NEPI Rockcastle N.V. (NRP.JO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen and welcome to the results presentation of NEPI Rockcastle for the first half of this year of 2025 and we're happy to have us with you. [Operator Instructions] But let's go into the presentation right away. As [indiscernible] said, so we are here to tell you actually where we are, where we stand after 6 months of this year. But believe me, the team is more focusing already on the next set of results. So building tomorrow's future in this area of Central Eastern Europe, I think with the 2 really strong acquisitions that we did by the end of last year we became an even stronger player within the Central Eastern Europe markets with now 34% allocated in Poland and 35% in Romania. And that is promising one more time that we will grow within this region because when you look at the underlying economics and that in this region, in the countries we are operating in, actually, the growth of GDP in this region for 2025 is around 2.2% and even in '26, it shall increase to 2.5%. And if you compare this to the rest of Europe, you will see that we are really doubling actually the numbers against the other 27 states in the European Union. So -- and we see here this annual growth in purchasing power, 10% around last year and that is continuing throughout 2025. And of course, this has to do with the underlying basic economics that we have a very low unemployment rate, the wages, salaries are actually above inflation and this gives actually a lot of turnovers to our retailers, which you will see later on in the presentation of Marek, who will give you a bit more details on the operational numbers. Now NEPI Rockcastle, you know us, we tend to deliver on our promises, on our strategy. And that's why I'm very happy to announce that we have an increase of distributable earnings for the first half of this year of 3.1%, a bit above our expectations. And that has been driven mostly obviously, by our NOI growth, double digit, 12.1%, not like-for-like. So that includes actually obviously the acquisitions that we did by the end of last year but still a like-for-like growth of 4% for the rest of the portfolio for the standing portfolio, which is above inflation. Now the growth of sales, again, as I said, has to do with the fact that in our region, let's say, consumers are very willing to come to shopping centers and to shop and to spend their money and that led to a 3.9% increase of turnover to our dear retail partners. Now as well, we are delivering on our strategy, a little bit more looking into the future of our development pipeline, almost EUR 800 million that we will spend actually over the next 2, 3 years in order to create only on the retail side, 8% of additional GLA. But not only within the retail side but as well in our new businesses like the energy business. Now what does it mean when we talk about asset rotation? I think you've seen the acquisitions of last year, the 2 really big ones, Magnolia and Silesia. And that has already contributed another almost EUR 29 million of NII for our business, 9.3% additional. But what I'm really a bit proud of is that when you look at the point of acquisition until now and the valuation of those assets, this gives us another almost EUR 60 million uplift on valuation. So we're really happy to see that, also valuers are, let's say, valuing these assets in a very positive way. And I think there is more to come. And it's another EUR 20 million -- almost EUR 25 million only from the point of the end of last year until now within the first 6 months of this year. Now the new businesses are developing actually quite nicely. We are already EUR 5 million of revenues for the first half of this year on our energy business. And we will spend another EUR 10 million on taking it out to all the other countries. So we have another 23 projects ongoing there, out of which 16 are already under construction. So you can believe that this will come soon also within our revenue stream and as well another EUR 100 million where we are investing into 160 megawatts on greenfield production in Romania and that is also to come over time until the end of next year. I think the first 50 megawatts we will have already online until the end of this year. And you can imagine how the income stream on the energy side will grow with about a 20% yield. Now -- but not only delivering, of course, on the operational side, we also are very, let's say, cautious when it comes to our balance sheet. And there, we see another EUR 108 million of valuation uplift for our portfolio for the first half year. That is mainly driven not by yield. This is mainly driven by simply our operational excellence and that is a 1.4% plus versus the numbers of December 2024. Still, all these acquisitions, all these investments and still our loan-to-value at 32.1%. I think I'm looking here always at my CFO -- our CFO, Eliza, who is doing an amazing job here on our funding side. And you see that we have a very healthy ratio here and no debts actually that are maturing in 2025. Next one is coming in '26, '27 but no worries. We're going to take care of it. ESG is, of course, in progress. As said, for now, we are only producing 5% of the electricity that the portfolio needs, that our retailers need. But you saw it just a slide before, we are heavily investing into the future to gear this up all the way to 50%. So you can imagine how the income stream of your energy business will increase over the next 2 years. So we're putting the seeds now but you will see the outcome of this very soon. Engaged teams, I always like to emphasize this, the all is only possible because of our NEPI Rockers, as we call a little bit ourselves. So 100% of all the core value creation of that business is done in-house. So only really small stuff is outsourced wherever we have a belief that we need to have a grip on the value creation, it is a NEPI Rocker that is running the show. So CEE market leader, well, I can announce and I'm happy to say that we could increase your distributable earnings versus the first half of '24 by another 3%, a notch above that to EUR 0.3105 per share. I think that's a good result for the first half of the year. And of course, driven by this increase of NOI, which again, driven by the acquisitions and -- but also the basics of the business, like are our tenants paying in time? Yes, 99% collection rate, I think, speaks for itself. Are our tenants eager to be in our assets? Yes, 98.2% occupancy. So sometimes we would love to have at the very moment, a bit more vacancy, I think, Marek, because when you see later on in the presentation, our base rental uplift, which is like above 5%, we would be happy to do even more deals. And at the same time, very healthy as well, I think, for our retailers because when you have an occupancy cost of 13%, then this is a very healthy number for our retailers. And due, of course, due to the uplift in valuation, our investment property value now a record high of EUR 8.1 billion. Now with this -- was just the introduction. We give you a bit more detail. I'm very happy to introduce Marek, who will give you more insight on our operational results. So for now, thank you. See you later.

