Good morning, ladies and gentlemen, and welcome to the result presentation of NEPI Rockcastle for the first half of this year of 2025. We're happy to have us with you. When you look at the screen, you will see, of course, the presentation, but maybe also focus a little bit on the box below where you could send us emails, questions that we might answer later on in the Q and A session. Just as a remark at the beginning for the organizational part, let's go into the presentation right away, as [Mr. Goethe ] said. We are here to show you actually where we are, where we stand after six months of this year. Believe me, the team is more focusing already on the next set of results. Building tomorrow's future in this area of Central and Eastern Europe.
With the two really strong acquisitions that we did by the end of last year, we became an even stronger player within the Central and Eastern European markets, with now 34% allocated in Poland and 35% in Romania. That is promising one more time that we will grow within this region, because when you look at the underlying economics 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 2026 it shall increase to 2.5%. 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. We see this annual growth in purchasing power, 10% around last year, and that is continuing throughout 2025.
Of course, this has to do with the underlying basic economics, that we have a very low unemployment rate, that 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. 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. That has been driven mostly obviously by our NOI growth, double digit 12.1%, not like for like.
That includes actually obviously the acquisitions that we did by the end of last year, but still a lot like for like, growth of 4.4% 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 centres and to shop and to spend their money. That led to a 3.9% increase of turnovers. 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 two, three 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 two really big ones, Magnolia Park and Silesia City Center, and that has already contributed another almost EUR 29 million of NOI for our business, 9.3% additional. 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. We're really happy to see that also valuers are, let's say, valuing these assets in a very positive way.
I think there is more to come. It's another 20, almost EUR 25 million only from the point of the end of last year until now, within the first six 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. We have another 23 projects ongoing there, out of which 16 are already under construction. You can believe that this will come soon also within our revenue stream. As well, another EUR 100 million where we are investing into 160 MW on greenfield production in Romania. That is also to come over time until the end of next year.
I think the first 50 MW we will have already online until the end of this year. You can imagine how the income stream on the energy side will grow with about a 20% yield now. Not only delivering, of course, on the operational side, we also are very, let's say, cautious when it comes to our balance sheet. 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. That is a 1.4% + versus the numbers of December 2024. Still, all these acquisitions, all these investments, and still our loan-to-value ratio at 32.1%. I think I'm looking here always at my CFO. Our CFO, Eliza, is doing an amazing job here on our funding side.
You see that we have a very healthy ratio here and no debts actually that are maturing in 2025. Next ones coming in 2026, 2027, 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. You saw it just a slide before. We're heavily investing into the future to gear this up all the way to 50%. You can imagine the income stream of your energy business will increase over the next two years. We're putting the seeds now, but you will see the outcome of this very soon. Engaged teams. I always like to emphasize this. All is only possible because of our [NEPI-rockers], as we call a little bit ourselves.
100% of all the core value creation of that business is done in house. 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. CE market leader. I can announce, and I'm happy to say that we could increase your distributable earnings versus 1H 2024 by another 3%, a notch above that to EUR 31.05 per share. I think that's a good result for the first half of the year. Of course, driven by this increase of NOI, which again driven by the acquisitions, 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.
Sometimes we'd love to have at the very moment a bit more of 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. At the same time, very healthy as well, I think for our retailers. When you have an occupancy cost of 13%, then this is a very healthy number for our retailers. Due to the uplift in valuation, our investment property value now a record high of EUR 8.1 billion. This was just the introduction, we give you a bit more detail. I'm very happy to introduce Marek Noetzel, who will give you more insight on our operational results. For now, thank you, see you later.
Thank you, Rüdi, and good morning from the beautiful city of Amsterdam. It is my absolute pleasure to present and talk about the excellent operational results for the half year, first half of the year of 2025. 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. As Rüdi mentioned, the overall NOI growth was very high at 12.1%. Even if you look at non like-for-like growth, we recorded 4.4%, which is very, very, very solid growth. I think it's very interesting to look at 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 growth and 54% on overall growth.
