NewRiver Retail Limited
("NewRiver" or "the Group" or "the Company")
Fourth Quarter Portfolio Update
Strong performance in final quarter with successful equity financing, acquisitions and continued active asset management across the portfolio
NewRiver Retail Limited (AIM: NRR), the UK REIT specialising in value-creating retail property investment and active asset management, announces the following portfolio update for the fourth quarter, 1 January 2015 to 31 March 2015.
The fourth quarter has been another highly active period for NewRiver. The Group completed a number of key acquisitions which has grown the portfolio by 1.4% to a record £811 million at the end of March 2015 (December 2014: £800 million) and continued to achieve a significant number of value-enhancing asset management and development initiatives.
HIGHLIGHTS
▪ Assets under management increased by 1.4% to £811 million at the end of March (December 2014: £800 million)
▪ Completion of the £75 million equity fundraise at 275 pence per share, enabling the Company to acquire the remaining 90% equity stake of a shopping centre portfolio within the Bravo joint venture (a fund advised or managed by Pacific Investment Management Company LLC)
▪ Total of £89.26 million of acquisitions at an average net initial yield of 7.89%, comprising the shopping centre portfolio within the Bravo joint venture, one major retail and leisure park and two separate retail warehouse investments
▪ Total of £5.53 million of disposals at an average net initial yield of 7.3%
▪ Agreed two new debt facilities which together reduce NewRiver's cost of debt from 4.02% to 3.82%, increase debt maturity from 3.7 years to 4.6 years and further strengthening the Company's banking relationships
▪ Active asset management continues to create income growth with the total rent roll under management for the period increasing 1.6% to £71.8 million per annum (December 2014: £70.7 million)
§ Completed 55 new lettings and lease renewals securing a total of £973,425 per annum in rent. New long-term leasing events achieved a rental income of 10.9% above valuation ERV with an average lease length of 10.5 years
§ Maintained a stable retail portfolio occupancy rate of 96%
§ Weighted Average Lease Expiry ("WALE") for the retail portfolio remained stable at 7.4 years (December 2014: 7.6 years)
§ Sustained an affordable average retail rent of £12.64 per sq ft (December 2014: £12.72 per sq ft)
§ During the period the top 15 retailers within the portfolio defined by rental income accounted for 26.6% of total rent. These are all strong national covenants including Poundland, New Look, Primark, Boots, Superdrug, Asda, Wilkinson, Argos and Dixons Carphone
§ Footfall continues to perform well with a total of 22 million across the portfolio for the period; annual footfall for the portfolio totals over 122 million
▪ Significant progress continues in the pub portfolio conversion programme with a number of planning applications submitted for which several planning permissions have been successfully secured
▪ Plans are well-advanced to submit five major planning applications enabling the Company to deliver nearly one million sq ft of new development space for retail led and mixed-use, including hotels, leisure and residential
Fourth Quarterly Dividend:
In December 2014, the Board declared a third quarterly dividend of 4.25 pence per Share to be paid on 30 January 2015. On 8 April 2015, the Company announced a fourth quarterly dividend of 4.25 pence per Share to be paid on 18 May 2015 as a REIT Property Income Distribution to shareholders on the register at close of business on 17 April 2015. The total dividend for the year ended 31 March 2015 declared and paid to date will therefore amount to 17 pence per Share.
David Lockhart, Chief Executive at NewRiver Retail, said:
"We are delighted to have had such a highly active and significant quarter, resulting in a strong finish to our financial year ended 31 March 2015. During the period, the Company completed the key acquisition of the remaining 90% of a portfolio of five shopping centres contained within the Bravo JV, financed through a successful placing which reflects continuing shareholder support of our proven strategy. The Company continues to deliver on its core strategy of generating above market returns, through targeted acquisitions supported by an active asset management and risk controlled development programme."