Thank you, Rudi and good morning from the beautiful city of Amsterdam. It is my absolute pleasure to present and brag about the excellent operational results for the half year -- first half of the year of 2025 and unpack a bit where the growth comes from and what it means for the portfolio and what it means for the future of our operations. So as Rudi mentioned, the overall NOI growth was very high of 12.1%. But even if you look at non-like-for-like growth, we recorded 4.4%, which is a very solid growth. And I think it's very interesting to look how different countries contributed to the growth. Hence, the slide where I would like to describe the situation in various geographies. Obviously, Poland stands out from the crowd with 9.1% on non like -- for like-for-like growth and 54% on overall growth. Obviously, this is a function of acquisitions at the end of last year, namely Magnolia and Silesia, the 2 properties together produced around 29% -- EUR 29 million in the first half, which then translated into the impressive growth of 54%. But should we take out the effect of non-like-for-like elements, looking at only like-for-like in Poland, this is as high as 9.1%, which is remarkable. Yet we must remember that this mainly comes from cost management, cost recoveries or put differently from the cost side of the business. Therefore, those are one-off elements. They are not recurring, meaning one cannot expect that the portfolio given the macroeconomic situation will continue to increase at 9.1% on, let's say, natural growth. But still, this is a very solid number. Then looking at Lithuania, 5.8%, again, very solid growth. And I think we now see full year impact or effect of all the efforts that have been taken by the teams of the asset management initiatives, adding GLA, retenanting the property that now is adding a lot to the growth of the company with as much as 5.8%. Then Bulgaria with 4.8%, again, I'd like to say that we are enjoying very much the honeymoon effect, so to say, with the amazing refurbishment, rebuilding and retenanting of Paradise in Sofia, which is increasing enormously fast in terms of operations and therefore, it translates into the NOI of the property. But the good news is we are not done yet. The team has identified another amazing initiatives, which will fuel of the Bulgarian portfolio in the future. On the other side of the scale, you can see Hungary with negative growth of 1.1% but there is nothing unexpected happening. We are very busy retenanting, refurbishing, rebuilding part of the external areas around Arena, Budapest and this is over EUR 30 million worth of investment. Therefore, there are some operational issues that we solve as we go, meaning some tenants close to open later. And therefore, there are some challenges that we face as we do redevelopment. But this is nothing unexpected. The property works as budgeted and we should see openings of tenants who fit out as we speak towards end of the year and effects of the opening in the year of 2026. And I expect similar effect that we have seen in -- be that Lithuania or Bulgaria. So overall, very good performance of all the countries and we are looking forward for the second half of the year. I'm sure we are very well positioned to deliver at least what we promised, if not more. Then obviously, NOI growth comes from the income of our tenants and the -- is function of their performance. And we are very happy to see that turnovers despite the macroeconomic situation has increased by 3.9%, which is higher than inflation, which is very important. And of course, this is function of the turnovers, which are fueled by footfall at a stable level of 168 million visitors in the first half of the year but basket size increased by as high as 9.7%. I need to pause here and explain a bit what this number means. This number represents the overall portfolio. So obviously, the new acquisitions of Silesia and Magnolia add a lot to the average basket size. Should we take out non-like-for-like elements, the basket size would still grow at over 4%. So that, coupled with footfall, took the turnovers of our tenants to plus 3.9%. The very healthy performance of tenants, of course, fuels all the energy we put into leasing. So EPRA vacancy is at stable level, 1.8%, ticked up a bit. But it is normal for the first half of the year where we are busy doing -- implementing all the asset management initiatives, the effect of which we should see towards the end of the year. And we aim to get the vacancy much lower, hopefully around 1%. Then, of course, BRU, very important metric, the team did manage to increase the -- or achieve 5.3% of the base rental uplift and that is on top of indexation. And let me add here, not only is it on top of indexation but we define base rental uplift as a rent that is not headline but effective, which means it is calculated in an incentive or CapEx that the company would put into the leasing agreement. I think it's very important to understand. We speak here about the effective rental levels. And with that increasing turnovers and cost under control, the occupancy ratio is at similar level to the one of H1 2024, which is 13.1%. And despite increasing operational costs, the team did an amazing job to