Q1 Portfolio Update

NewRiver Retail Limited

 

("NewRiver" or the "Group" or the "Company")

 

Q1 Portfolio Update

 

Strong first quarter performance with £150 million equity fundraise, key acquisitions with continued value-enhancing asset management and its risk-controlled development progress

 

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 first quarter, beginning 1 April 2015 and ending 30 June 2015.

The Company has begun its financial year with a highly active and successful first quarter. The highlight was NewRiver's £150 million equity fundraise as announced on 19 June 2015 for which the majority of proceeds are committed. The Company also completed a number of acquisitions and one disposal with assets under management at the end of June 2015 totalling £849 million (31 March 2015: £848 million). Furthermore, the Company completed a significant number of value-enhancing active asset management and development initiatives.

HIGHLIGHTS

• Completed a £150 million equity fundraise through the issue of 50,000,000 new ordinary shares at 300 pence per share, for which majority of the proceeds are committed
• Post period end exchange of contracts for the £69.10 million acquisition of the Ramsay retail park portfolio at a yield of 8.03%
• Exchange of contracts to acquire the remaining 50% of two separate joint ventures (Camel III and Trent) from LVS, a subsidiary of Bravo II*
• Completed £7.23 million of acquisitions at an average net initial yield of 8.68%
• Disposal of a portfolio of high street assets totalling £6.00 million, acquired in December 2014 for £5.00 million resulting in an IRR of 43.9%
• Assets under management total £849 million at the end of June 2015 (31 March 2015: £848 million); on completion of the Ramsay portfolio NewRiver's assets under management will total nearly £920 million
• Maintained a stable retail occupancy rate of 96%, at an average retail rent of £12.38 per sq ft (31 March 2015: 96% and £12.36 per sq ft respectively)
• Weighted Average Lease Expiry ("WALE") for the retail portfolio is 7.5 years (31 March 2015: 7.4 years)
• Successfully completed 55 new lettings and lease renewals during the period securing a total of £1.37 million per annum in long-term rent. New long-term leasing events achieved a rental income of 2.1% above valuation ERV with an average lease length of 9.4 years
• Significant progress with the pub portfolio conversion programme, submitting a further six planning applications and successfully securing another three consents taking the total number of planning applications submitted to 45 and total planning consents received to 13.
• Progress continues across the Company's growing development pipeline, comprising a total of 1.25 million sq ft of mixed-use, retail and leisure space which also includes hotels and residential

 

David Lockhart, Chief Executive at NewRiver Retail, said:

 

"We are delighted to have started our financial year with another highly active period. Our £150 million fundraise in the first quarter reflects the excellent support from new and existing shareholders for the Company's proven growth strategy. We have made swift progress in deploying our shareholders' capital into assets with a low risk profile, sustainable income stream and identifiable value-enhancing opportunities which should deliver attractive long-term returns for investors. 

The imminent completion of the Ramsay portfolio will increase our assets under management to nearly £920 million of which £795 million will be our proportional share on the Company's balance sheet. We have continued driving our active asset management with a number of key lettings and progressing some exciting new food and restaurant offers.

Recycling of capital remains an important objective of the Company and we are pleased to complete the sale of five high street assets which have delivered attractive returns in the very short period of time under NewRiver's ownership."

 

ACQUISITIONS AND DISPOSALS:

 

During the period, NewRiver completed £13.23 million of transactions and exchanged on the remaining 50% of two separate joint ventures (Camel III and Trent) from LVS, a subsidiary of Bravo II*. Following the Company's successful £150 million equity raise, post-period the Company exchanged contracts on the £69.10 million acquisition of the Ramsay Portfolio.

Acquisitions completed during the period totalled £7.23 million at an average net yield of 8.68%. Disposals during the period totalled £6.00 million resulting in an IRR of 43.9%.

·   Successfully completed the acquisition of Allison Court retail park in Gateshead, in Tyne and Wear, from joint owners Cheshire West and Chester Borough Council for a total consideration of £4.40 million, reflecting a net initial yield of 8.49%. Allison Court is a well located retail park situated adjacent to The Metrocentre - the largest covered shopping and leisure centre in Europe, with over 23 million visitors per year, which the asset benefits from. Extending to 4.24 acres, Allison Court comprises a multi let retail park, let to a variety of retailers including Evans Cycles, Maplin, American Golf and Halfords. The park has a WALE of 5.27 years and benefits from low rental levels of between £7.50-12 per sq. ft. affording scope for potential rental growth. NewRiver has identified a range of significant asset management opportunities to enhance capital values.

