slide 4: Key business figures
Key business figures Dec 2019 Jun 2020 Variance €6.3bn Investment property value* €6.1bn Investment property value* 3.4%^ 98% EPRA Occupancy 96% EPRA Occupancy 2pp €7.32 EPRA NRV per share €6.65 EPRA NRV per share 9% 32.0% Prudent loan-to-value* 36.1% Prudent loan-to-value* 4.1pp 83% Unencumbered as
Slide 5: Key business figures » continued
Key business figures » continued All concessions granted for the period fully reflected in NOI Jun 2019 Jun 2020 Variance €170m Distributable earnings €118m Distributable earnings 31% €200m NOI €160m NOI 20% 2.4% Cost of debt 2.1% Cost of debt 0.3pp 121mVisitors* 78m Visitors* 36% 23,200m2 New GLA o
Slide 6: Overcoming COVID-19 impact at NEPI Rockcastle
Overcoming COVID-19 impact at NEPI Rockcastle Pre lockdown Lockdown After lockdown January February March April May June July August January - February Strong LfL NOI growth of +6.3% at Group level Tenant sales +8.5%* January and February 4.3%* Footfall increase in January and February 94% Q1 collec
Slide 7: Overcoming COVID-19 impact at NEPI Rockcastle » continued
Overcoming COVID-19 impact at NEPI Rockcastle » continued Pre lockdown Lockdown After lockdown January February March April May June July August March - May 58* days of lockdown 34%^ operating GLA Non-essential businesses temporally closed Health and safety measures implemented Community and tenant
Slide 8: Overcoming COVID-19 impact at NEPI Rockcastle » continued
Overcoming COVID-19 impact at NEPI Rockcastle » continued Pre lockdown Lockdown After lockdown January February March April May June July August May - June July - August 96% operating GLA 96% operating GLA as at 30 June as at mid August 75%-80% Footfall Ongoing tenants from last year value negotiati
Slide 9: Facing COVID-19 in Central and Eastern Europe
Facing COVID-19 in Central and Eastern Europe CEE countries are recording less infections vs Western General lockdown is not expected but local/regional countries as restrictions were imposed faster lockdowns/restrictions may occur. COVID-19 infections COVID-19 infections by region (as of 20 Aug 202
Slide 10: Operations across portfolio
Operations across portfolio • Resumed operations starting end of April - beginning of May and continued in June • Main categories still affected by restrictions are restaurants and food courts in Romania while cinemas are still closed in Romania, Croatia and Serbia March April May June July August L
Slide 11: Operations across portfolio » continued
Operations across portfolio » continued 96% of the Group’s GLA is operational at the end of June / July Operational GLA Operational GLA in lockdown period as at 30 June / 31 July 2020 Lithuania 14% 100% Poland 28% 100% Serbia 11% 93% Croatia 21% 95% Czech Republic 23% 100% Bulgaria 28% 100% Hungary
Slide 12: Rebound post lockdown - Footfall
Rebound post lockdown - Footfall June 2020 at 70% of June 2019 July 2020 at 75% of July 2019 Footfall dynamic post lockdown - relative to re-opening week 40% 20% 0 -20% -40% -60% -80% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Romania Slovakia Bulgaria Serbia Poland Hungary Lithuania Croatia Czech Republic 12
Slide 13: Rebound post lockdown - Tenant sales
Rebound post lockdown - Tenant sales NEPI Rockcastle tenant sales at 88%* of June 2019 Mirroring consumer's behavior, strong performance of: » DYI (+2.5%) » Sporting Goods (+30.6%) included in Other Retail » Pet Shops (+2.6%) included in Other Retail Sales performance per country per retail category
Slide 14: Actions to adapt operations to unprecedented context
Actions to adapt operations to unprecedented context Preserve Safety in liquidity our properties Rental Engage with reliefs our communities 14 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020
Slide 15: Liquidity
Liquidity Preserve liquidity and optimise capital allocation • Reduced variable non-critical operating expenses during lockdown by 40% vs 2019 comparative period • Deferred non-committed development projects • Supplementary cash capacity through partial drawdown of revolving credit facilities • 1st
Slide 16: Safety in our properties
Safety in our properties 1st "Covid-19 Compliant" certification in 6 countries. 16 malls certified Safe Retail Destinations by SAFE Shopping Centers The Group adehered to the highest health and safety standards: • social distancing rules • preventions measures in line with World Health Organisation
Slide 17: Tenant support measures
