PERFORMANCE AND OPERATIONS Company profile 4 CEO's statement 6 Chairman's statement 8 Director's report 10 Strong strategic positioning oriented towards long-term growth 28 Strong operational and financial performance 30 EPRA performance measures 32 Portfolio at a glance 38 Development and extensions pipeline 76 CORPORATE INSIGHTS Executive Board of Directors 84 Corporate governance 86 Risk management 114 Remuneration review 124 EXCELLENCE. INNOVATION. EXPERIENCE. Sustainability report 140 Analysis of shareholders and share trading 176 Beneficial shareholding of Directors 177 FINANCIAL STATEMENTS Statement of Directors' responsibilities 181 Independent Auditor's report 182 Financial Statements 188 APPENDIX Visit our website Schedule of properties 236 www.nepirockcastle.com Glossary 238 for more information about us and our business The terms ‘NEPI Rockcastle’, the ‘Group’, the ‘Company’, ‘we’, ‘our’ and ‘us’ refer to NEPI Rockcastle plc and, as applicable, its subsidiaries and/or interests in joint ventures and associates. 2 NEPI Rockcastle plc Annual Report 2019 1 Performance and operations PHOTO: MAMMUT SHOPPING CENTRE, HUNGARY 1 2 NEPI Rockcastle plc Annual Report 2019 3 PERFORMANCE AND OPERATIONS €6.3 billion* investment property portfolio PROPERTY PORTFOLIO BY COUNTRY Company profile (by market value) 325 million visits in 2019 Lithuania 2% NEPI Rockcastle is the premier owner and operator of The Group’s financial strategy includes maintaining a shopping centres in Central and Eastern Europe (CEE), profile of adequate liquidity, conservative gearing, and with presence in nine countries and an investment a diverse debt structure, which combines secured and 2.1 million portfolio of €6.3 billion (including Romanian office unsecured bank debt with unsecured bonds listed on m2 GLA of income-producing portfolio held for sale). the Irish Stock Exchange. NEPI Rockcastle is investment- Poland properties grade rated by Standard & Poor’s (BBB, stable outlook) The Group benefits from a highly-skilled internal and Fitch (BBB, stable outlook). management team which combines asset management, 23% development, investment, leasing and financial NEPI Rockcastle’s shares are listed on the expertise. Geographically diverse management Johannesburg Stock Exchange (“JSE”), Euronext skills allow NEPI Rockcastle to pursue CEE property Amsterdam (“Euronext”) and A2X. The Group opportunities efficiently, benefiting from a strategic distributes at least 90% of its distributable earnings on advantage in the acquisition, development and a semi-annual basis. Given the nature of its business, 280,000 2 management of properties. and as it is considered a more relevant performance Czech Republic m GLA of measure than earnings or headline earnings per share, ongoing developments NEPI Rockcastle owns and operates 53 retail properties and extensions NEPI Rockcastle uses distribution per share as its key 3% (excluding joint venture) which attracted 325 million performance measure for trading statement purposes in Slovakia visits in 2019. With group-level management of tenant accordance with the JSE Listings Requirements. relationships and a focus on cross-country collaboration, 9% the Group is the leading strategic partner for major retailers targeting CEE countries. Hungary 10% Croatia Romania 4% 38% Serbia 3% Bulgaria 99.9% 8% collection rate AA ESG rating Silver Prize awarded over 97.9% after the first year of ESG Risk rated as Low "leader" EPRA occupancy rate EPRA membership among 86 companies in the real estate management 440 & services industry professionals * Includes Romanian office portfolio held for sale 4 NEPI Rockcastle plc Annual Report 2019 5 PERFORMANCE AND OPERATIONS CEO's statement The Group achieved a solid growth in earnings per share Our robust business enabled the strong access to funding Building on its strengths, the Group envisages to focus on of 6.6% in 2019, in line with guidance, reflecting the high of NEPI Rockcastle, having issued €1 billion in unsecured retail in 2020, while also pursuing complementary mixed- quality of the underlying asset base. NEPI Rockcastle’s bonds and €161 million in new equity. The Group had a use developments and working on further consolidating its talented team played a key role in achieving these results €861 million liquidity at year-end, out of which €575 million business model to maximise long-term sustainability and through their efforts to enhance and maintain our assets' in undrawn revolving facilities, which provides a strong performance. NEPI Rockcastle’s position, in the medium- attractiveness to tenants and visitors. base for pursuing new opportunities and long-term, is unrivalled due to an exceptional team, in 2020. high-quality asset base and strong markets fundamentals. Twelve