be able to recoup as much as 94% of the operational cost, which then translated, of course, into the growth of NOI. Now looking at the performance of retail segments. Nothing surprising here. We have seen similar data for the end of the year 2024 with Health & Beauty and Entertainment being at the forefront of the growth. This is something we have seen across the portfolio for a few quarters. Now you may ask questions about electronics and sports goods. Well, with electronics, it's a bit a function of us being busy retenanting some of the shopping centers where we closed some of the stores -- electronic stores replaced them. Therefore, there were some disruptive moments but now we are back on track. And I'm sure we will show positive [ data ] for those branches toward end of the year as well. Now moving on, I bragged about base rental uplift. But 5.3% is just a number. But you need to understand what is behind the number. And behind the number, we have over 7 lease agreements signed for the first half of the year or 170,000 square meters of GLA. And that is a lot of job. So I want to thank all the team putting all the effort into the leasing and that is amazing result and we are very happy to see the pipeline of the leasing towards the end of the year, making us quite certain we will, as I said, deliver as budgeted, if not better. Now looking at EPRA vacancy, as we said, 1.8% overall and 1.6% for retail only. With the pipeline that we see, we should be getting to around 1%. I promised to Rudi one day we'll get to 1%. I hope it will still happen this calendar year. Let's see. I am very positive. And there's a lot of leasing happening as we speak and I'm -- I will be very proud to report on those at the end of the year. Moving forward, I'm sure you are all interested to see how our new keys are doing, namely Silesia and Magnolia. Let me just start with saying that we have integrated totally the 2 properties. By that, I mean, we are hands on and we took over the management from A to Z of both properties. And one needs to remember, we are talking about 600 lease agreements that we had to take over and 1 team managed that over the last 6 months. I'm very proud of it. And now we are very busy with next step, which is actually improving those assets and adding more value to them and figuring out what else can we do, how we can manage them better and what asset management initiatives can we implement in order to get the value up for our investors. And now looking at the performance, we are very happy. We are on the budget. Silesia and Magnolia added 9.3% of NOI. in 2024. This is how dominant those shopping centers are and we are very happy with operations so far. With very low operational vacancy, those 2 have recorded actually uplift in valuations. And the question is, obviously, where the uplift comes from where, it's a combination of a few things. When we took over the properties, we have revised the leasing strategy. We have applied higher rental expectations. We have gained more from short-term income and media sales. At the same times, we have changed the CapEx assumptions and that resulted in a very nice uplift in valuation and we hope to see this trend continuing as we go towards end of the year. Moving forward, balanced tenant profile. We show it every time. I think it's quite a boring slide but I'm happy it's boring because the top 10 of our tenants, those are the very reputable, very -- a lot of them listed, high credit rated tenants. So it's very solid and it's very resilient number of names that we can see here. Looking at the leasing opportunity or expiry profile, you can see that there is still some work we have to do in 2025, 2.4 -- 2.6%, yet the same statistic at the end of last year was over 7%. So a lot of work has been done and we are busy doing, as I said, all the leasing and we should finalize it as planned, if not better. And now my -- one of my favorite slides, new openings, I'm particularly happy when we do those new openings but even more when we can introduce new brands to new markets. And that is the case for Sports Direct in Romania or those in Bulgaria. We are super proud to see how those brands flourish with us and how they expand and we are very busy talking with those amazing tenants about new markets, new opportunities and this is probably the best part of the job we do every day. And last but not least, I would like to talk about our Retailers Day. It was third edition. First one was in Warsaw, the second in Bucharest, third in Sofia. And we are very happy to see the effect of those. This is not only about building the relations. There are business opportunities. And without getting into details, I can tell you that some of the tenants who came for the first time in Bulgaria loved it so much that they actually asked us to help them grow there and this is what our business is all about. We are very happy from the outcome. And for sure, we will continue, yet we don't know which city would be the next target. But for sure, this is going to be recurring event by NEPI Rockcastle. And with that being said, I would like to invite Eliza, who makes sure that all the ideas that come from operations are fundable. So Eliza, thank you very much. Over to you.