Tenant suport measures Aim: re-boost retail ecosystem and ensure long-term sustainability of NEPI Rockcastle business Consistent approach applied across portfolio • Fair and balanced criteria • The degree by which tenant's business or retail segment were affected • Support measures taken by authorit
Slide 18: Tenant support measures » continued
Tenant suport measures » continued Measures implemented during lockdown 30%^ signed lease addendums • deferral of rent payment for up to 60 days Agreed terms for 66%^ of the leases • monthly instead of quarterly invoicing • relief of marketing contribution during lockdown Post lockdown negotiations
Slide 19: Tenant support measures » continued
Tenant suport measures » continued Overview of the local legislation's impact on lease agreements Slovakia, Romania*, Bulgaria Poland Czech Republic, Hungary, Croatia Lithuania Serbia 23% 14% 63% by market value by market value by market value Government imposed relief of rent Government partially c
Slide 20: Rent collection overview
Rent collection overview Q1 collection 94% H1 Collection rate 11% 17% Q2 collection 50% 100% 72% 72% Contractually invoiced Collected Forgiveness of Due and deferred rental and service receivables charge income H1 collection of contractual income 20 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020
Slide 21: Engaging with our communities during COVID-19 pandemic
Engaging with our communities during COVID-19 pandemic Group initiative: Support for National Red Cross Romania 90% of the shopping centers directly involved in helping the local communities overcome the COVID-19 effects • Support for the 1st private COVID-19 hospital • National food collection camp
Slide 22: Office disposal
Office disposal Disposal of Romanian offices • Terms of new agreament in line with the initial ones • €15m cash advance • Estimated cash consideration of approximately €290m • Use of proceeds expected to be held as additional liquidity/ increase balance sheet safety Floreasca Business Park The Offic
Slide 23: Adapted asset management
Adapted asset management 23 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020 2
Slide 24: Key projects in H1 2020
Key projects in H1 2020 ACTIVE MANAGEMENT ADAPTIVE RETAIL DEVELOPMENTS COMPLETED AND ONGOING 24 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020
Slide 25: Active management
Active management Operational optimisation Environmental responsibility Most efficient operations 100% renewable energy Smart buildings used in all common areas and parkings of the shopping centres Automate Building operations Enhanced health and safety measures Sustainable acquisitions 1st "COVID-1
Slide 26: Active management » continued
Active management » continued Tenant mix management 234 new lease agreements signed in H1 2020 City Park, Serdika Center, Braila Mall, Shopping City Ramnicu Ploiesti Shopping City, Romania Bulgaria Romania Valcea, Romania Romania Shopping City Deva, Romania Little to no change to typical lease terms
Slide 27: Active management » continued
Active management » continued New stores opened in H1 Forum Liberec Forum Liberec Forum Liberec Mammut Shopping Centre, Shopping Centre, Shopping Centre, Arena Mall, Arena Mall, Bonarka City Shopping Centre, Czech Republic Czech Republic Czech Republic Hungary Hungary Center, Poland Hungary Bonarka
Slide 28: Adaptive retail
Adaptive retail Adapted leisure and entertainment Large outdoor terraces • Social gathering point in the city • Alternative to the food court, allowing customers to eat safely in the shopping centers Adapted entertainment • Outdoor cinemas Adapted leasing Flexible leases for local, smaller tenants:
Slide 29: Adaptive retail - Physical Retail and E-commerce
Adaptive retail - Physical Retail and E-commerce COVID-19 crisis accelerated e-commerce growth. Online retail in CEE expected to reach 7% penetration by 2023 Online share of total retail sales by region 2019 13% 10% 9% 8% 4% 2% 2% Western North America Australasia Asia Latin America Eastern Europe M
Slide 30: Adaptive retail - COVID-19 impact on digital consumer behavior
Adaptive retail - COVID-19 impact on digital consumer behavior Driving further digital transformation for NEPI Rockcastle is key. Digital adoption has increased with 13pp during COVID-19 Digital adoption1 % of respondents Finland 88 11 99 Denmark 93 5 98 Czech Republic 85 11 97 Sweden 88 9 97 Spain
Slide 31: Adaptive retail - Digital acceleration strategy