ACQUISITIONS AND DISPOSALS:
During the period, NewRiver announced the following Acquisitions and Disposals totalling £94.8 million:
▪ Acquisition from LVS, a subsidiary of Bravo (a fund advised or managed by Pacific Investment Management Company LLC), of the remaining 90 per cent of a joint venture (the "NewRiver Retail Property Unit Trust") following the Company's successful £75 million equity raise. The portfolio, comprising five UK-wide shopping centres and one high street asset all previously part-owned by NewRiver, was acquired for a cash consideration of £71 million, reflecting a net initial yield of 7.75% on the acquisition price
▪ Acquisition of Lower Audley Street Retail and Leisure Park, Blackburn, for a total consideration of £14.6 million, reflecting a net initial yield of 8.85%
▪ Acquisition of Sealand Road, Chester, a 10,591 sq ft retail unit let to Staples from a local authority pension fund for £2.1 million, reflecting a net initial yield of 8.24%. Staples has a 25 year lease on the unit expiring in 2017 at a rent of £183,000 pa
▪ Acquisition of Great Eastern Square, Felixstowe's only retail warehouse scheme, a 17,180 sq. ft. unit let to Homebase with 5.75 years remaining on the lease, from a private investment company for £1.56 million reflecting a net initial yield of 7.84%
▪ Sale of a 34,705 sq. ft. retail unit within the Dolphin shopping centre in Poole, let to Wilkinson, to Legal and General for £2.3 million, reflecting a net initial yield of 7.27% resulting in an IRR of 15.5% since acquisition in 2010
▪ Sale of a 20,100 sq. ft. unit in Paisley occupied by Halfords, for £1.8 million, at a net initial yield of 8.44% to a private investor reflecting a levered profit on cost of 56%. The Company acquired the unit as part of the Linear portfolio in June 2014 for £1.4 million at a net initial yield of 10.93%
▪ Sale of 40 Fishergate, a 10,000 sq. ft. former HSBC bank in Preston for £1.43 million to a private investor at a yield of 5.96%. Acquired in April 2014 for £0.7 million, NewRiver subsequently secured planning consent to convert the building to a city centre convenience store which the Company simultaneously pre-let to J Sainsbury on a 15 year lease. The sale reflects an unlevered profit on cost of 45%
Financing:
During the final quarter of the financial year, the Company has agreed two new debt facilities. Both facilities reduce the Company's cost of debt, increase debt maturity and further strengthen the Group's banking relationships.
The first facility, arranged by Santander and HSBC, has refinanced the Camel II debt which the Company recently acquired from LVS, a subsidiary of Bravo (a fund advised or managed by Pacific Investment Management Company LLC). The bank margin has reduced from 350 bps to 175 bps (initially 195 bps), maturity improved from 2017 to 2019 and total facility size increased from £43 million to £69 million.
The second facility is a Revolving Credit Facility ("RCF") arranged by Barclays Bank Plc, totalling £53 million. The RCF has refinanced the Company's Camel I portfolio which was initially funded by the Clydesdale Bank. The bank margin has reduced from 250 bps to 195 bps and debt maturity increased from 1.3 to 5 years.
As a result of these transactions, the Group's average interest rate will reduce from 4.02% to 3.82% and average debt maturity increases from 3.7 years to 4.6 years.
ACTIVE ASSET MANAGEMENT & DEVELOPMENT:
Marston's pub portfolio (2)
The final quarter of the financial year has seen a major acceleration in progress across the Company's pub portfolio. A number of planning applications were submitted to meet targets that were set for the delivery of the Company's development programme and the first planning permissions have been successfully secured in several locations. The progress follows the Agreement for Lease with The Co-operative Group Limited in September 2014 to lease 63 new convenience stores from the portfolio. The current portfolio EBITDA is performing above the guaranteed income received from Marston's Plc by 2.08%. The Company continues to register strong interest from national retailers seeking to expand their footprint by growing their convenience store penetration, which is ideally suited for the potential alternative use identified at the time of the original portfolio purchase.
Shopping Centres:
Abbey Centre, Newtownabbey, Belfast (2)
NewRiver has completed the enabling works for the delivery of a brand new 43,000 sq ft Next store across three storeys, for which the Agreement for Lease will generate a rent of £475,000 per annum for the Company. NewRiver is now undertaking the tendering process for the construction works.
Regent Court, Royal Leamington Spa (1)
The Company is well-advanced in the delivery of its strategy to re-position Regent Court to be the town's principal food leisure destination and has secured three new lettings. Lease terms range from 5-20 years and generate a combined new rental income of £132,000 per annum. The landmark new lease was with the upmarket French restaurant chain Cote, which signed a new 20 year lease on a 3,500 sq ft unit generating a rental income of £85,000. Refurbishment work to upgrade the common parts including re-painting, improved signage and new branding is due to commence in spring this year.