Thank you, Marek. Thank you, Rüdiger, for setting the floor. Good morning, everyone. Before starting my presentation, I would like to tell you that in the last week, while working and reviewing and looking at the financial statements, I've realized how much we've come as a company and how far we've come as a team. In NEPI Rockcastle, we have an internal motto and we use it quite often, which is stronger together, which is a reminder of our merger in between the NEPI and Rockcastle and it's also a reminder of the good collaboration that we have across teams. And while I will present you the set of numbers, I would like to remind you also that beyond the numbers, there is a shared commitment and motivation to build something solid, stronger together and this pushes us forward. So today, in my finance area, I will talk to you about 3 topics, the regular one, distributable earnings, funding and valuation. Speaking about distributable earnings, as Rüdiger already mentioned, we delivered in this half of the year a growth of 3.1% in distributable earnings per share. On top of our business as usual on managing the existing portfolio and extracting more value out of it, we have also worked and we put our consistent efforts to integrate the 2 properties that we bought last year, which were Magnolia and Silesia that Marek already talked about. But to integrate these 2 properties, which are valuing more than 10% of the portfolio, more than EUR 800 million, more than 170,000 square meters, this is not a walk in the park. This takes times that we need to dedicate so that to bring them into the operational standard of NEPI. And this is what we delivered in the first 6 months, so that to unleash value in the upcoming months with the asset management initiatives that we are still deciding upon. On top of that, we advanced our investment in the greenfield energy -- in the greenfield green energy, so that, as Rüdiger mentioned, to put the harvest -- to put the seeds now and to harvest the outcome as soon as possible. Looking at the numbers on top of the EUR 0.3012 distributable earnings per share that we had in H1 2024, we came this year with a 5.6% from our recurring and existing portfolio and with a double-digit 10.6% coming from this net acquisition. They are exactly those kind of properties with strong fundamentals, premium assets that are going to deliver and that are going -- that fit very well in our long-term strategy. Obviously, for this operational performance that's solid to be possible, we needed funding, both debt and equity. And each of them naturally came with a cost, 5.5% increase in the net finance cost and the dilutive effect of 7.8% coming from the increase in the number of shares. Looking at the distributable earnings and how much we increased the P&L capacity, this is an 11% growth relative to the same period last year. So for those of you supporting shareholders that invested in NEPI because you believe in us, you are going to benefit on -- in nominal terms of 11%. From distributable earnings to distribution, this is a quite familiar information to you that we are putting in the last 4 years since we began our mandate, we are going to deliver at least -- we deliver in general, 90% -- at least 90% of our distributable earnings and we are going to do the same this time. This is because we care about our consistency in what we are doing. And this once again is above the payout of our European peers, which are standing at 70%. Speaking about the next move and the direction that Rüdiger mentioned at the beginning, for me, when it comes about the next move in my CFO role, what's important is to ensure that the necessary funding is there so that to implement the strategic opportunities with the right trade-off in between growth and stability. And when we are speaking about this, I'm speaking about the right liquidity, the right pricing and also about staying within the self-imposed boundaries when it comes about gearing. I made here, let's say, a contradiction in terms with solid liquidity because how can something be solid and liquid in the same time. But in NEPI Rockcastle this has to do with our solid foundation that we built stronger together. And it's about ensuring the right liquidity so that to have the necessary flexibility to act upon opportunities. And I think that this is a unique recipe, which ensures resilience. Looking at something more tactical. This year, as Rüdiger already mentioned, there are no debt upcoming because we are always addressing them in advance. The next maturity is going to come in October 2026 and we are going to address it by the end of this year, if not entirely, at least partially, at a comfortable level for us. When I'm looking at the debt capital markets now, they are in a very good shape and we have already a plan so that for us to act upon it. So don't worry about it, it's in good hands. Our debt capital market activity is depending on our credit rating. And apart from the BBB+ that we have from Fitch 2 years ago, this year, we had S&P putting us on a positive outlook and while keeping also the BBB flat rating. This is a very good news for us because it's for the first time that we are not tied within the credit rating of one single country, which is Romania. And this means that we became diversified enough and large enough and solid enough to be tied to the average of the credit rating of the countries in which we are operating and judged by our own performance. So this is very good news despite the fact that it's only a word over there positive. Loan-to-value, 32.1%, the same as always almost, which on the surface may mean some stability and something which is really boring. But in the back, it's a lot of work and a lot of strategic making decision so that to ensure this reversion to the mean of 32.1%, which is very comfortable for us. In February, we came in front of you and we committed on the inclusion of NEPI Rockcastle into the EPRA NAREIT. And now 6 months down the line, here we are. This is going to provide us with more visibility and more liquidity and it's also a validation of the current performance. In terms of valuation, yes, indeed, we crossed another threshold. Our portfolio changed the prefix. We are at EUR 8.1 billion. This comes from the performance that our properties are delivering because the valuation yield is not changing relative to December. So this EUR 108 million gain is the result of the teams that are pushing the properties forward and extracting more value, as I said at the beginning. EUR 25 million are coming from these 2 acquisitions, Magnolia and Silesia because even the valuers are recognizing the standard of operations of business. The estimated rental values applied to these 2 properties were revised upwards based on the renewals that we have done and the renegotiation of the contracts that we had to do in these 2 properties. I will wrap up my finance section with one takeaway, which is the consistent delivery of strong results. This builds trust with the markets and with the shareholders and this makes us deliver even stronger. And with this objective in the mind, the mission of finance team, I would say that it's quite straightforward in the way that be development or acquisition or green energy, we need to make sure that we use all the tools so that to deliver good returns and to make sure that the strategic opportunities are going to be implemented. And we do this with commitment and with passion because as someone used to say, to be successful, you need to have your heart in the business and your business in the heart. And with that, I will turn to Rüdiger. Thank you.

