The commercial property market is anticipating that Romanian shopping centre owner New Europe Property Investments (Nepi) is considering merging with Polish-focused Rockcastle Global Real Estate, with the resultant entity set to become an eastern European real-estate powerhouse.
Nepi and Rockcastle have started to invest in countries other than their main focuses and could help one another find opportunities in Eastern Europe. Both were launched by professionals from SA’s Resilient stable of property companies.
Nepi, which has a market capitalisation of R52bn, bought a shopping centre in the Czech Republic recently. Rockcastle, which is worth about R33bn, also has a retail centre there.
Analysts say a merger could benefit both parties.
“A merger of Nepi and Rockcastle does make business sense for the individual companies and broader group. A unified company would be a Central and Eastern Europe (CEE) regional property champion, able to more effectively leverage its size, management expertise, depth, and financial muscle into more accretive deals and effective property management,” said Alternative Real Estate Capital Management’s Garreth Elston.
“(They) are reportedly already working together quite closely. The overlap is limited to the Czech Republic. The caveat, though, is that both companies are trading at quite high premiums to their net asset values and merger synergies would need to be rapidly and efficiently extracted so as not to prejudice investors,” Elston said.
Ron Klipin, a money manager at Cratos Capital, said Nepi merging with Rockcastle would create a strong fund with an experienced management team that understood eastern European real estate with “years of experience and boots on the gound”.
“As a combined entity, they would rank in the top three or four listed property companies by market capitalisation on the JSE,” he said.