This is a function of acquisitions at the end of last year, mainly Magnolia Park and Silesia City Center. The two properties together produced around EUR 29 million in the first half, which then translated into the impressive growth of 54%. 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. Still, this is a very solid number. Looking at Lithuania, 5.8%, again very solid growth.
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%. Bulgaria with 4.8%. I 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. The good news is we are not done yet. The team has identified another amazing initiatives which will fuel the growth 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 development. 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. I expect similar effect that we have seen in be that Lithuania or Bulgaria. 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.
Obviously, NOI growth comes from the income of our tenants and is function of their performance. 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. 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 Park 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%. That coupled with footfall took the turnovers of our tenants to + 3.9%.
The very healthy performance of tenants, of course, fuels all the energy we put into leasing. So EPRA vacancy at stable level 1.8% ticked up a bit, but it is normal for the first half of the year where we are busy implementing all the asset management initiatives, the effect of which we should see towards the end of the year. We aim to get the vacancy much lower, hopefully around 1%. 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. Let me add here, not only is it on top of indexation, but we define base rental uplift as a rent that is not headlined 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%. 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 and beauty and entertainment being at the forefront of the growth. This is something we have seen across the portfolio for a few quarters. We may ask questions about electronics and sport goods. With electronics, electronics is a bit function of us being busy retenanting.
Some of the shopping centres will be closed, some of the stores, electronic stores replace them. Therefore there were some deceptive moments. We are back on track and I'm sure we will show positive delta for those branches toward end of the year as well. Moving on, I dragged about base rental uplift, but 5.3% is just a number. You need to understand what is behind the number. Behind the number we have over seven lease agreements signed for the first half of the year or 170,000 sq m of GLA and that is a lot of jobs. I want to thank all the team putting all the effort into the leasing and that is amazing, amazing result. 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 promise to Rüdiger 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 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 kits are doing, namely Silesia and Magnolia Park. Let me just start with saying that we have integrated totally the two properties. By that I mean we are hands on and we took over the management from A to Z of both properties.
One needs to remember we are talking about 600 lease agreements that we had to take over and one team managed that over the last six months. I'm very proud of it. We are very busy with the 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 we can implement in order to get the value up for our investors. Now looking at the performance, we are very happy we are on the budget. Silesia and Magnolia Park added 9.3% of NOI in 2024. This is how dominant those shopping centres are and we are very happy with operations so far with very low operational vacancy.
Those two 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 time, 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 the end of the year moving forward. Balance 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, a lot of them listed, high credit rated tenants. 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 that same statistic at the end of last year was over 7%. A lot of work has been done and we are busy doing, as I said, all the leasing and we should finalize as planned, if not better. 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. 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. 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.
Last but not least, I would like to talk about our retailers. It was the third edition. First one was in Warsaw, the second in Bucharest, third in Sofia. 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. This is what our business is all about. We are very happy from the outcome and for sure we will continue. We don't know which city would be the next target, but for sure this is going to be a recurring event by NEPI Rockcastle.
With that being said, I would like to invite Eliza, who makes sure that all the ideas that come from operations are fundable. 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 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 NEPI and Rockcastle. It's also a reminder of the good collaboration that we have across teams. 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. This pushes us forward.
Today in my finance area, I will talk to you about three 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 two properties that we bought last year, which were Magnolia Park and Silesia City Center that Marek already talked about. To integrate these two 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 time that we need to dedicate so that to bring them into the operational standard of NEPI.
This is what we delivered in the first six 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 advance our investment in the greenfield energy, in the greenfield green energy, so that as Rüdiger mentioned, to put the seeds now and to harvest the outcome as soon as possible. Looking at the numbers, on top of the EUR 30.12 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 fit very well in our long term strategy.