Thank you, Eliza and I think you sure have. No doubt. So let me go a bit deeper into the question of, of course, also the future and delivering actually on our developments. I mean we have a pipeline at NEPI Rockcastle of almost EUR 800 million. I mean, try to find this in the market. So that is an amazing, let's say, pipeline that we have here and it consists obviously mainly of almost EUR 640 million that we are spending on enlarging our retail real estate portfolio with extensions of shopping centers, refurbishments but also with greenfield developments. So in total, we want to deliver here around another 188,000 square meters of GLA until, let's say, the end of the year of 2028. Another, of course, very important project for us and pipeline is our energy business, EUR 110 million. So that's meanwhile, 15% of our total pipeline is related to the energy business, which, of course, is a bit of a different business but it's very much linked, obviously, to our retail real estate business as we are delivering here energy to our retailers like we deliver car parks to our retailers. So it's a business in itself but very much linked, of course, to our business. And I think this will also deliver quite interesting returns in the near future. And then we have another EUR 47 million. I know this is not a really big number. And you know that -- and I'm stating this again, NEPI Rockcastle is not planning to become a resi developer. This is exceeding land that we have around our shopping centers where we just create additional value for you as our shareholders. And there, we have currently 2 projects, one in Brasov and another one in Craiova, where we will build another 33,000 square meters to come to the market in the next 2 years. So -- and let me talk about the main projects that we have here. Of course, the most outstanding one is our ground zero project in Promenada in Bucharest, where we already obviously operate our shopping center but we will add another 55,000 square meters. And what is so special about the project is not only the location and that it's already an amazing retail project but that we are actually converting this for a really big -- first time in NEPI Rockcastle history into a multi-use project. So you have about 30,000 square meters of GLA retail that we are extending here, already 68% is prelet and preagreed. So all the big retailers, all the anchor retailers are secured and more than this. And then on top of this, we have an 85-meter tower where we integrate first time a hotel -- a 4-star hotel and on top of this, which is around 10,000 square meters and another 15,000 square meters of offices on top of the hotel, just to name the main functions. But of course, on this, we are integrating now into the asset a full-fledged cinema. We are integrating here also a theater first time for NEPI Rockcastle, which will be an outstanding, I think, entertainment activity because it does not exist so far in the city. So I think it's really a unique project where we're investing here. And it's on time. Very important is it is on time and it is on budget. Promenada Plovdiv -- to move to Bulgaria -- and we are just picking here, of course, the most important ones, 60,000 square meters GLA and we are very close to obtain the building permit here, really made a great step forward over the last months and we estimate here the opening still for Q3 '27. So it's on track so far and we hope to get the building permit and start with construction actually as soon as we have it. Galati, we already operate a shopping center, very successful in Galati. Demand, and I told you in the past, was there by retailers for a retail park and that's why we are looking there to develop a 41,000 square meter GLA retail park with, again, exceeding land where we can, in a second stage, go for some residential and that should be completed, at least the retail park, the retail part of it by Q4 2026. So very nice. And also there, the demand of retailers is quite exciting. So definitely something to deliver over that period of time. Vulcan residential. So for all of those that are -- had a bit of doubt that NEPI Rockcastle can do residential, I'm just telling you, we have sold all these 254 units and it gave you as shareholders a EUR 13 million return. And Eliza, what was the -- what was again the yield we achieved there on Vulcan, sorry [indiscernible] 39% yield. So I think quite -- it's small but a nice add-on to your distributable earnings. Brasov and also Craiova, you know that we opened the shopping center in Craiova. We have some exceeding land there. And we are here for both of these projects, Brasov and Craiova, we are in the phase now of obtaining the building permits. It's on track. It's on time. Got a positive response here from the City Hall. So we think we will deliver this on time until Q4 2026. Now PV panels. You know that we invested EUR 100 million in greenfield developments of photovoltaics. We have bought actually 2 major plots here. The first plot in Chisineu-Cris will be online, I think, until the end of the year. We are now in the testing phase and that might come then online already like beginning of next year. And the second plot, we are also already under construction, material is all delivered. So we are in time, we are in budget. And as I said, this will have, I think, a very positive impact on your earnings in the near future. By the way, at the mid of this year, we could raise here also the pricing for energy because the whole market went up with the pricing, which, of course, helps us with our profitability. And I think we will see another EUR 1 million more on this business until the year-end as we had budgeted. So that's going in the right direction. But let's look a little bit forward, not too much forward but at least until the year-end. And of course, as a CEO, you're always happy to increase actually your guidance. We had a guidance of 1.5%, maybe a bit conservative. But as we see after 6 months that we are growing like 3% on this, together with the Board, we decided to increase our guidance in a rational way, somewhere between 2.5% and 3%. It should be doable until the year-end, maybe rather on the upper end of 3% but to give a range of 2.5% to 3%. Of course, there are always, let's say, some challenges to manage over this period of time. But I think you get it when you hear the team speaking. And I have to say you, as a CEO, it's hard to fail when you have such a team. So I think we can deliver this until the year-end. And with this, ladies and gentlemen, we are super happy to come to our Q&A session and ready for your questions. So please, we have here, I think Marius will read out the questions and we will have my colleagues, myself here to come back to you with answers.