Priory Meadows, Hastings (2)
Following the Company's acquisition of Priory Meadows last year (the main shopping centre in Hastings, West Sussex) NewRiver has quickly secured a number of lease renewals and new lettings attracting a number of key retailers to enhance the overall retail mix. The Company exchanged contracts with UK-wide footwear retailer Deichmann to occupy a 3,500 sq ft unit reactivating a unit that had remained vacant for over three years prior to NewRiver's purchase. Deichmann is paying a rent of £100,000 per annum on a new 10 year lease. In addition, fashion retailer Schuh has taken a 3,900 sq ft unit in the centre on a 10 year lease at a rent of £50,000 per annum. Books and stationery operator Cards Direct has taken a 2,803 sq ft unit on a 10 year lease at a rent of £60,000. These new lettings are ahead of forecast rental value.
Furthermore, NewRiver has agreed lease renewals with a number of existing strong covenant retailers ranging from one to five years. These include H Samuel and Eem Sabai, generating annual rental income of £61,000.
The Sovereign Centre, Boscombe (1)
NewRiver has agreed terms with new value family fashion retailer Pep&Co to take a 4,153 sq ft unit on a five year term. Pep&Co launches in the UK this summer selling a range of affordable fashion products similar to the fashion lines offered within British supermarkets. To date Pep&Co has taken two stores within the NewRiver portfolio, in Boscombe and newly acquired Warminster, and are in advanced negotiations with NewRiver on a number of other locations as part of the retailer's roll-out of its first 50 stores within the UK by July 2015.
The Promenades, Bridlington (1)
This popular Spa town in East Yorkshire attracts a wide footfall from across the region and NewRiver has secured key lettings, including the creation of a new anchor food court. National pharmacy chain Boots, has taken a 10 year lease on a prominent 3,367 sq ft unit at an annual rent of £30,000. The previous retailer, Sole Diva, is to maintain its presence in The Promenades by relocating to a near-by unit within the centre.
Demonstrating the Company's ability to enhance and unlock additional value, NewRiver has secured a letting to Milcliffe Ltd on a new 20 year lease on a 10% turnover rent with a minimum of £65,000 per annum creating a new food court to the centre. Milcliffe Ltd will incorporate Burger King and Roosters Chicken, to operate as a key food court anchor through the amalgamation of four formerly vacant units.
Merlin's Walk, Carmarthen (1)
Surf fashion retailer Saltrock has taken a new lease for a 1,300 sq ft unit on a 10 year term, generating £25,000 in rental income per annum for this West Wales coastal shopping destination.
Templars Square, Cowley (1)
Cheltenham & Gloucester has renewed its lease in Oxford's largest indoor shopping centre, Templars Square, increasing the term to five years on the 1,475 sq ft unit increasing the rental income to £28,750 per annum. Pleasingly, Templars Square has seen two further renewals in the period generating an additional £26,500 of annual rental income.
Burns Mall, Kilmarnock (1)
Premium jeweller Warren James has taken a new 10 year lease for a 1,195 sq ft unit which will generate a rental income of £22,500 per annum.
Newkirkgate, Leith, Edinburgh (2)
The City of Edinburgh Council have removed their break option, due later this year, and extended their lease of 6,800 sq ft of office space at £74,000 per annum to 2025. In addition to this, Store Twenty One, the value fashion retailer, has taken a turnover based 5 year lease for Unit 37/38 extending to 3,400 sq ft and are trading above expectations. The completed programme of enhancement work which includes the creation of a brand, signage, the installation of cedar panelling, free WiFi, redecoration and improved lighting throughout, together with the mall resurface work due to complete this summer, will significantly revitalise and enhance the shopping experience at the centre.
The Beacon Centre, North Shields (2)
NewRiver has secured a new 5 year lease to Nail Fairy at £22,000 per annum in addition to two lease renewals to leading retail operators Poundland and Card Factory. Poundland has signed a new 10 year lease to remain in the existing 9,000 sq ft unit at a rent of £70,000 per annum. Card Factory has renewed their lease for a further five years generating an income of £27,800 for the existing 1,748 sq ft unit.
Gloucester Green, Oxford (2)
NewRiver's strategy to re-develop and position Oxford's market square as a food and leisure destination is progressing well with the Company securing a significant new food operator, El Mexican, which has signed a 10 year lease at a rent of £45,000 per annum for a 1,099 sq ft unit.
The Forum, Wallsend (1)
Following the successful planning consent in January 2015, work will begin on site in early summer 2015 for the delivery of phase two of the major regeneration at The Forum. Phase two comprises the development of an adjoining site to create a new 18,500 sq ft food store, drive-through, new car park and improved common parts together with an extensive centre refurbishment programme.
NewRiver has also secured a lease renewal with Greggs on a five year term for the 2,410 sq ft unit generating £32,220 in rental income per annum.
