South-African investment fund New Europe Property Investments (NEPI), which is one of the most active investors on the Romanian real estate market and which currently makes EUR 66 million in annual rent from its functional property portfolio, could see rents increasing to EUR 100 million after the ongoing developments in Romania will be finalized in 2015.

The new developments NEPI is currently working on in Romania, which are valued at EUR 490 million, could generate some EUR 35.3 million in revenues when they will be finalized, according to the fund.

By far the largest rental income should come from the Mega Mall shopping center in the Eastern part of Bucharest, which NEPI expects to be finished one year from now, in the second quarter of 2015.

Mega Mall, which is a EUR 165 million investment, could bring an EUR 16.5 million annual rent, which is a 10 percent yield on its cost. The mall, that will have a 70,700 gross leasable area (GLA), will be among the largest in Bucharest. NEPI has signed or agreed contracts for 85 percent of the mall’s GLA.

This year, NEPI expects to launch the Vulcan Value Centre shopping center in Bucharest, a EUR 47 million investment which should generate an EUR 4.1 million annual rent.

At the end of this year, the first phase of Shopping City Targu Jiu should also be functional. NEPI invested some EUR 30 million in it and expects to get EUR 2.95 million in rents a year.

NEPI also forecasts some EUR 12 million annual rents from three office buildings it is currently developing in Cluj-Napoca and Bucharest. The fund already inaugurated the first phase of The Office project in Cluj, a joint-venture with Romanian entrepreneur Ovidiu Sandor. The EUR 22.5 million investment should generate EUR 3.3 million rent once the 21,300 sqm GLA will be fully occupied. The offices are currently just 55 percent leased. NEPI and Sandor plan to build two more office buildings within in the same project.

NEPI also wants to develop an office building in Bucharest, next to the Romanian Government building, for which it recently received the building permit.

Currently, NEPI makes more than EUR 55 million annual rent from its Romanian properties, which are valued at EUR 656 million. Almost EUR 35 million come from the retail properties, which include City Park Mall of Constanta, Ploiesti Shopping City, Braila Mall, Shopping City Deva, Shopping City Galati, Retail Park Pitesti, Severin Mall, but also some smaller commercial galleries.

These properties are valued at EUR 419 million, which is more than half its current portfolio, which is valued at EUR 781 million. NEPI expects its malls in Romania to draw in more than 33 million visitors this year.

The investment fund also has three office buildings, two in Bucharest and one in Timisoara, which are currently valued at some EUR 220 million and make EUR 18.7 million annual rent. This brings an average yield of 8.5 percent. The fund also has two industrial properties valued at EUR 17 million. These generate EUR 1.81 million revenues each year, which is a 10.7 percent yield.

The fund has only two property outside Romania. The largest is the Zilina Aupark shopping center in Slovakia, which generates EUR 6.8 million annual revenues. It has paid EUR 95 million for this purchase in 2013. NEPI also holds a small retail portfolio in Germany, which is valued at EUR 30.4 million and which makes EUR 2.46 million a year.

NEPI expanded its operations at a very rapid pace in the last two years. It made seven large acquisitions in 2013 only. An important part of the money for these investments came from the capital market, as NEPI is listed in Johannesburg, London and on the Bucharest Stock Exchange. Last year only, the fund managed to draw EUR 250 million from the capital market, through four share issues.

NEPI made EUR 41.4 million net rental income last year and a net profit of EUR 56.5 million. The fund’s net asset value at March 31, 2014, was EUR 770.6 million. The fund has a market capitalization of EUR 1.42 billion.

Andrei Chirileasa, andrei@romania-insider.com