Ladies and gentlemen. So a question for Marek. Marek, the question is, do we expect reversions on effective rent to remain above 5% in the coming quarters? Could you provide some granularity on the trend per sector, especially for fashion?

Thank you for the question. Well, it's very difficult to draw a trend because the structure of leases expiring differs from quarter-to-quarter, from geography to geography and there are bigger or lesser opportunities to grow BRU. But what I can say is that we would be very disappointed if it was lower than just indexation. It should be higher than that. It should be a function of GDP growth. We are happy with 5% but we aim much higher. And I think we are on the right track to do at least that looking at the pipeline of leasing that happens as we speak. But of course, we don't know everything. Every month brings us new data about turnovers of tenants. And if those are good, which was the case for first half of the year that fuels our or gives us more arguments with tenants to get more than 5.3%, obviously. And the second part was about the fashion. Yes. I mean this is the trend that we observe not only in where we operate but actually in Europe and in the whole world that other segments pick up and fashion that used to be the anchor part of any shopping center is just one of the functions. And if you couple that with the fact that some of our fashion retailers have been a bit disappointingly [ added ] to the growth and we are busy fine-tuning the situation and finding replacement, then we got to this growth. But still, this is growth of turnovers. And we must as well remember that the first half of the year was a bit difficult in terms of the weather. We got very mixed weather in March. It was very hot and it was very wet and cold in May. So it didn't help, especially fashion tenants. But as we saw the turnover trends towards end of H1, this has improved. And I'm sure this situation will improve further towards end of the year.

Cool. Thank you, Marek, for the answer. I hope it satisfied the gentleman with the question. We have other 2 since you started, I will continue with you.

Let's do it.

Can you comment a bit about the like-for-like property expenses trend and utilities?

