Q2 Portfolio Update

RNS Number : 4733T

NewRiver Retail Limited

06 October 2014

 



NewRiver Retail Limited

("NewRiver" or "the Company")

Quarterly 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 second quarter ending 30 September 2014.

It has been another highly active period for NewRiver during which the Company completed a number of key acquisitions, growing the portfolio by 21% to £735 million at the end of September (June 2014: £609 million) and continued to achieve a significant number of value-enhancing asset management and development initiatives.

PORTFOLIO HIGHLIGHTS

▪     Assets under management increased by 21% to £735 million (June 2014: £609 million) following transactions announced during the period 

▪     Total of £155 million of Acquisitions comprising a portfolio of three shopping centres, part of the Swallowtail Portfolio, for £140 million at a yield of 8%; a shopping centre in Warminster for £9 million; a former department store in Hull for £1.92 million; and a retail warehouse in Gloucester for £4.25 million

▪     Further £28.7 million of Disposals comprising Bramley Shopping Centre in Leeds for £18.5 million; a multi-let retail building in Norwich for £6.2 million; a single vacant unit in North Shields sold to Costa Coffee for £325,000; and a retail parade in Andover for £3.7 million

▪     Completed and expanded the Agreement for Lease with The Co-operative Group Limited to lease 63 new convenience stores ("C-Store") from the Company's public house portfolio, increased from the original 54, with a total of 215,232 sq ft of new retail space to be created over two year phased development programme

▪     Exchanged a 15 year Agreement for Lease with Next at the Abbey Centre, Newtownabbey, Belfast to create a new 43,000 sq ft retail store at a rent of £475,000 pa

▪     Total annualised rent roll under management increased by 21% to £67.4 million pa (June 2014: £55.5 million)

▪     Completed 65 new lettings and lease renewals securing a total of £1.3 million pa in rent. New long-term leasing events achieved a rental income of 14.4% above valuation ERV with an average lease length of 11.2 years

▪     Maintained a stable retail portfolio occupancy rate of 95%

▪     Weighted Average Lease Expiry ("WALE") for the retail portfolio remained stable at 7.91 years (June 2014: 8.31 years)

▪     Sustained an affordable average retail rent of £11.87 per sq ft   

▪     During the period the top 10 retailers within the portfolio defined by rental income are strong national covenants and include Poundland, New Look, Superdrug, Primark, Wilkinson, Dixons Carphone, ASDA, Boots, The Co-operative Group and Argos

▪     Plans to submit six major planning applications enabling the Company to deliver over 1 million sq ft pf new development space for retail led and mixed-use, including hotels, leisure and residential

▪     Footfall continues to improve with a total of 14.4 million across the portfolio for the period with various shopping centres reporting significant uplifts and the annual footfall for the portfolio totalling over 110 million

QUARTERLY DIVIDEND:

Following recent announcements stating the Company's proposal to pay quarterly dividends for its financial year commencing 1 April 2014, the Board declared its first interim dividend relating to the quarter ending 30 June 2014 of 4.25 pence per share.

This interim dividend will be paid on 31 October 2014 to shareholders on the register at close of business on 26 September 2014. The ex-dividend date was the 24 September 2014. Of this interim dividend, 1.0 pence per share will be paid as a REIT Property Income Distribution (PID). Further information on the tax treatment of dividends can be found on the Company's website.

INTERIM RESULTS:

The Company will announce its Interim Results for the six months to 30 September 2014 on Thursday 20 November 2014. 

David Lockhart, Chief Executive at NewRiver Retail, said:

"We are delighted to report on our second quarter which, consistent with the preceding quarter, has been highly active and successful across a number of key metrics. During the period the Company completed a number of key transactions, including the acquisition of six new assets and the sale of four separate properties. Importantly gross assets under management increased significantly.

"Strong progress has been made in our pub portfolio with a major agreement with the Co-Op to lease 63 new C-Stores positioning NewRiver as the UK's leading developer of C-Stores.

"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 control development programme."

ACQUISITIONS AND DISPOSALS:

11-19 High Street, Andover ⁽³⁾

NewRiver completed the sale of a parade of three high street shops in Andover to Threadneedle Property Unit Trust for £3.675 million reflecting a yield of 7.4%.

