NewRiver Retail Limited
("NewRiver" or the "Group" or the "Company")
Q2 Portfolio Update
Strong second quarter sees £222.3 million of strategic acquisitions at a combined average yield of 9.6% and continued progress on value-enhancing asset management and risk-controlled development
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 second quarter, beginning 1 July 2015 and ending 30 September 2015.
HIGHLIGHTS
- Deployment of £150 million equity fundraise and the completion of four strategic acquisitions totalling £222.3 million, reflecting an average yield of 9.6%:
- £69.10 million acquisition of the Ramsay Retail Warehouse Portfolio, equating to a net initial yield of 8.0% on the income producing assets
- £60.75 million acquisition from LVS, a subsidiary of Bravo II, for the acquisition of the 50% stake not already owned by NewRiver in the Trent JPUT - the Marston's public house portfolio, at an implied net initial yield of 10.1%
- £38.95 million acquisition from LVS, a subsidiary of Bravo II, of the 50% stake not already owned by NewRiver, in the Camel III JPUT - a portfolio of five shopping centres reflecting an implied net initial yield of 7.2%
- £53.50 million acquisition of 158 pubs from Punch Taverns at a net initial yield of 13.5%
- Announced second quarterly dividend of 4.5 pence per share in respect of the year ended 31 March 2016 totalling 9 pence per share for the half year to 30 September 2015.
- Debt facility agreed with Lloyds Bank Plc to fund NewRiver's retail warehouse portfolio with a 1.90% margin payable on the investment facility and intention to convert to a fixed rate for at least 75% of the loan equating a total loan interest cost at inception of 3.16%. The Company's current cost of debt remains low at 3.72% with good maturity of 4 years.
- Assets under management increased by 17% to £1 billion at the end of September 2015 (30 June 2015: £849 million).
- Detailed planning application submitted following successful pre-application discussions with Mid Sussex Council on a £65 million major mixed use town centre development in Burgess Hill totalling 465,000 sq ft.
- Public consultation completed for a £64 million mixed-use 225,000 sq ft regeneration development of Templars Square, Cowley, Oxford, with a planning submission targeted for the end of 2015.
- Significant progress on the Company's alternative use and extension strategy within the existing pub portfolio, submitting a further three planning applications and successfully securing another nine approvals taking the total number of planning applications submitted to 48 and the total planning approvals received to 22.
- Construction commenced on surplus land for the first of the Company's convenience stores for the Co-operative Group with completion expected for December 2015 and handover to the Co-Operative Group planned for January 2016.
- Great progress on the retail warehouse portfolio with three planning applications secured in Felixstowe, Kirkstall and Hull with a further five planning applications due for submission in Q3.
- Total rent roll under management increased by 19% to £85.3 million per annum (30 June 2015: £71.7 million).
- Weighted Average Lease Expiry ("WALE") for the retail portfolio is 7.4 years (30 June 2015: 7.5 years).
- Improved retail occupancy rate of 96.3% (30 June 2015: 96.0%).
- The average retail rent for the portfolio, including recent acquisitions, remains at an affordable level of £12.35 per sq ft.
- 54 leasing events achieved during the period of which 21 were new lettings and lease renewals, securing a total of £0.6 million per annum in long-term rent. New long-term leasing events achieved a rental income 22.6% above ERV (30 June 2015: 2.1%) with an average lease length of 8.7 years. Occupier incentives continue to decrease, now at an average of 5.7 months equivalent rent for the period.
- Strong retail covenants across the portfolio with the top 15 retailers defined by rental income including Poundland, New Look, Boots, Primark, ASDA, Argos, Wilkos and Sainsbury's.
- Good progress continues across the Company's growing development pipeline, comprising over 1.25 million sq ft of mixed-use space including retail, leisure, hotels and residential.
David Lockhart, Chief Executive at NewRiver Retail, said:
"The second quarter of the year has once again demonstrated NewRiver's ability to successfully deploy equity capital into targeted acquisitions, following our recent £150 million fundraise. Acquisitions completed during the period totalled £222.3 million, growing assets under management to £1 billion, the vast majority of which are now on our own balance sheet. We were also pleased to announce a second quarterly dividend of 4.5 pence per share, equating to a total of 9 pence per share for the half year to 30 September 2015.
The Company's risk-controlled development programme is growing significantly. Our pub portfolio and convenience store programme for the Co-operative Group is advancing well and we are making good progress on major town centre developments in Burgess Hill and Oxford, which promise to make a real difference to these town centres, in turn creating significant value for the Company and its shareholders."