Obviously, for this operational performance that solid to be possible, we needed funding, both debt and equity. Each of them naturally came with a 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 increase the P&L capacity, this is an 11% growth relative to the same period last year. For those of you supporting shareholders that invested in NEPI Rockcastle because you believe in us, you are going to benefit in nominal terms of 11% from distributable earnings to distribution. This is quite familiar information to you that we are putting in the last four 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. 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 to implement the strategic opportunities with the right trade-off between growth and stability. 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 at the same time? In NEPI Rockcastle, this has to do with our solid foundation that we build stronger together. It's about ensuring the right liquidity to have the necessary flexibility to act upon opportunities. 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 for us to act upon it. 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 two years ago, this year we had S&P putting us on a positive outlook while keeping also the BBB flat rating. This is 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. 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.
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. In the back, it's a lot of work and a lot of strategic making decision so that we 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. Now, six 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. 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 two acquisitions, Magnolia Park and Silesia City Center, because even the valuers are recognizing the standard of operations of business. The estimated rental values applied to these two 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 two 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.
With this objective in mind, the mission of the finance team, I would say that it's quite straightforward in the way that, be it development or acquisition or green energy, we need to make sure that we use all the tools to deliver good returns and to make sure that the strategic opportunities are going to be implemented. 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. With that, I will turn to Rüdiger. Thank you.
Thank you, Eliza. I think you sure have no doubt. Let me go a bit deeper into the question of, of course, also the future and delivering actually in our developments. We have a pipeline at NEPI Rockcastle of almost EUR 800 million. Try to find this in the market. That is an amazing, let's say, pipeline that we have here. It consists obviously mainly of almost EUR 640 million that we are spending on enlarging our retail real estate portfolio with extensions of shopping centres, refurbishments, but also with greenfield projects. In total, we want to deliver here around another 188,000 sq m of GLA until, let's say, the end of the year 2028. Another, of course, very important project for us and pipeline is our energy business, EUR 110 million.
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. It's a business in itself, but very much linked, of course, to our business. I think this will also deliver quite interesting returns in the near future. 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 residential developer. This is exceeding land that we have around our shopping centres, where we just create additional value for you as our shareholders.
There we have currently two projects, one in Brașov and another one in Craiova, where we will build another 33,000 sq m to come to the market in the next two years. Let me talk about the main projects that we have here. The most outstanding one is our ground zero project in Promenada in Bucharest, where we already obviously operate our shopping centre. We will add another 55,000 sq m . 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. You have about 30,000 sq m of GLA retail that we are extending here. Already 68% is pre-let and pre-agreed. All the big retailers, all the anchor retailers are secured and more than this.
On top of this, we have an 85 m tower where we integrate, for the first time, a hotel, a four-star hotel. On top of this, which is around 10,000 sq m , and another 15,000 sq m of offices on top of the hotel, just to name the main functions. Of course, on this, we're 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. 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 obtaining the building permit here. Really made a great step forward over the last months, and we estimate here the opening still for Q3 2027. 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. Galați, we already operate a shopping center, very successful in Galați. Demand, and I told you in the past, was there by retailers for a retail park.
That's why we are looking there to develop a 41,000 sq m 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. Very nice, and also there, the demand of retailers is quite exciting. Definitely something to deliver over that period of time. Vulcan Residential. For all of those that 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. Eliza, what was again the yield we achieved there on Vulcan? Sorry, I have 39% yield, so I think quite. It's very small, but a nice add-on to your distributable earnings.
Brașov 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, Brașov 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. We think we will deliver this on time until Q4 2026. Now, PV panels, you know that we invest EUR 100 million in greenfield developments of photovoltaics. We have bought actually two major plots here. The first plot in Chișineu-Criș 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. The second plot, we are also already under construct when material is all delivered. We are in time, we are in budget.
As 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. I think we will see another EUR 1 million more on this business until the year end as we had budgeted. That's going in the right direction. Let's look a little bit forward, not too much forward, but at least until the year end. 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 six 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%- 3% should be doable until the year ends. Maybe rather on the upper end of 3%, but to give a range of 2.5%- 3%. Of course, there are always, let's say, some challenges to manage over this period of time. I think you get it when you hear the team speaking. I have to say, as a CEO, it's hard to fail when you have such a team. I think we can deliver this until the year end. With this, ladies and gentlemen, we are super happy to come to our Q and A session and ready for your questions. Please, we have here, I think, Marius will read out the questions and we will have my colleagues and myself here to come back to you with answers.