Adaptive retail - Digital acceleration strategy Future of Retail is Omnichannel Enhanced brand experience Enhanced loyalty NEPI Rockcastle aims at: programs Offer more value with online platforms • Bridge physical and online retail by using Artificial INVEST IN AN OMNICHANNEL New leasing Intelligenc
Slide 32: Developments completed and ongoing
Developments completed and ongoing * Catchment area presented for 30-min drive Ozas Shopping and Entertainment Centre Vilnius, Lithuania Population: 562 000 inhabitants Catchment*: 586 000 €84m capital expenditures Population: 140 000 inhabitants Catchment*: 284 000 in H1 2020 Focus Mall Zielona Gor
Slide 33: Shopping City Targu Mures
Developments completed and ongoing » continued 100% 40 200m2 95.4% Ownership Lettable area EPRA Occupancy Shopping City Targu Mures CATCHMENT AREA 130 000 15-minute drive 275 000 30-minute drive 517 000 45-minute drive 33 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020
Slide 34: Ozas redevelopment and extension
Developments completed and ongoing » continued before after Ozas Shopping and Entertainment Centre - redevelopment and extension (ongoing) • Conversion of unused coridor and unfriendly entrance into entertainment area • New playground - a successful leisure destination despite of COVID-19 inconvenie
Slide 35: Bonarka and Shopping City Buzau redevelopment
Developments completed and ongoing » continued before in progress Bonarka City Center - redevelopment • Relocated escalators • Common area converted to GLA • Refurbished/extended tenants: Costa Coffee, Douglas, Pandora, Peek & Cloppenburg, Pinko before after Shopping City Buzau - redevelopment • GLA
Slide 36: NEPI Rockcastle today
NEPI Rockcastle today Promenada Novi Sad, Serbia 36 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020 3
Slide 37: Large scale and geographically well diversified portfolio
Large scale and geographically well diversified portfolio 97% of the properties are located in EU investment-grade countries Lithuania 2% CEE countries where the Group operates Population (m inhabitants) 104.0 Poland Total GDP (€m) 1 452 757 23% Average GDP per country (€m) 298 190 GDP per capita (€
Slide 38: High quality dominant retail assets with large catchment areas
High quality dominant retail assets with large catchment areas Portfolio at 30 June 2020* Annualised EPRA Occupancy Buildings/ Assets GLA Valuation Passing rent/ERV % '000m2 €m €m TOTAL PROPERTIES 67 2 389 6 145 423 INCOME-PRODUCING 62 2 147 5 952 412 95.8% Retail 54 1 961 5 554 381 95.9% Office 6 1
Slide 39: Largest listed retail real estate company in CEE markets
Largest listed retail real estate company in CEE markets NEPI Rockcastle URW Klepierre CA Immo^^ Immofinanz Atrium GTC^^ EPRA Net Initial Yield 6.83% 4.20% 5.10% 5.40% 5.80% 5.00% 6.90% CEE Retail Real Estate landscape by GAV (€bn) 8 6 6.1 5.3 5.2 5.2 4 2.7 2.3 2 1.3 0 NEPI Rockcastle^ Immofinanz UR
Slide 40: CEE growth prospects expected to continue post COVID-19
CEE growth prospects expected to continue post COVID-19 Real GDP growth (%) Unemployment (%) NEPI Rockcastle’s portfolio countries are expected to experience a more muted NEPI Rockcastle’s portfolio countries are expected to be more stable in terms of recession than the EU / Euro area employment tha
Slide 41: CEE countries to receive a boost from EU recovery plan
CEE countries to receive a boost from EU recovery plan €750bn EU Recovery Fund aiming to facilitate economic recovery across the EU: Preliminary allocation of the EU Recovery Fund and the EU Cohesion Funds in 2021-2027 • €390bn grants 40 • €360bn low-interest rate loans 30 CEE region allocated 25% o
Slide 42: Financing
Financing Promenada Mall, Romania 42 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020 4
Slide 43: Prudent financial strategy
Prudent financial strategy Robust balance sheet 36.1% Prudent LTV €379m Liquidity BBB Investment grade rating A marginal increase in LTV over the strategic threashold due to the devaluation €862 million Assigned by Standard & Poor’s (negative outlook) and Fitch (stable outlook) available liquidity a
Slide 44: Extending debt maturity and issuing the first green bond
Extending debt maturity and issuing the first green bond Successful €500m inaugural green bond issued in July 2020 with a 4.5 7 year maturity gaining access to new investors and demonstrating our commitment to sustainability Remaining weighted average debt term Next bond repayment is not due until M