DIVIDEND
During the period the Company announced that it has declared a second quarterly dividend of 4.5 pence per share in respect of the year ended 31 March 2016. The ex-dividend date will be 22 October 2015. The quarterly dividend will be payable as a REIT Property Income Distribution (PID) on 13 November 2015, to shareholders on the register at close of business on 23 October 2015. For the half year to 30 September 2015, the dividend increased by 5.9% to total 9 pence per share (2014: 8.5 pence).
ACQUISITIONS
During the period, NewRiver completed four strategic acquisitions totalling £222.3 million, deploying the proceeds from the recent £150 million equity fundraise into strategically selected acquisitions. Acquisitions during the period saw the Company's assets under management increase to £1 billion. Acquisitions included:
- £69.10 million Ramsay Retail Warehouse Portfolio acquisition, equating to a net initial yield of 8.0% on the income producing assets. The geographically diverse portfolio was acquired from a major foodstore operator and comprises 13 assets including nine value-led retail parks and four development sites each with approved planning consents together with pre-let interest from retailers
- £60.75 million acquisition from LVS, a subsidiary of Bravo II, of the 50% stake not already owned by NewRiver in the Trent JPUT - the Marston's public house portfolio - at an implied net initial yield of 10.1% bringing the portfolio 100% under NewRiver's ownership
- £38.95 million acquisition from LVS, a subsidiary of Bravo II, of the 50% stake not already owned by NewRiver, in the Camel III JPUT - a portfolio of five shopping centres reflecting an implied net initial yield of 7.2% bringing the portfolio 100 per cent. under NewRiver's ownership
- £53.50 million acquisition of a portfolio of 158 pubs across England and Wales from Punch Taverns which equates to a net initial yield of 13.5%. On a levered basis, the portfolio will generate an attractive cash on cash equity return in excess of 20%.
KEY ASSET MANAGEMENT HIGHLIGHTS
NewRiver continues to enhance and drive the value of its portfolio through strategic active asset management. The Company successfully completed 54 leasing events during the period including key lettings with Pandora, Holland & Barratt, Evans and Warren James. Long-term leasing events achieved a rental income 22.6% above valuation ERV at an average lease length of 8.7 years securing an annual rent of £0.6 million.
The Company has delivered an improved occupancy of 96.3% and a sustained footfall, with a total of 27.6 million shoppers visiting NewRiver's shopping centres during the period with the Company's annual footfall now totalling 126 million. The portfolio's top 15 retailers defined by rental income continue to be underpinned by successful national retailers including Poundland, New Look, Boots, Primark, ASDA, Argos, Wilkos and Sainsbury's.
- Next, Belfast: The Company is making excellent progress on the construction of a new 43,000 sq ft store for Next at the Abbey Centre in Newtownabbey, Belfast, to create one of Northern Ireland's largest Next stores. Completion and handover of the new Next store is expected in September 2016. Next are upsizing from their existing 15,000 sq ft to create a new three-storey anchor store, scheduled to open in time for Christmas 2016. In addition, NewRiver are progressing plans with Dunnes Stores to significantly extend and upgrade their existing store to create a new flagship Dunnes store for Northern Ireland.
- Packhorse Centre, Huddersfield: Development works are in the final stages to deliver The Packhorse Kitchen, a modern new food court offer, including the pre-let of 20,000 sq ft of formerly vacant space to introduce a new leisure offer including a new bar, pan-Asian restaurant and Burger King, supporting the Company's strategy to re-position the Packhorse Centre into one of Huddersfield's leading food and leisure destinations.
- Retail warehouse portfolio: The Company has made great progress on the value-enhancing asset management of its retail warehouse strategy successfully securing three planning consents during the period. The planning application consents include open A1 consent including a 20% allowance for food sales in Felixstowe, a 12,000 sq ft site extension at ground with mezzanines in Kirkstall and a new 1,800 sq ft drive through pod in Hull. A further five planning applications are due for submission in Q3 to unlock additional value within the retail warehouse portfolio.
- Refurbishment and Public Realm: Significant enhancement works totalling £1.5 million are underway at the Forum Shopping Centre in Wallsend, including new roofing and entrances, a refurbishment of the car park, mall surfaces and public toilets together with new LED lighting throughout the centre. In Leamington Spa, refurbishment works have been completed to modernise the public realm at Regent Court introducing new landscaping. This follows the re-positioning of the former thoroughfare into Leamington's principle food and leisure destination through the introduction of leading national restaurant operators. Wider refurbishment and enhancement works are also underway across the portfolio in Leith, Kilmarnock and Huddersfield.