The following Acquisitions and Disposals were also announced during the period:

▪     Acquisition of a portfolio of three shopping centres, part of the Swallowtail Portfolio ⁽²⁾, for a total consideration of £140 million, reflecting a net initial yield of 8%

▪     Acquisition of Three Horseshoes Walk shopping centre in Warminster, Wiltshire ⁽¹⁾, from Stockland for a total consideration of £9 million, reflecting a net initial yield of 9%

▪     Acquisition of Eastern Avenue, a 22,000 sq ft retail warehouse in Gloucester ⁽¹⁾ for £4.25 million reflecting a net initial yield of 8.3%

▪     Acquisition of 119/121 Ferensway, Hull ⁽²⁾ a 49,000 sq ft former department store from Redevco for £1.92 million, reflecting a net initial yield of 6.3% and a low capital value per square foot of £39

▪     Sale of Bramley Shopping Centre ⁽¹⁾ in Leeds to Rockspring Property Investment Managers for £18.5 million reflecting a 7.2% yield on exit

▪     Sale of a 44,000 sq ft multi-let retail building on Guildhall Hill in Norwich ⁽³⁾ to Associated British Foods Pensions Trustees Limited for £6.2 million reflecting a yield of 6.7%

▪     Sale of a single vacant unit in The Beacon Centre, North Shields ⁽²⁾ sold to a Costa Coffee franchisee for £325,000, comparing favourably to the apportioned entry price in December 2013 of £91,000

ACTIVE ASSET MANAGEMENT & DEVELOPMENT:

The Abbey Centre, Newtownabbey, Belfast ⁽²⁾

NewRiver has rapidly secured a key letting with Next at The Abbey in Newtownabbey, Belfast having acquired the centre in August this year. The Company has exchanged a 15 year Agreement for Lease with Next to create a brand new 43,000 sq ft retail store across four floors at a rent of £475,000 pa. The new store involves the demolition of three existing units and a mall entrance, currently totalling 4,000 sq ft, to create a new 43,000 sq ft Next Store extending into the adjacent car park. Next currently trades in the centre in a 15,300 sq ft store. The swift exchange is demonstrative of the Company's ability to move quickly and deliver on its asset management strategy to unlock further asset value.

The Avenue, Newton Mearns ⁽²⁾

Acquired in August 2014, the Company is already delivering on its asset management strategy securing new lettings to: Michael Warren, the reputed jeweller within the Glasgow area, on a five year lease at £20,000 pa with 10% turnover; and Agreements for three further new lettings in advanced stages.

Newkirkgate, Leith, Edinburgh ⁽²⁾

An extensive refurbishment and re-brand of NewKirkgate has commenced which will include new timber frontage and panelling, flooring, new lighting and new stonework together with new branding and wifi to drive footfall.

Hill Street, Middlesbrough ⁽²⁾

NewRiver completed the letting of Unit 18, previously occupied by La Senza, to Bodycare at a rent of £75,000 per annum on a 10 year lease. NewRiver's proactive asset management has ensured that the unit has been fully let during the La Senza administration and the new letting reflects favourably being 15% above the business plan ERV. Additionally, the Company has secured a letting of Unit 39 to fashion retailer Modella on a 10 year lease at £28,500 per annum, which will further enhance the fashion offer within the centre. 

Burns Mall, Kilmarnock ⁽²⁾

NewRiver completed a key lease extension with East Ayrshire Council for a further 10 years at a rent of £115,000 pa as well as securing a long term commitment to the Centre from the Council who have undertaken a complete refurbishment of the offices.

A new lease has been signed with JD Sports which involves the amalgamation of two adjacent units on King Street to create a new 3,100 sq ft unit. JD Sports has agreed a 10 year lease with no breaks on a turnover basis with an anticipated net rent of £90,000 pa. This is one of only two stores taken by JD Sports in Scotland this year and delivers an excellent long term retail offer for the Centre and town.

Forum Shopping Centre, Wallsend ⁽¹⁾

Phase two of the centre's redevelopment is well underway with the demolition of the residential units on the adjoining site now complete. Terms have been agreed with a major food retailer to create a 17,000 sq ft food store and with a fast food operator to provide a 2000 sq ft unit.

Locks Heath, Fareham ⁽¹⁾

Terms have been agreed with Allied Carpets to lease the final remaining retail unit in the Centre on a 10 year lease at a new Zone A rent of £33.35 per sq ft. This letting secures a 100% retail occupation for the centre which is achieving strong rental growth following the opening of the new Waitrose store.

Plans to redevelop the centre and introduce further retail units continue to progress well with detailed discussions underway with the local Council for the relocation and procurement of a new library and community centre to facilitate the construction of a new discount foodstore, two retail units and residential. The new development will create over 30,000 sq ft of new retail space. The Company aims to submit a detailed planning application by the end of the year.   

Gloucester Green, Oxford ⁽²⁾

Progress is being made to advance plans with the Council for the re-development of Gloucester Green in Oxford to deliver a new retail and leisure offer in the heart of the town. In the meantime, NewRiver have signed a 20 year Agreement for Lease to restaurant operator Grill Stock for a 2,100 sq ft A3 unit in line with the Company's strategy to re-position the shopping centre as the town's principle food and leisure destination. Agreements for four new lettings including three retail units and one office unit are also in advanced stages.

Additionally the Company has agreed with Oxford City Council to add an additional weekend market within Gloucester Green focused on food and crafts which will create new interest improve Saturday footfall and introduce an additional stepped income of £4,500 in the first year, £6,750 in years two and three and increasing at 5% pa thereafter.

