Portfolio Update

RNS Number : 1839C

NewRiver Retail Limited

13 March 2014

 



NewRiver Retail Limited

("NewRiver" or "the Company")

Portfolio update

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 period between 7 October 2013 to 12 March 2014.

During the period, the Company achieved a number of value-enhancing active asset management initiatives and significant portfolio growth. NewRiver completed two asset acquisitions, one disposal and as announced separately at the end of 2013, acquired three substantial portfolios including the transformational purchase of 202 pubs from Marston's Plc. Following the acquisitions, NewRiver has grown to become the UK's third largest shopping centre owner/manager by number of assets over 50,000 sq ft.

The period included the important Christmas trading period when NewRiver's shopping centres enjoyed strong footfall with an increase of 2.6% year on year, which compares to a national decline of 1.5%.

The Company intends to announce its Final Results for the year ended 31 March 2014 on Thursday 15 May 2014.

Portfolio highlights

§ Assets under management increased by 29% to £566 million (October 2013: £438 million)*

§ Three portfolio acquisitions totalling approximately £148.3 million and two asset acquisitions totalling approximately £4.9 million*

§ Rent roll under management increased by 29.7% to £54.95 million*

§ Completion of 46 leasing events, reflecting an additional total rent of £508,000 pa. New long term leasing events achieved a rental income of approximately 18% above valuation ERV and an average lease length of 9.6 years

§ Retail portfolio occupancy stable at 94%

§ Weighted Average Lease Expiry ("WALE") is 7.94 years, reflecting new asset management opportunities

§ Sustainable average rent of £10.48 per sq ft across the portfolio

§ During this period, NewRiver's top ten retailers, defined by rental income, include New Look, Superdrug, Primark, Wilkinson, Poundland, Tesco, Asda, the Co-operative, T.K. Maxx and Mall income 

*metrics include the recently acquired Marston's public house portfolio

Acquisitions and Disposals:

40 Fishergate, Preston, Lancashire

NewRiver has exchanged contracts for the purchase of a former bank at 40 Fishergate in Preston from HSBC for £650,000. The Company has also exchanged contracts for a pre-let of the 10,000 sq ft unit within the prime retail location, to Sainsbury's at an annual rent of £90,000 pa on a 15-year lease with a ten year break. NewRiver will undertake the initial strip out works before Sainsbury's commences the fit-out prior to opening for trade in mid-August.

Poundland, Crawley, West Sussex

NewRiver has exchanged contracts to acquire the 43,000 sq ft Poundland store situated in Crawley's prime retail location for £4.25 million.

The Forum Shopping Centre, Wallsend, North Tyneside

NewRiver has completed the redevelopment of the former Co-operative building on time and within budget. The project comprised three new retail units on the ground floor extending to 27,000 sq ft and a new 52,000 sq ft Community First Centre and library on the upper floors. The retail units have been handed over to the occupiers 99p Stores, Iceland and Home Bargains.

The Community First Centre and library has been handed over to North Tyneside Council which will occupy under a new 30-year RPI lease. Furthermore, the Company announces the exchange of contracts for the sale of the Community First Centre and library.

As part of the ongoing investment in and active asset management of the Centre, two new retailers, Optica Eyecare and Milligans Bakers, have agreed long-term lease agreements and will open in March. The Company has recently completed an external refurbishment of the Centre and will commence an internal refurbishment within the next three months.

NewRiver is commencing stage two of the redevelopment and currently demolishing the vacant residential estate located adjacent to the Forum Centre which will lead to further retail development.

Portfolio Acquisitions

Announced separately in November and December 2013, NewRiver acquired three significant portfolios totalling £148.3 million. The three portfolio acquisitions were transformational for the business growing the asset base to £566 million, promoting NewRiver to become the UK's third largest owner/manager of shopping centres and included the off-market portfolio acquisition of 202 pubs from Marston's Plc. Progress is being made at pace across all three acquisitions.