·   Acquisition of two high street units in the affluent town of Market Harborough, Leicestershire for £2.83 million reflecting a net initial yield of 8.98%. The acquisition comprises 19/21 The Square, let to Tesco with five residential flats above; and 10 The Commons, a stand-alone retail unit let to discount retailer B&M. NewRiver has identified A1 and A3 development opportunities which it is now pursuing.

·    Completed the sale of a portfolio of five high street assets totalling 33,800 sq. ft. in five separate UK locations: Rugby, Nuneaton, Spalding, Blackpool and Perth. The portfolio was sold to a private investor for £6.00 million resulting in an IRR of 43.9%.

·    NewRiver exchanged on the remaining 50% of two separate joint ventures (Camel III and Trent) from LVS, a subsidiary of Bravo II (a fund advised or managed by Pacific Investment Management Company LLC) (announced 19 June 2015).

·   Post-period, exchange for the acquisition of The Ramsay Portfolio for a total consideration of £69.10 million, reflecting a net initial yield of 8.03% for the income producing assets. The portfolio comprises 13 assets including nine value-led retail parks and four development sites each with approved planning consents and strong pre-let interest from retailers (announced 13 July 2015). 

 

ACTIVE ASSET MANAGEMENT HIGHLIGHTS

 

NewRiver continues to enhance and drive the value of its portfolio through strategic active asset management. The Company successfully completed 55 new lettings and lease renewals during the period. Long-term leasing events achieved a rental income of 2.1% above valuation ERV at an average lease length of 9.4 years securing annual rent of £1.37 million.

 

The Company has maintained a high occupancy of 96% and sustained footfall, with a total of 22.5 million shoppers visiting NewRiver's shopping centres during the period with an annual total footfall of 121 million. The portfolio's top 15 retailers continue to be underpinned by successful national retailers which include Poundland, New Look, Primark, Boots, Superdrug, Asda, Wilkinson, Argos, Dixons Carphone Warehouse, Sainsbury's and Sports Direct.

 

Key Asset Management Highlights:

 

·   Customer Insight and Increased Engagement: Following the completion of NewRiver's 2015 Portfolio Consumer Surveys with CACI, the Company is pleased to report uplifts in customer dwell time, customer satisfaction and sustained frequency across the portfolio reflecting the success of the Company's asset management in creating more attractive retail destinations with greater choice, convenience and affordability. The Portfolio's average retail spend conversion is 83% performing 5% above CACI's national benchmark with NewRiver's grocery spend accounting for 27%, which is 6% higher than the CACI national benchmark. NewRiver shoppers visit the Company's shopping centres an average of 83 times per annum, compared to the CACI national benchmark of 74 visits per annum, demonstrating the portfolio's convenience-driven and high-frequency positioning.

 

·    Food & Leisure: Responding to evolving consumer demand, NewRiver has made good progress advancing its strategy to create attractive food and leisure offers undertaking a number of restaurant lettings including three Burger King restaurants in The Promenades, Bridlington; Hill Street Shopping Centre, Middlesbrough; and The Packhorse, Huddersfield. Additionally NewRiver agreed terms with restaurant operators Roosters, El Taco Mexican and a craft beer microbrewery at The Packhorse, Huddersfield, part of the Company's strategy to reposition the centre and create The Packhorse Kitchen. Typical lease terms for these new restaurants are 20 years with rents ranging from £65,000 to £85,000 pa.

·    New Long-Term Lettings: Diversified and improved the quality of the portfolio's occupancy by completing 42 new long-term lettings with rental income totalling £1.11 million. Key tenancies include Trespass (Newtownabbey), Game (Cowley), F Hinds (Middlesbrough), Select (Wallsend) (Cowley and Wallsend) and Warren James (Paisley and Skegness).

·    Pep & Co: Extended the portfolio deal with international fashion retailer Pep & Co, introducing a further four stores to the NewRiver portfolio at The Prospect Centre, Hull re-activating a formerly vacant unit; The Avenue, Newton Mearns; The Sovereign Centre, Boscombe; and The Piazza, Paisley.