Hello, ladies and gentlemen. 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. Thank you for the question. 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. 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. 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.
If those are good, which was the case for the first half of the year, that fuels us or gives us more arguments with tenants to get more than 5.3%, obviously. The second part was about the fashion.
Yeah.
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. Fashion, that used to be the encore part of any shopping center, is just one of the functions. 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, we go to this growth. Still, this is growth of turnovers. 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. It was very wet and cold in May. It didn't help, especially to fashion tenants.
As we saw the turnover strengths towards end of H1, this has improved and I'm sure this situation will improve further toward end of the year.
Cool. Thank you, Marek, for the answer. I hope it satisfied the gentleman for the question. We have other two. Since you started the whole country, let's do it. Can you comment a bit about the like-for-like property expenses trend and utilities?
Like for like properties, growth of operational cost was around 10%, and as said, we capture of that or reconcile 94%. 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? In the light. How do you view this in the light of the tenant's health and what is our OCR target range?
Let's put it this way. I mean it has ticked up a bit. I wouldn't compare to OCR we recorded at the end of last year because obviously the second half of the year is stronger in operations. If you compare OCR for the first half of 2025 to the first half of 2024, then the difference is marginal actually. We feel very comfortable. 13% in anything that is recognized by the industry below 15% puts us in a comfort zone. When I say comfort zone, what I mean is that we have the arguments to work on our BRUS to be higher than 5.3% on top of index and we are happy there. If there is, it gives us arguments obviously only at about 15%- 17% of gross rental income expires every year.
We can't translate those numbers to the whole portfolio in year one, which we would like to do. We do our best with what we can.
I think we have still one last for you, and then we move to.
Alisa and I can do even more, Marek. No problem.
There are a few questions about the like-for-like growth of NOI in Romania compared with relatively higher NOI growth for Poland in the first half of the year. Can you bring more color on these two?
Of course, numbers. Yeah. I think it's actually a very good question because it's very important to look longer than just one or two quarters that we reported because we have been very busy doing what we do in Romania and Poland. In Romania, actually, you have seen that 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 go to the point where this portfolio is healthy in nature, but there are lots of initiatives we are busy implementing and they will add value to the second half of the year. As I said, and intentionally I said that 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%- 5%, the organic growth is fine. I must add here that we are aware that there are some fiscal measures that will be or are now implemented in Romania which may translate into the customer's 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. First, congratulations on the results, and the question is, is there any activity picking up 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, the optimization of the portfolio is an ongoing process. We don't have any concrete asset currently with the M&A team, with Anca, that we are targeting, 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. From that perspective, I think you can expect that NEPI Rockcastle will also grow further on by acquisitions in the future. As 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 and Eastern Europe that there is an attractive deal to do and acquire a whole portfolio. I think for the time being, the strategy is 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 four pillars of growth. I think that's what we're mainly concentrating on.
Thank you, Rüdiger. Continuing with you, there are some questions related to one of your favorite topics, energy. What are your expectations regarding when the income of the 5 MW to be completed by full year 2025, and this income, would it flow in 2026? Previous communication suggested that the income will only be recognized in 2026, but I think it will be in 2026 already.
Yeah, we have more than 150 MW 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. That's an ongoing process. This will deliver additional MW to be sold to our retailers that will be finished by hopefully all by the end of the year. Sixteen out of those are already under construction and everything is permitted already. I think that's pretty much on track. This should deliver already starting beginning of next year. As I said, from these two 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.
Obviously, you need to have a testing phase first. I think we will start to deliver this 50 MW to the portfolio beginning of next year. You will see the first 50, 65 MW round already being delivered by the beginning of next year. We are already under construction on the second field. It's actually two fields, two stages, and the first stage should also be delivered throughout next year. It will come in stages. You don't need to wait until, let's say, the end of 2027 until we finally get some income here. 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.