Well, so like-for-like properties growth of operational cost was around 10%. And as I said, we capture of that or reconciled 94%. So this is the -- I hope this satisfies the author of the question.

Okay. And the last one from this batch for you is, there was an increase of the OCR to 13.1%. Do you view this in the light -- how do you view this in the light of the tenants held? And what's your -- what is our OCR target range?

Well, there's -- let's put it this way. I mean, it has ticked up a bit but I wouldn't compare to OCR recorded at the end of last year because, obviously, second half of the year is stronger in operations. So if you compare OCR for the first half of 2025 to first half of 2024, then the difference is marginal actually. And we feel very comfortable with 13%. I mean anything that is recognized by the industry below 15% puts us in a comfort zone. And when I say comfort zone, what I mean is that we have the agreements to work on our BRUs to be higher than the 5.3% on top of indexation. And we are happy there. And if there is -- it gives us agreements, obviously, only at about 15% to 17% of gross rental income expires every year. So we can't translate those numbers to the whole portfolio in year 1, which we would like to do but we do our best with what we can.

I think we have still one last for you and then we move to Eliza.

I can do them more, Marius, no problem.

There are 2 -- so there are a few questions about the like-for-like growth of NOI in Romania compared with the rather relatively higher NOI growth for Poland in the first half of the year. Can you bring more color on these 2 numbers?

Of course. Yes. And I think it's actually a very good question because it's very important to look longer than just 1 or 2 quarters that we reported because we have been very busy doing what we do in Poland. In Romania, actually, you have seen very fast growth. Romania was outpacing the rest of the portfolio because what we said about Poland, which is cost management, cost recovery and ability to actually recoup more from tenants. That was the story for Romania for a few years. Now we got to the point where this portfolio is healthy, it's mature but there are lots of initiatives we are busy implementing and they will add value to the second half of the year. And as I said and intentionally, I said, this is one-off effect in Poland. Don't expect that to be the natural growth for next period. I think given the inflation, the growth between 3% to 5%, the organic growth is fine. But I must add here that we are aware that there are some fiscal measures that will be in -- or are now implemented in Romania, which may translate into the customers' behavior. We don't see it yet. It's nothing to be worried about but it's something to take in consideration as we budget the second half of the year.

Thank you, Marek. Sorry, Eliza but we have some questions for Mr. Dany. So first, congratulations on the results. And the question is, is there any activity picking up on the -- in the capital markets? And are you looking to acquire more assets in the near term in Bulgaria, Poland or other countries?

I mean, of course, I mean, the optimization of the portfolio is an ongoing process. We don't have any concrete asset currently with the M&A team, with Anchor that we are targeting. I'm not being exclusivity. But of course, we are scanning the market. There is more product for us actually that we would like to acquire. It just needs to come to the market. So from that perspective, I think you can expect that NEPI Rockcastle will also grow further on by acquisitions in the future. And as I said, if assets come to the market where we say they tick the boxes, they are at the quality level, at the size and have still potential to grow, then I think definitely, we will be the first ones sitting on the table and negotiating. From a corporate perspective, we don't have any, let's say, talks there at the moment. We don't see within our region of Central Eastern Europe that there is an attractive deal to do and acquire a whole portfolio. So I think for the time being, the strategy that we have to look into those markets and acquire top-notch assets in order to grow our portfolio, in order to grow by our developments and to grow by our energy initiatives, I think -- and of course, also the growth that we create within the existing portfolio, I think that is still these 4 pillars of growth. I think that's what we're mainly concentrating on.

Thank you, Rudi. Continuing with you. There are some questions related to one of your favorite topics, energy. So what are your expectations regarding to when the income of the 5 megawatts to be completed by full year '25 and this income would it flow in '26? And previous communication suggested that the income will only be recognized in 2027 but I think it will be in 2026 already.

Yes, we have more than 150 megawatts to deliver. First of all, we have, of course, let me call it the second stage where we are currently implementing actually these -- around 24 projects, which are located in all other countries, except Romania because there we have already finalized it. So that's an ongoing process. This will deliver additional megawatt to be sold to our retailers. That will be finished by, hopefully all by the end of the year. So 16 out of those already under construction and everything is permitted already. So I think that's pretty much on track and this should be -- should deliver already starting beginning of next year. And as I said, from these 2 big plots that we acquired and where we have been constructing these fields, one field is more or less from a construction perspective, finished, ready, everything good and we'll go into the testing phase. So obviously, you need to have a testing phase first. And then I think we will start to deliver this 50 megawatt to the portfolio beginning of next year. So you will see the first 50 -- 65 megawatt round already being delivered by the beginning of next year. And then, of course, we are already under construction on the second field. It's actually 2 fields, 2 stages and the first stage should also be delivered by -- throughout next year. So it will come in stages. So you don't need to wait until, let's say, the end of '27 until we finally get some income here. So it goes by stages and you will see this in the results already in 2026, you will harvest actually already the revenues out of this business. And as the business goes for now and the pricing in the market, we see this quite positive and we will have a return on this investment for you of approximately 20%.