years since inception and three since the successful merger, NEPI Rockcastle’s assets continue to As part of the focus to streamline the asset base, the Further to the market events which have unfolded since outperform. Capitalising on its dominance in the Central Group proceeded with the announced divestment of the publication of the 2019 financial statements, the and Eastern European real estate markets, the Company its Romanian office portfolio in December 2019. The management team is currently focused on driving the intensified its focus on expanding, re-designing and re- transaction is expected to complete in April 2020. The business smoothly through the turmoil generated by tenanting its shopping centres during 2019. Shopping disposal proceeds will be used for financing the significant COVID-19. The strategic positioning of the Group as lowly environments were improved with differentiating retailers development pipeline, a key source for future growth, and geared, with adequate liquidity, and the geographically and new leisure and entertainment activities, which new investments aimed to maintain or increase the overall diversified and high-quality asset base, are advantages resulted in the overall growth of retail sales and footfall. quality of our portfolio. which will contribute significantly to the Group’s ability to weather this storm well. Priorities include focusing on our In the current market context, the Group’s strong The Company increased its focus on Environmental, staff, business continuity and stability of the communities presence in capital and primary cities of CEE provides Social and Corporate Governance (ESG) initiatives, and where NEPI Rockcastle is present, while ensuring the an appealing platform for international retailers, and the was assigned a low ESG risk by Sustainalytics, while also most suitable allocation of capital in the coming period. unique partnerships with top brands ensure the long-term entering FTSE4Good index. NEPI Rockcastle is committed Management is coordinating the numerous on-the- sustainability of the Group’s centres. The team is focused to further improve its environmental performance, ground teams in the nine countries of our operations, to on understanding the consumption and technological social impact and strong adherence to best Corporate ensure relevant and adequate measures in each one of trends, as well as new demographical dynamics, and adapt Governance practices. our locations for preserving the safety of our staff and the feel of the centres and range of services on offer to customers. We remain confident that we are best placed customers’ needs. among our peers to continue with a strong performance in 2020 and the years to come. 17 March 2020 ALEX MORAR Chief Executive Officer 6 NEPI Rockcastle plc Annual Report 2019 7 PERFORMANCE AND OPERATIONS Chairman's statement NEPI Rockcastle continued to thrive in 2019, reaffirming The Board together with the management team are findings to date. Considering the above, the completion itself as the leading retail property investor in Central constantly assessing new strategic options. The ultimate of all investigations regarding NEPI Rockcastle by South and Eastern Europe ('CEE'). The Group delivered focus is on creating sustainable value for stakeholders and Africa’s Financial Sector Conduct Authority and finding all robust growth, in line with guidance, in a competitive there is a great degree of flexibility as to the means of allegations made against the Company as ungrounded was environment. The CEE as a region once again achieving that goal. the expected outcome. outperformed the rest of the European Union and looks set to continue showing superior growth rates in both The business has a strong management team in place, Looking forward, NEPI Rockcastle will continue to build retail and the wider economy. All nine markets where capably led by Alex Morar. The competence and skill of on a strong foundation. New challenges are emerging at NEPI Rockcastle is present have strong potential for the management team has been constantly proven by all times, as we are currently witnessing during this period, sustainable growth. The convergence to Western Europe the Group’s increasingly established position as CEE’s and businesses must be able to adapt and thrive in the levels of consumption and GDP per capita is a structural largest and most successful retail property investor, most unexpected circumstances. phenomenon and will continue to play out in the economic as well as a track record of outperforming peers in environment, ensuring long-term increase in both delivering shareholder value. At Board level, we aim to The Board is in close communication with the traditional and online retail. further strengthen