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%.
Cool. Thank you. Rüdiger, 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 power initiatives, how much will this cover from NEPI Rockcastle utility needs, energy needs?
Yeah. We're currently only covering around 5, 6% of the total consumption of our retailers. That's a pretty low number. You also see, like at the moment we have a revenue maybe this year of EUR 10 million. It's obviously not really moving the needle, but you need to start somewhere. It's like a startup. As we invest and as we are delivering actually the production, of course we're ramping up our revenue stream. You will get to, with what we have investing now, we will get to close like 48% of the total consumption of retailers. You see that with 5% that we're delivering now, we're making EUR 10 million. You can imagine and calculate yourself if price levels and whatever stays as it is, and if the yield stays as is.
When you get close to 50%, you will have a more substantial income stream for NEPI Rockcastle out of this business. 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. We don't need a sales team. We already have 8,000 clients that already signed up to buy energy from us and that's what we are harvesting here.
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 as 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 is going to be the higher the cost of debt. Obviously, we will close it in the market. This is in the range of 150 basis points over the mid swap for various periods. The impact in the overall cost of debt may be in the range of 20- 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 Rockcastle?
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. 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 factored in is what we are expecting for this year and included in the guidance. This is assuming that no changes are going to appear in the tax legislation. It's an uncertainty that currently we cannot have any kind of glass ball to tell you what's going to be. 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. There is also a question on Romania from an 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?
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. 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? What we see so far and what we also see in the turnovers of July, that is promising. 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, let's optimize the guidance from 2.5% to 3%. We need to take these kind of uncertainties into consideration.
For now, with the matters 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.
Thank you. Speaking of the guidance, there is a question on how you see the second part of the year and the impact that the second part of the year would have on the guidance, considering that the upgrading guidance is lower than the first part of the year results. If you see any potential for achieving better results than what you have guided.
That's an interesting question. We did 3% in the first half of the year and we are saying we will do something between 2.5%- 3% in the second half of the year. I think it kind of equals out. There is not a specific reason why we would say it will only be 2.5% or 3.2%. It's just a range. As we know, there are always uncertainties in our business, which a lot of things we have under control. We do not have everything under control. You see the political discussions ongoing, of course, now on a geopolitical scale with our neighbors in Ukraine. If we see a peace coming up here, I think this would rather stimulate the market. That could be a positive outcome. We are forecasting now about 2.5%- 3%.
I already said in my presentation, most likely it's going to be closer to 3% than 2.5%. It's a range and I think that's the best we can offer you now as an answer.
Thank you. The question for Eliza and Rüdiger, speaking of acquisitions, how do you see the impact of those on LTV, and do you consider in case of an acquisition that would drive the LTV above 35%, would you take this into consideration and look at decreasing the LTV, and do you see a conflict between acquisitions and your objective on the credit rating?
Yes, obviously that the LTV is. The threshold is 35%. It wouldn't be for the first time that we will be bold enough to exceed this 35%. We did it back in 2022 when we acquired the Gdansk property. We were 70 basis points on top of this 35%, but we managed to bring it back to below 35% in less than six months time. If we are going to find the right acquisitions in the market, we won't be shy to go and, let's say, exceed this threshold as long as we are going to have the right actions to put it back in the next 24 months. For the right products, you make bold moves when it comes about the acquisitions and the credit rating.
As you know, we are in the countries, all of them having a credit rating, and I don't think that this is going to contradict in any way the credit rating that we have now. As long as it's in the universe that we are now and we don't go for non-rated countries, there won't be a foreseen conflict with this measure.
Let me maybe add here from my point of view, less technical. I think we have proven that the assets that we acquire are absolutely worth it and that we buy them for the right pricing. Now, when you look at the assets we acquired in Toruń, when you look at Forum Gdansk, we bought it for EUR 250 million. It's now in the books for EUR 330 million and we have more than 20% growth on NOI on that asset. When you look at Silesia, when you look at Magnolia Park, which we acquired, EUR 405 million for Silesia, EUR 370 million for Magnolia Park, and already the valuation is up EUR 65 million. Turnovers are going the right direction and we haven't even started to implement 100% the asset management activities that we have already been planning before we bought it.