Three Horseshoes Walk, Warminster (1)
Acquired in September 2014, NewRiver has quickly agreed terms with Pep&Co, the new-to-market value fashion retailer, on a new 10 year lease for a 4,528 sq ft unit. The new occupier will generate a rental income of £75,000 per annum.
Albert Square, Widnes (3)
The Company has completed a lease re-gear with Iceland on its 8,468 sq ft store to extend its term by an additional 10 years from 1 Jan 2018 and incorporating a minimum rental uplift from £76,000 per annum to £82,650 per annum or open market rent. The terms agreed are ahead of ERV and secures another long term key anchor retailer.
Horsefair, Wisbech (1)
NewRiver is pleased to confirm that Santander Bank has renewed its lease signing a new 10 year lease at an annual rent of £21,750 per annum for its existing 1,220 sq ft unit.
Retail Warehouses:
Mount Street Retail Park, Wrexham (1)
Following the acquisition of Mount Street Retail Park in Wrexham, part of a strategic portfolio of retail warehouses that NewRiver acquired in June 2015, the Company has secured a new letting to Euro Car Parts for a 8,000 sq ft unit on a 10 year lease at a rent of £89,628 per annum ahead of business plan forecast. The unit had been vacant for over three years prior to NewRiver's acquisition.
Clough Road Retail Park, Hull (1)
NewRiver has successfully secured planning consent for Clough Road Retail Park, acquired in June 2015 as part of a strategic portfolio of retail warehouses. The consent allows for the amalgamation of two existing units to create a single 30,000 sq ft unit with full cover mezzanine, widening consent and removing previous inhibitive restrictions for the retail park, demonstrating NewRiver's ability to efficiently unlock additional value.
Commercialisation:
In the final quarter, commercialisation income has performed 11% ahead of forecast for the period accounting for the anticipated post-Christmas dip to achieve £459,490 (December 2014: £511,042). Notable Q4 performers included Leamington Spa, Newtownabbey, Hastings, Newton Mearns and Fareham, performing between 10 to 25% ahead of forecast.
Leasing:
Effective from 1st April 2015 NewRiver has adopted the Model Commercial Lease ("MCL") across the portfolio. The MCL was devised by the British Property Federation with input from multiple solicitors, institutional landlords and occupiers, to produce a standardised modern lease which reflected the current shift in acceptable variations and shorter lease terms. The MCL will result in a more efficient leasing process facilitating earlier occupation and income generation. Adopting the MCL is a further demonstration of NewRiver's ability to adapt to changing market conditions and work with retailers to ensure efficient leasing processes saving both parties time and costs.
Property Management:
During the period NewRiver has successfully completed the installation of a fully integrated finance and management system that provides a sophisticated platform to further drive efficiencies across the portfolio.
Key
(1) Refers to NewRiver Retail 100% owned assets
(2) Refers to the joint venture with Bravo II (funds advised or managed by Pacific Investment Management Company LLC)
(3) Refers to the Barley Joint Venture
-ends-
For further information
NewRiver Retail Limited David Lockhart, Chief Executive Mark Davies, Finance Director |
Tel: 020 3328 5800 |
Bell Pottinger David Rydell / James Newman / David Bass |
Tel: 020 3772 2500 |
Liberum Richard Crawley / Jamie Richards |
Tel: 020 3100 2000 |
Peel Hunt LLP Capel Irwin / Alex Vaughan / Hugh Preston
|
Tel: 020 7418 8900 |
About NewRiver
NewRiver Retail Limited is an AIM listed REIT. The Company is a specialist real estate investor and asset manager focused solely on UK retail with a particular focus on food and value retailing. NewRiver Retail was named Property Company of the Year - Retail & Leisure at the Estates Gazette Awards at the close of 2014.
The management team, with over 100 years combined experience in the UK commercial property market, actively engages with retailers, stakeholders and consumers. NewRiver Retail is one of the UK's largest shopping centre owner/managers with assets under management of £811 million principally comprising 29 UK wide shopping centres, further nationwide retail assets and a portfolio of 202 public houses principally suitable for conversion to alternative uses. The portfolio has 1,384 occupiers, a total of over 5.4 million sq ft, total annual footfall of over 122 million and a retail occupancy rate of 96 per cent.
The Company's activities include active and entrepreneurial asset management and risk-controlled development, utilising both its own balance sheet and co-investment joint venture structures.
Founded in 2009, NewRiver has become the UK's leading retail-focused property investment business. The Company's shares were admitted to London's AIM in September of the same year. For more information on NewRiver, please visit www.nrr.co.uk .
