South-African investment fund NEPI, one of the largest real estate investors in Romania, will issue a total of 2.07 million new ordinary shares which will be given to managers and employees for subscription for a fixed price of EUR 5.74 per share. The total value of the issue is EUR 11.9 million.

The share issue is part of the fund’s share purchase scheme, which is a mechanism used to motivate management and to align the managers’ interests with those of the NEPI shareholders. As part of this scheme, NEPI’s managers and eligible employees get 10-year loans from the company which they can use to purchase shares at the current market price. They can pay the loan and the interest all at the end of the ten-year period but they can also make partial repayments as they sell some of the shares.

Basically, this motivates the fund’s management to work towards increasing the fund’s share price and to get returns on the shares that are higher than the average interest rate at which the fund manages to get bank financing, which is also the interest rate that NEPI charges on these share purchase loans.

“Participation in the share purchase schemes is restricted to employees and executive directors. share purchase scheme awards are considered and allocated annually by the Remuneration Committee based on individual performance. The group provides loan financing to employees and executive directors for acquiring shares. There are no separate share purchase schemes to encourage retention, aside from the share purchase schemes rewarding performance,” according to NEPI’s annual report for 2013.

NEPI’s CEO Martin Slabbert holds some 4.23 million shares issued under similar share purchase schemes at end-2013. His shares have a market value of almost EUR 25 million. Victor Semionov, the fund’s CFO, has 1.325 million shares and Alexandru Morar, the fund’s executive director, has some 1.07 million shares, according to the fund's report.

This scheme comes to compensate the fact that NEPI’s directors receive only base pay, as bonuses are not part of the group’s policy. Last year, Slabbert was paid EUR 225,000, or some EUR 18,000 a month.

NEPI is one of the most active real-estate investors in Romania, with EUR 490 million new developments in the pipeline. The largest of these developments is the Mega Mall shopping center in Eastern Bucharest, a EUR 165 million investment. The fund’s net asset value at March 31, 2014, was EUR 770.6 million and its current market capitalization is EUR 1.42 billion.

NEPI is listed in South-Africa, but also on the London Stock Exchange and the Bucharest Stock Exchange.

Andrei Chirileasa, andrei@romania-insider.com