Developer NEPI Rockcastle completed the construction of the 39,800 sqm Shopping City Targu Mures project in Romania in Q1 2020. The opening was, however, rescheduled from the end of March to Q3 2020. The company is not launching new constructions until there is further clarity on the impact of COVID-19 on its operations.
According to NEPI Rockcastle’s Q1 2020 business update, the company had five development projects underway in Q1 2020 with completion of each of them planned for this year.
- Focus Mall Zielona Gora (Zielona Gora, Poland): Necessary works regarding the parking and common areas of the extension (15,600 sqn) are progressing. New tenants include: Apart, Express Marche, Millennium Bank, Rainbow Tours and Time Trend. The first phase of the refurbishment and extension is expected to be finalised in Q4 2020.
- Bonarka City Center (Krakow, Poland): Peek & Cloopenburg’s extended store was opened and several units have been handed over to tenants such as Apart, Costa, Douglas, Pandora and Pinko for fit-out. Completion of the current development phase is expected in June 2020.
- Shopping City Buzau (Buzau, Romania): The last phase of the project, which includes the refurbishment of the ground floor and opening of an outdoor terrace and a 6 screen cinema by Cinema City will be completed in Q2 2020.
- Forum Liberec Shopping Centre (Liberec, Czech Republic): The refurbishment is expected to be finalised as planned, in Q2 2020.
- Shopping City Targu Mures (Targu Mures, Romania): A 39,800 sqm shopping mall was completed in Q1 2020. The opening was scheduled for the end of March and is now estimated for Q3 2020 after the Romanian government ends trading restrictions. The tenant mix includes Carrefour, CCC, Cineplexx, Flanco, eMag, Hervis Sports, Intersport, KFC, LC Waikiki, LPP (Cropp, House, Reserved and Sinsay) and New Yorker.
During Q1 2020, €50 million was spent on the pipeline projects detailed above. Following a detailed business review, the Group actively implemented various measures aimed at optimising the allocation of capital, among which was the deferral of non-committed development and capital expenditure projects. Thus, the Group will not launch new constructions until there is further clarity on the impact of COVID-19 on the Group’s operations. Consequently, the Group estimates to incur further development and capital expenditure of only €70 million in 2020.
“COVID-19 had limited impact on revenues during the first quarter, with social distancing measures causing the closure of most shops starting mid-March. From the beginning of the COVID-19 outbreak, our priority has been ensuring the health and safety of all our customers and staff. Over the last few weeks, in the context of easing of restrictions, a large proportion of retailers have resumed their operations and 63% of the Group’s GLA is currently open,” Alex Morar, CEO of NEPI Rockcastle said.
Further highlights from the Q1 2020 business update:
- Further to the low rate of COVID-19 infections in CEE, trading restrictions in eight out of nine countries have been significantly relaxed and most shops located in Poland, Bulgaria, Slovakia, Hungary, Croatia, Czech Republic, Serbia and Lithuania are now open. Entertainment facilities in the countries mentioned above, except for Hungary, are expected to open by end of June, increasing footfall and turnover.
- Net operating income for the three months ended 31 March 2020, net of the COVID-19 losses of €4 million, was €101 million, 4% higher compared to Q1 2019. The COVID-19 losses in Q1 were mainly due to rent and service charge relief imposed by the Polish government during the lockdown.
- Until 29 February 2020, like-for-like turnover increased by 8.5% and footfall grew by 4.3%. The closure of most of the stores since mid-March led to a 15% decrease in the Q1 2020 sales compared to Q1 2019, on a like-for-like basis.
- 94% of rent and other charges due in Q1 2020 have been collected and no major tenant insolvencies have occurred to date.