Slide 45: Significant headroom on unsecured debt covenants
Significant headroom on unsecured debt covenants % Solvency ratio (%) Solvency threshold breached 60 only by 438bps increase in 50 valuation yields 40 40% 30 36% 37% 31% 20 LTV Solvency ratio 10 Debt Debt 0 2017 2018 2019 H1 2020 - Cash Consolidated coverage ratio 8 - Cash collateral 7.9x 7 7.4x - D
Slide 46: Environmental, Social and Governance focus
Environmental, Social and Governance focus Over 50% of the Group’s assets have “Very good” or “Excellent” BREEAM certifications, confirming they are resource-efficient. The Company’s goal is to have the entire portfolio green-certified by the end of 2022. Environmental €2.7bn Certified green buildin
Slide 47: COVID-19: Accounting and property valuation
COVID-19: Accounting and property valuation Promenada Mall, Romania 47 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020 5
Slide 48: Impact of concessions in NOI
Impact of concessions in NOI Lease modifications (concessions) recognised over the new lease term and accounted for prospectively by the lessor as from the date the modification is contractually agreed and signed between the parties (IFRS 16 - "Leases") A few negotiations with tenants signed and agr
Slide 49: Fair value losses on property valuation driven by COVID-19 context
Fair value losses on property valuation driven by COVID-19 context » continued Fair value loss on property portfolio of €237m generated by COVID-19 context Exit rate Discount rate Countries* 2020 2019 2020 2019 Poland 6.11% 6.00% 7.81% 7.80% Hungary 6.28% 6.20% 7.65% 7.50% Property valuation is down
Slide 50: Fair value losses on property valuation » continued
Fair value losses on property valuation driven by COVID-19 context » continued External appraisers covering NEPI Rockcastle's portfolio Share of total Countries covered portfolio (%) Colliers International Romania 33% Cushman and Wakefield Poland, Hungary and Lithuania 31% Bulgaria, Croatia, Czech R
Slide 51: H1 2020 distributable earnings
H1 2020 distributable earnings amounts in euro cents 29.02 (+0.4%) +0.11 19.66 -7.43 -0.11 (-25.6%) (-0.4%) -1.11 -0.06 -0.17 -0.24 -0.35 (-3.8%) (-0.2%) (-0.8%) (-1.2%) (-0.6%) H1 2019 NOI effect Corporate Accrued Net finance Foreign Taxes Antecedent Share of H1 2020 distribution expenses income ex
Slide 52: EPRA NRV: from December 2019 to June 2020
EPRA NRV: from December 2019 to June 2020 amounts in € 7.32 +0.15 6.65 -0.18 -0.39 -0.25 December 2019 Fair value loss from Fair value loss from Dividend payment Profit for the period and June 2020 listed securities investment property other items 52 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020
Slide 53: From distributable earnings to cash flow from operating activities
From distributable earnings to cash flow from operating activities amounts in € thousand 118,168 +2,934 +430 +53 -120 -1,967 63,696 -55,802 Distributable Antecedent Non-cash items Amortisation of Accrued net Non-cash portion Working capital Cash flow from earnings dividend relating to JVs and financ
Slide 54: 2020 outlook
2020 outlook Timisoara Business Center, Romania 54 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020 6
Slide 55: Summary & Outlook
Summary & Outlook H1 2020 » €48m concessions granted to tenants recognised in H1 2020 NOI » Safety » Liquidity » Developments completed H1 2020 interim dividend not declared / Capitalisation issue Full year 2020 outlook: approximately 30% contraction of expected distributeable earnings per share, as
Slide 56: Appendix
Appendix Timisoara Business Center, Romania 56 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020 7
Slide 57: Reconciliation of profit for the period to EPRA Earnings and distributable earnings
Reconciliation of profit for the period to EPRA Earnings and distributable earnings amounts in €'000 EPRA Earnings Jun 2020 Jun 2019 Earnings in IFRS Consolidated Statement of Comprehensive Income (206 554) 224 729 Fair value adjustments of investment property 236 572 (90 104) Fair value (loss)/gain
Slide 58: Disclaimer
Disclaimer NEPI Rockcastle plc is a commercial property investor and developer, listed on the Main Board of the Johannesburg Stock Exchange Limited (JSE), Euronext Amsterdam and A2X. The information in this presentation has been included in good faith but is for general informational purposes only.
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59 NEPI ROCKCASTLE RESULTS PRESENTATION JUNE 2020