·   Card Factory: The Company agreed one new letting and two lease renewals with Card Factory in The Montague Centre, Warminster; Central Square, Erdington; and Templars Square, Cowley respectively, across a total of 4,233 sq ft securing a total rent of £78,000 pa.

·    Oxford: Competed four key lettings and lease renewals in Templars Square, Cowley. The lettings and lease renewals to Select, Game, Card Factory and Bon Marche, equates to a total rent of £140,000 pa across a total of 14,992 sq ft.

·    Hastings: Acquired in August 2014, the Company has made great progress enhancing Priory Meadows in Hastings, improving the overall rental tone and increasing occupancy to 98.41% (from 96.25% at Acquisition). Completed a new letting to The Works at a rent of £72,500 pa for 10 years for a 2,500 sq ft unit which since opening, has traded extremely well, becoming one of the retailer's top performing stores in Q1 from within their 310 store portfolio. Planning consent successfully secured for new signage, a centre refurbishment and an upgrade to the car park where on 1st April 2015 parking tariff was increased in line with the local council from £1.00 to £1.20 per hour reflecting an uplift in Q1 car park income of 3.9% on a like-for-like basis.

·    Belfast: Commenced the full re-brand of The Abbey Centre in Newtownabbey in order to modernise the centre as part of a wider refurbishment strategy. Driving the growth strategy for the centre, NewRiver successfully completed five new lettings and one lease renewal at a total rent of £205,700 pa.

·    Skegness: Two new lettings and two lease renewals at The Hildreds, Skegness equating to a total rent of £62,300 pa across a total of 4,000 sq ft of retail space.

·    North Shields: Commenced the £650,000 enhancement programme at North Shields and began works to relocate Home Bargains welfare facilities to free up an additional 11,000 sq ft lettable area.

·    Public Realm and Modernisation: Completion of enhancement works in Leith, including the refurbishment of the public realm. In Three Horseshoes Walk, Warminster, improvement works are now complete enhancing the facilities significantly through resurfacing, signage and security which has generated a positive uplift in footfall into the centre.

DEVELOPMENT HIGHLIGHTS:

 

Our risk-controlled development programme continues to grow, accelerating the conversion programme of our Marston's pub's portfolio and advancing a number of projects:

 

·    Marston's Pub Portfolio: Submitted 6 further planning applications during the quarter to meet the development programme targets, bringing the total submission to date to 45. During the period NewRiver successfully secured 3 further consents equating to a total of 13 planning consents successfully secured to date. The current portfolio EBITDA is performing 0.46% above the 4-year guaranteed income of £12.2 million pa received from Marston's Plc.

·    Cowley, Oxford: Pre-application discussions with Oxford City Council now complete for the redevelopment of Templars Square, Cowley, Oxford including Oxford Design Review support. The plans, due for submission at the end of October 2015, will involve the complete regeneration of Oxford's largest covered shopping centre extending the retail offer to introduce A3 use for new food and restaurant operators, 200 residential units, a 60 bed hotel and the extensive reconfiguration and refurbishment of the multi-storey car parks and enhancement of the centre entrances and public realm.

COMMERCIALISATION

·  In the first quarter of FY16, commercialisation income achieved £455,242 with notable Q1 performers including Hastings, Newtownabbey and Burgess Hill performing between 30% to 32% ahead of forecast.

·    Completed an agreement with Universal Outdoor for the installation and management of 22 digital pods and wall mounted screens across the shopping centre portfolio. The new digital pods and screens will provide shoppers with a new touch-screen store directories and coupons, together with a new communication platform for retailers to engage with shoppers. This exciting new agreement accelerates NewRiver's digital integration strategy and provides NewRiver with an additional annual income through advertising revenues.

·   Extension of the Company's contract with Amazon to provide a further 25 income-generating Amazon Collection Lockers across the shopping centre portfolio providing customers with an enhanced experience, greater convenience and extending NewRiver's bricks and clicks commitment.

*LVS, a subsidiary of Bravo II, refers to a fund advised or managed by Pacific Investment Management Company LLC

- 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 £849 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 1,376 occupiers, a total of over 5.6 million sq ft, total annual footfall of over 121 million and a retail occupancy rate of 96 per cent.