Thank you, Rudi. There is another question. I think you answered that in our previous meetings but I think it's worth repeating. After we deploy all the solar panel initiatives, how much this will cover from NEPI utility needs, energy needs?

Yes. We're currently only covering around 5%, 6% of the total consumption of our retailers. So that's a pretty low number. And you also see like at the moment, we have a revenue maybe this year of EUR 10 million. So it's not obviously not really moving the needle. But you start -- need to start somewhere. It's like a start-up. And as we invest and as we are delivering actually the production, of course, we're ramping up our revenue stream. And you will get to -- with what we have invested -- are investing now, we will get to close like 48% of the total consumption of retailers. So you see that with 5% that we're delivering now, we're making EUR 10 million. So you can imagine and calculate yourself with price levels and whatever stays as it is. And if the yield stays as it is, so when you get close to 50%, you will have a more substantial income stream for NEPI Rockcastle out of this business. And that's actually what we are -- that's what we are -- let's say, that's why we're driving this business in order to create this, let's say, I would call it a natural diversification of our business because it is very much related to our assets. You need to understand, we have 8,000 clients that have the need of energy on a daily basis. It's a commodity. Whether they do turnovers, have footfall or not, they all need to switch on their light. They all need to switch on their air conditioning and we are just delivering here the utility. So we don't need a sales team. We already have 8,000 clients that already signed up to buy energy from us. So -- and that's what we are harvesting here. And I think this can be and will be very much in the future, another pillar of income stream for NEPI Rockcastle.

Thank you, Rüdiger. Going also to Eliza. I was expecting so. What do you expect this impact on average cost of debt from the refinancing of next bond maturity?

We are now at a cost of debt of 3.2%. The refinancing of the next maturity is going to be a subject of the tenor that we are going to elect because the longer it's going to be the higher the cost of debt. Obviously, that we will close it in the market. This is in the range of 150 basis points over the mid-swap for various periods. So the impact in the overall cost of debt may be in the range of 20 to 30 basis points.

We have a few questions relating to how do you see the tax rate going in the future? And where do you see a normalized tax level for NEPI?

That's a prediction that I wouldn't like to make, especially nowadays. As you may already know, in Poland and in Romania, there are new presidents with new governments. And speaking exclusively about Romania, the country is running a significant budget deficit that the current government is looking at fixing, a reason for which we have already an increase in the VAT rate of 2 percentage points from 19% to 21%. This may have or not an impact in the purchasing power. But as we are presenting now to you and taking questions from you, the government is looking also at amending some thresholds for deductibility of the legal entities for various intercompany transactions and not only a reason for which I cannot make predictions. I mean whatever is going to come, we are going to inform you about. Currently, the only thing that we factor in is what we are expecting for this year and which was included in the guidance. This is assuming that no changes are going to appear in the tax legislation. But it's an uncertainty that currently we cannot have any kind of glass ball to tell you what's going to be. So let's be patient. We are going to keep you posted on that.

Thank you. You partially answered also some questions on the outlook for Romania. And there is also a question on Romania from the -- from operational perspective. Do you expect a significant impact on sales and on operations in Romania following the measures that are now being taken by the government?

Well, the main measure has been actually for now, the increase of VAT on the 1st of August. which, of course, came kind of with a surprise. But let's say, these basis points, I don't think that they will really move the needle. The matter is what about the mood of customers. So what we see so far and what we also see like in the turnovers of July, that is promising. So we are still performing -- our retailers are performing well. Difficult to say whether this could have, of course, in the future until end of the year, an effect, a negative effect. We don't see this to that extent. But it's one of the reasons why we're saying, well, let's optimize the guidance from 2.5% to 3% but we need to take these kind of uncertainties into -- in consideration. But for now, with the measures that the government has taken for now until year-end, we don't believe it will have a significant impact on our business in Romania.