Marston's Plc portfolio

The attractive high yielding portfolio has high potential for conversion to convenience store use to meet the strong demand from the national grocers seeking to grow their convenience estate. As part of the agreed terms of the acquisition, Marston's entered into a minimum four-year term leaseback agreement (extendable to five years) during which time it will continue to manage and operate the portfolio as public houses. Marston's pays annual rent of £12,235,000, reflecting a net initial yield of 12.8 per cent on the purchase price. NewRiver is making significant progress to activate the value-enhancing opportunities presented through this portfolio focused on conversion to alternative uses, principally convenience stores and restaurants.

Zolfo Cooper portfolio

The Company acquired the Newkirkgate Shopping Centre in Edinburgh; the Beacon Centre in North Shields, Tyne & Wear; and the La Porte Precinct in Grangemouth, near Falkirk for approximately £24 million from administrators Zolfo Cooper in November 2013. The acquisition reflected a net initial yield of 10.4%. With a high occupancy rate of 94% and a range of high quality retailers, the portfolio benefits from a stable rental income stream. NewRiver is advancing asset management and development initiatives to further enhance the income and capital value of the assets. 

Gloucester Green, Oxford and St. Elli Centre in Llanelli, Carmarthenshire

In November 2013, NewRiver acquired two shopping centres for approximately £34.3 million equating to a net initial yield of 7.78%, from insurance group AXA. NewRiver has made immediate progress on the newly acquired Gloucester Green, an open air retail market square in the heart of Oxford, activating formerly empty space with a new letting to Sweatshop, the high end sport retailer, on a 10-year lease at a rent of £40,000 pa.

The St. Elli Shopping Centre, acquired predominantly on a freehold basis for £29.2 million reflecting a net initial yield of 7.5% is producing robust income through its existing retailers, anchored by a 70,000 sq ft Asda supermarket, Argos, Poundland, Sports Direct and Wilkinson. Additional value-enhancing asset management initiatives are in progress which the Company believes will deliver long-term benefits to shareholders.

Active asset management:

Locks Heath Shopping Village, Fareham

Waitrose has completed the acquisition of the 29,000 sq ft Co-operative anchor supermarket within Locks Heath Shopping Village. Following significant store investment by Waitrose, including a new entrance, the store will open on 27 March 2014 significantly enhancing the grocery and retail offer for this popular shopping centre. In addition, a new letting to Pizza Hut on a 20-year lease at a rent of £20,000 pa has increased the rental tone by 14.5% to £31.50 Zone A from a previous £27.50 Zone A.

Prospect Centre, Hull

Eat StrEAT, a multi-branded food court offer anchored by Burger King, opened on 30 November 2013 re-activating formerly disused space, which had been vacant for eight years under the previous owner, and increasing footfall and turnover. The additional restaurants within the StrEAT food court include Pizza Neo, REAL Café.co, El Taco Loco and Wuji. The operator, CPL Foods, has signed a 20-year lease at a rent of £60,000 pa plus a turnover top up provision. The transaction reflects a rent 140% above Valuation ERV.

Regents Court, Leamington Spa

In addition to the grant of an A3 planning consent for the entire centre in August 2013, a further planning consent was granted in February 2014 for a refurbishment and upgrading of the communal areas. Following the completion of the landlord works, restaurant operator Turtle Bay has taken occupation of a double unit totalling 4,200 sq ft on a 15-year lease paying £107,650 pa and is due to open on the 20 March 2014. Since purchasing the Centre in December 2012, NewRiver has completed two new restaurant lettings at a total rent of £177,250 pa against the ERV rent at purchase of £118,600 pa. A further three new restaurant lettings are under offer.

These lettings deliver on the Company's strategy to re-position Regents Court as the town's principle restaurant and leisure destination.