- Commercialisation: In the period commercialisation income delivered £0.5 million with notable performers including Burgess Hill, Erdington, Hastings, Newtownabbey and Newton Mearns. NewRiver has extended its agreement with the Cloud for a further six WiFi contracts, providing free Wifi coverage across the entire NewRiver shopping centre portfolio. Portfolio agreement completed with Top Gift, the mobile phone accessories operator, for 15 mall kiosks in the covered centres generating £0.3 million in annual income with a further two mall kiosks and six retail units under negotiation.
KEY DEVELOPMENT HIGHLIGHTS
NewRiver's 1.25 million sq ft risk-controlled development programme continues to progress well, with the submission of one major planning application in Burgess Hill, successful completion of pre-planning for a major 225,000 sq ft mixed-use redevelopment in Oxford and good progress on the implementation of the alternative use strategy of the Company's Marston's pub's portfolio where the Company is now on-site constructing the first of the Co-Operative Group's Convenience Stores.
- Burgess Hill - Major planning application submission: Pre-application discussions held with Mid Sussex District Council concluded successfully with NewRiver submitting a detailed planning application to deliver a major £65 million town centre investment. The proposed 465,000 sq ft town regenerative development would provide a 10-screen multiplex Cineworld cinema, 63 bed Travelodge, a higher quality retail offer and new restaurant and leisure provisions, 163 additional car park spaces and an improved public realm, together with 142 new residential flats and new purpose built library. The proposals will deliver an estimated 500 new jobs to the town. The detailed planning application has now been submitted by NewRiver with the decision expected early 2016.
- Cowley - Pre-application process completed: NewRiver has completed two public consultations receiving positive response for the £64 million regeneration of Templars Square shopping centre, Oxford's largest covered shopping centre. The 225,000 sq ft mixed-use redevelopment will create 230 new residential flats, a new 71 bed hotel, improved retail offer, two new restaurants and the modernisation of two multi-storey car parks together with a greatly improved public realm and enhanced shopping centre entrances. Submission for the planning application is targeted for the end of 2015.
- Pub Portfolio:
- During the period NewRiver successfully secured a further nine planning approvals equating to a total of 22 successfully secured to date. Construction has commenced on surplus land for the first of the Company's convenience stores for the Co-operative Group with completion expected for December 2015 and handover planned for January 2016.
- Value-creating residential development within the pub portfolio is progressing well, submitting nine planning applications for residential units during the quarter. Further applications are due to be submitted in Q3 to provide over 50 new dwellings, providing one and two bedroom apartments as well as detached and semi-detached houses.
- Following the recent acquisition of 158 pubs from Punch Taverns this quarter, the Company has appointed an experienced pub management company to run the operations of the pub portfolio allowing NewRiver to focus on value creating real estate asset management and development.
FINANCING & CORPORATE UPDATE
During the period the Company entered into a new £98 million debt facility with Lloyds Bank Plc to fund its retail warehouse portfolio including Project Ramsey. The margin payable on the investment facility is 1.90% and with an intention to fixed rate swap at least 75% of the loan, the total interest cost of the loan at inception will be 3.16%. The Company is pleased to establish this new arrangement with Lloyds who now sit alongside Santander, HSBC, Barclays and Venn as the Company's principle bankers. The Company's current cost of debt remains low at 3.72% with good maturity of 4 years. The Company's last reported Loan to Value as at 31 March 2015 was 39%.
In June 2015 the Company announced its intention to obtain a Premium Listing on the Main Market of the London Stock Exchange. Good progress has been made during the period and the Company expects to achieve this important milestone next year as previously indicated. Following this, the Company also expects to qualify for inclusion in the FTSE EPRA/NAREIT Global Real Estate Index Series in 2016.
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, asset manager and developer focused solely on the UK retail sector. At the close of 2014 NewRiver Retail was named Property Company of the Year - Retail & Leisure at the Estates Gazette Awards.
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 £1 billion principally comprising 29 UK wide shopping centres, further nationwide retail assets and a portfolio of 360 pubs with retail and mixed-use extension opportunities. The portfolio has 1,440 occupiers, a total of over 6.4 million sq. ft., total annual footfall of over 126 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
