NEPI, Rockcastle merger to create largest listed real estate player in CEE

NEPI, Rockcastle merger to create largest listed real estate player in CEE
By bne IntelliNews December 14, 2016

South African New Europe Property Investments (NEPI) real estate investment fund, which is active and listed in Romania, announced on December 14 that it has concluded a framework agreement with Rockcastle under which their businesses will be merged into an entity incorporated in the Isle of Man, NEPI Rockcastle PLC.

The merged entity is expected to become the largest listed real estate player in CEE. NEPI’s total investment property portfolio was valued at approximately €2.2bn at the end of September. NEPI recently acquired Arena Centar in Zagreb, Croatia, together with 4.4ha of adjacent land, as well as concluding the acquisition of Aupark Shopping Centre in Piestany, Slovakia. In addition, it opened Shopping City Piatra Neamt in Romania at the beginning of this month

NEPI's portfolio in Romania includes retail centres (Mega Mall, Promenada Mall, Vulcan Value Center and City Park Constanta) as well as office buildings (Floreasca Business Park, LakeView in Bucharest, City Business Centre in Timisoara and The Office in Cluj).

At the end of September, the portfolio of investment properties of Mauritius-based retail property developer Rockcastle comprised seven income producing properties, two developments under construction and three properties under permitting and preleasing, together valued at €878.6mn.

Rockcastle’s investment focus has been on Poland. Since the end of September, two development properties, Galeria Wolomin and Galeria Tomaszow, have opened. In addition, Rockcastle acquired the Focus Shopping Centres in Poland, together valued at over €160mn.

“NEPI investors will gain immediate exposure to a significant portfolio in Poland, the most liquid and largest real estate market in the CEE region, with a positive economic outlook. Rockcastle shareholders will gain exposure to the largest retail real estate portfolio in Romania (which is the second real estate market in CEE by size and the fastest growing economy in Europe in 2016 and 2017, according to IMF forecasts), and the second largest retail real estate portfolio in Slovakia,” NEPI said in a statement.

The transaction will be implemented with reference to an effective share swap ratio of 4.5 existing Rockcastle shares for every one existing NEPI share.

“Pursuant to the framework agreement, both NEPI and Rockcastle will transfer 100% of their respective assets and liabilities, including ownership interests in their respective subsidiaries, thereby each effectively transferring ownership of its entire business, to NewCo. In consideration, NewCo will issue a number of NewCo ordinary shares to each of NEPI and Rockcastle, determined at the Effective Date […] with reference to the swap ratio,” NEPI said.

Retail space deliveries are expected to grow by an annual 50% this year in Romania, a study by real estate services company DTZ Echinox quoted by local media showed in October. The stock of modern retail space amounted to 3.38mn square metres at the end of June, out of which 57% were malls, 35% retail parks and 8% commercial galleries. Romanian retailers have been expanding encouraged by the booming consumption in the country.

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