Packhorse Shopping Centre, Huddersfield, West Yorkshire

Planning consent has been granted for the redevelopment, refurbishment works and part change of use at the Centre. Development works will include significant improvements to all three entrances of the Centre and the creation of a 180-seat food court offer, The Packhorse Kitchen, which will feature six local and regional food and beverage brands and a new 15,000 sq ft anchor store.

As part of the redevelopment, the new restaurant and retail units will open onto the town's main retail precincts, Kings Street and Kirkgate. These initiatives will increase the Centre's WALE, activate unused space and generate increased footfall as well as reduce overheads for existing and prospective retailers.

Hill Street Shopping Centre, Middlesbrough

Muffin Break has replaced Greggs in the Centre's main atrium creating a smaller and more contemporary offer. Muffin Break has signed a 10-year lease paying a rent of £55,000 pa with turnover provisions. The café offer will allow for at least two additional retail merchandising units and enhanced event space which will help increase footfall, dwell time and overall income from the mall area by more than £25,000 pa.

Horsefair Shopping Centre, Wisbech

Planning consent was approved for the extension and change of use to provide a new Costa Coffee at the main entrance of the Centre. In addition, the unit's frontage is being extended and the Centre's entrance will be modernised. Costa Coffee is due to open at the end of March and will be the town's first national branded coffee operator.

The new letting is in line with the Company's asset enhancement strategy for the Centre to improve the food and beverage provision and will increase footfall and shopper dwell time as well as enhancing visibility to the principal entrance.

Mall Income

NewRiver continues to enhance its commercialisation revenue across the portfolio in line with the Company's strategy delivering a net income of £324,000 for the three months to 31 December 2013, outperforming internal forecasts by 62%. This success is attributed to strong growth in mall promotions throughout the Christmas period and includes the Company's ongoing Brand Experience programme. 

Risk-controlled development:

Primark, Warrington, Cheshire

Primark opened for trade on 6 December 2013 forming a new 56,000 sq ft anchor store at Golden Square Shopping Centre. NewRiver pre-let the unit to Primark on a 25-year lease and rent of £475,000 pa. The store fit-out was commended as a high quality execution, on time and within budget and since opening the store, the first in Warrington, has been reported to be trading well. 

Albert Square Shopping Centre, Widnes

Planning consent was granted in late 2013 to redevelop the Prince of Wales pub located adjacent to the Centre, into a new 10,800 sq ft anchor retail store. An agreement for lease was exchanged with 99p Stores Limited for a 10-year term at a rent of £135,000 pa. Works have commenced with the store due to be handed over to 99p Stores in late July. The development reflects an attractive yield on cost of 10% whilst enhancing the existing asset. 

Allan Lockhart, Property Director at NewRiver Retail, said:

"We continue to make significant strides in expanding and enhancing our portfolio through strategic acquisitions, active asset management and risk-controlled development generating sustainable and growing returns for our shareholders. NewRiver has quickly become the UK's third largest owner and operator by number, continuing to be the leading specialists in UK non-discretionary shopping centres. With fresh capital to deploy, we continue to identify attractive opportunities that will generate long-term shareholder value."

-Ends-

For further information

NewRiver Retail Limited  David Lockhart, Chief Executive Mark Davies, Finance Director	Tel: [phone]
Bell Pottinger David Rydell/Guy Scarborough/Charlotte Offredi	Tel: [phone]
Liberum Shane Le Prevost/Tim Graham/Simon Atkinson	Tel: [phone]

About NewRiver

NewRiver Retail Limited is an AIM listed REIT. The Company is a specialist real estate investor and asset manager focusing solely on the UK retailing sector with a particular focus on food and value retailing.

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 the UK's third largest Shopping Centre owner by number with assets under management of approximately £600 million principally comprising 25 UK wide shopping centres, 16 high street retail units, two supermarkets and a portfolio of 202 public houses mainly suitable for conversion to alternative uses. The portfolio has in excess of 1155 occupiers, a total of 4.3 million sq ft, total annual footfall of over 107 million and a retail occupancy rate of 94 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

 

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