I think the team has proven that we know what we do when we buy assets. Number one. Number two, if such an opportunity comes along, I mean, these assets are not, let's say, falling from heaven. You cannot just buy them. It is a matter, of course, of opportunity. If we see an opportunity to buy an extraordinarily good asset where we see potential for you as shareholders to grow, we go for it. We would stretch ourselves, and would stretch ourselves reasonably, also above the 35% with a plan to, of course, come back and fund it in a way that we get below 35%. I think that's our target. We are brave enough to go for assets where we believe these are the right ones for your portfolio. I think this is a clear statement. I will give you also another example.
It needs to be the right one. There was an asset on the market, Palladium, in Prague, which is an amazing asset. We looked at it, EUR 700 million. Not our asset. We're not buying assets to have it on the front page of our, let's say, annual results. We're buying assets in order to make money with it. This is just the pricing that for us was not relevant. The asset did not show, let's say, enough growth in the future. An amazing asset, don't get me wrong, and it got sold or is in the process of getting sold. We need to see that we are buying into assets that are, let's say, giving us or that we believe in, that give us growth in the future. That's very, very important.
Thank you, Rüdiger. I think it's a question that relates exactly with or continues the idea that you just finished. It is referring to our recent acquisitions. Do we think, or do you think, that they will ensure the NOI uplift that we delivered in the past? I mean, do you think that it will contribute to the same growth rate that we had in the past, these new acquisitions? You can take it, Marek or Rudy.
No, I mean, of course we bought those assets not to keep them and cut the yield every year. There is a plan, very detailed, for the next five years for each of the properties. That includes a lot of effort and that includes some funding. I know Eliza will make sure we do what you like to do. Initiatives which we have identified, which we want to implement, are yielding higher than the acquisition price. Therefore, they will be adding value and adding NOI. Obviously, that was the purpose to buy. That's on the income side, but there is a cost side of it, as we have proven with recoverability, with the example of Gdansk. For example, we have introduced the way that NEPI Rockcastle does cost management and reconciliation.
I think if you add the two engines, income and cost, together, then you can get more than average growth for the upcoming future. If you add on top of that asset management initiatives, it should be even better. Of course, those are big projects. Think about Bonarka. It took us so many years to get where Bonarka is. Think about Paradise in Sofia. These projects take time, but we won't stop until we do them because they simply are very lucrative. This is our main focus now.
Okay, thank you. Thank you, Marek. One question for, I guess, rather for Rüdiger. But anyway, recently a large property owner in Romania suggested that they may initiate a large disposal program. Are you seeing any activity in confirming this? Would NEPI be a potential buyer? Do you think new set of buyers will enter the Romanian market?
I haven't. At least our M&A team, we have not identified, let's say, a product currently on the market in Romania that could be very interesting for us. I have to say we have not been approached by, let's say, a potential party that would like to sell assets. I cannot comment on that. You also need to see, just in principle, we are in Romania. I mean, it's like we are such a dominant player. There are not too many assets that I would say are really relevant for us. Of course, focusing on cities like Bucharest, we would love to have one more asset. That would definitely be a stretch and definitely something we would look at. In principle, I think the portfolio we're operating is already quite substantial and those assets that we would then like to buy are currently not available.
Okay. Related to this question, there is another question related to the properties that we like to sell. Also, asset rotation, maybe you can add some color on that if we want to.
Yeah, I think this will be part of the process. We always said, if you look at this EUR 8 billion currently and it's 60 assets, and I'm always saying, maybe in three years' time you still have 60 assets, but it might be not EUR 8 billion, but I don't know, maybe EUR 10 billion. Meaning optimizing the portfolio in the sense maybe to, let's say, depart from assets which are in really tertiary cities, which are smaller, which are healthy, no problem. I think by reallocating that capital into assets that will be able to show more growth in the future, give the company more stability. I think that's a trend and that's a strategy that we have. I think any broadcaster will follow this strategy.
Yes, you saw this with the disposal, for example, of Novi Sad last year in Serbia, where we disposed the asset, which was an amazing asset from a growth perspective. I think we built that project and we started with something like EUR 6 million and we sold it with EUR 15 million. So it had a super good growth story, but it was the only one we could do there. The country is completely covered, the capital is already over retailed. Liquidity of this market is quite difficult and then of course no credit rating for the country. We decided, okay, we're going to sell the asset and reinvest that money into Poland. I think you will see also in the future that we will keep on optimizing the portfolio by disposing assets that have done a good job, but that we can actually replace with something better.
One question on the development pipeline, can you comment on the expected yields of our developments?
Maybe a bit more general, like if you see that we are in the market and we have been acquiring Silesia and Magnolia Park around 7%- 7.5%. You saw the uplift on valuation. I think we did not. Anca, you did not buy too expensive. Already gaining EUR 65 million on these assets, I think is a proof that we were quite okay with the pricing. Of course, our developments need to yield much better because you as an investor, you take there also a development risk. We need to fund these assets over a period of time until they of course come to the market. Obviously, the yields for our developments need to be much higher than this 7.5% on average.
We are usually not disclosing these numbers, but I think this needs to get closer to double digit than anything else and we're pushing hard here to do that. We are not disclosing, let's say, number by number for each asset. Why? Because this gives too much information also to other participants in the market.
On the residential developments, how do you see the synergies with the retail they are built next to? Have you seen any impact on the turnovers of the retail retailers?
No, I don't think that. For example, in Vulcan, you need to understand Vulcan and I give you the example of Vulcan. I mean, this is a retail park which is like in the heart of Bucharest. It's one of the most condensed areas of living in that city, and that asset just flies and it has always been flying. These 250 apartments next to it don't really make a serious difference to the turnovers of this asset. It's of course more helpful the other way around because when you have a residential project and you can build it right next to a top notch shopping center like, for example, in Craiova, what we're doing now, this is super attractive for those who are buying these properties because they have a full fledged service center shopping center next door with everything you need.
I don't think that in principle, of course, it's positive to have, or argue to have, not only the shopping center but to have the residential part next to it. With the sizes that we built there, I don't think it really stimulates as much the turnovers. It's a nice add on and I think it's rather the other way around. The fact that we do these residential projects right next to the shopping center is helping the sales process of the apartments.
A question for Eliza on valuations. When do you expect the yields to decrease, decline?
I would expect. As soon as, let's say, there is going to be more political calm in the regions where we are operating and, yeah, more political composure, so to say, in Romania to have the government settled in the role. In Poland, the same. See what's going to happen with the Ukrainian war because currently there is no value or wanting to take a position in relation to that, especially because NEPI Rockcastle was responsible for almost half of the transactions that happened last year. We either need more transactions or more political stability in the area. For the time being, we are going to bear with what we have and advancing the performance of our assets as the main driver of the valuation uplifts. There is potential to be unleashed, I think you can see that.
One question on how much capital NEPI Rockcastle can raise in the market per year. Do we have some limits to this?
As long as we are going to stay within the boundaries of 35% LTV and as long as the investors are going to have the right pockets prepared, I don't think that we have a limit. Okay.
Can you comment on the timing of the refinancing for the debt maturing in October 26?
I said in the presentation that we are going to address that, if not entirely, at least partially by the end of this year. The end of this year is going to be one of the deadlines for addressing it.
I think with this last question we can conclude our Q and A session. Quite a lot of questions. We thank the guys that put the questions, and thank you guys also. Thank you.
Thank you.
Okay, we come to an end and I would like to thank you all for participating today. It's always a pleasure for us and we hope for more questions maybe. We are always available for you, not only in the Q and A here. Whenever you find us, you can send us an email, contact us. We are happy to talk and looking forward to the one on one sessions that we have over the next couple of days. Thanks everybody. Also, thank you guys. Thank you.
Thank you.
Bye bye.