The Beacon, North Shields ⁽²⁾

NewRiver completed two new 10 year leases to o2 and JJ's Café for a total rent of £60,000 pa across retail space totalling 2,200 sq ft.  The Company has recently tendered for the full refurbishment of the centre which will include new lighting, flooring, signage and branding for the centre with work expected to commence in the New Year.

The Martlets, Burgess Hill ⁽¹⁾

Following a detailed planning review, progress is now well advanced for the submission of a major planning application enabling the total redevelopment of the Martlets Shopping Centre to create substantial new retail space as well as a cinema, hotel, restaurants and residential.

NewRiver is working closely with the council to deliver a town-transformational retail and leisure destination with the public consultation programme beginning on-site in October this year.

The Packhorse Centre, Huddersfield ⁽³⁾

In line with NewRiver's strategy to introduce key community uses to the centre the Company has completed a letting to Huddersfield Town Football Club on a three year lease at £7,000 per annum. The shop is used for the sale of club merchandise as well as match day tickets which will further strengthen shopper loyalty and local pride within the scheme.

Albert Square, Widnes ⁽³⁾

The rapid redevelopment of the former vacant Prince of Wales public house site has completed on time and within budget to provide a brand new 10,800 sq ft store for 99p Stores which opened for trade at the end of July reporting excellent trading figures in line with budget. The introduction of a new anchor retailer has resulted in a 10% increase in footfall for the July / August period on a like for like basis. 99p Stores signed a new lease at £135,000 pa on a 10 year term.

Prospect Centre, Hull ⁽²⁾

The Company has completed the letting to Cardzone, on a 10 year lease at £32,500 per annum. Additionally, Clinton's have agreed a five year reversionary lease from December 2016 paying £50,000 per annum ensuring the retailer's commitment to the centre until 2021 with the retailers having undertaken an extensive refurbishment of the shop fit to improve the offer and appearance of the unit. The new lettings, alongside the recent opening of Eurochange and the re-furbished Clintons, have contributed to a 25% increase in footfall for the centre against last year.  

Regent Court, Leamington ⁽²⁾

The Company has successfully delivered on its strategy to re-position the former thoroughfare to become the town's principle food and leisure destination securing two further lettings to reputed national food operators. NewRiver completed the letting of a 2,800 sq ft unit to Yo Sushi at £72,500 pa on a 20 year lease. The national sushi operator is on-site now fitting out and expected to open later this month. NewRiver has agreed a 20 year stepped lease from £62,000 to £68,750 to GBK for a 2,380 sq ft unit for the national burger operator.

The Yo Sushi and GBK leases reaffirm the Company's ability to deliver excellent asset management successfully repositioning Regent Court as Leamington's principle food and leisure destination.

Templars Square, Cowley  ⁽²⁾

A major new redevelopment is being appraised to create substantial residential as well as the reconstruction of the existing car park which is presently unfit for purpose. The Company hopes to submit plans by the end of the year. 

During the period, NewRiver agreed a new letting Yours Clothing on a 10 year lease paying £60,000 pa and further lettings to two local retailers. In total, the three new lettings result in an increase of £122,500 in annual income.

Poundland, Hereford ⁽¹⁾

NewRiver has agreed a new 10 year lease to Poundland at a new increased rent of £200,000 pa representing an increase of 8% on the annual rent paid by previous occupier TK Maxx.

40 Fishergate, Preston ⁽¹⁾

Following NewRiver's freehold acquisition of the 10,000 sq ft former HSBC bank in Preston in April for £650,000 listed planning consent was granted to convert the building to a city centre convenience store. The Company simultaneously secured J Sainsbury on a new 15 year lease at a rent of £90,000 pa and following enabling works to convert the building to a new C-Store, handed the premises over to J Sainsbury in late August 2014 who opened for trade at the end of September.

Marston's Pub Portfolio ⁽²⁾

As recently announced strong progress has been made in the Company's public house portfolio with the completion and expansion of the agreement with The Co-operative Group Limited to lease 63 new convenience stores (up from original 54) from the portfolio acquired from Marston's PLC. Over 215,000 sq ft of new retail space will be created over two year phased development programme. The agreement demonstrates rapid delivery of NewRiver's stated strategy for the public house portfolio to meet the growing demand from major food store operators for C-Store portfolios.  

Key:

⁽¹⁾     Refers to NewRiver Retail only

⁽²⁾     Refers to joint venture with Bravo I and II (a fund advised or managed by Pacific Investment Management Company LLC)

⁽³⁾     Refers to Barley Joint Venture

-Ends-

For further information

NewRiver Retail Limited  David Lockhart, Chief Executive Mark Davies, Finance Director	Tel: [phone]
Bell Pottinger David Rydell/James Newman/David Bass	Tel: [phone]
Liberum Tim Graham/Simon Atkinson/Jamie Richards	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 £735 million principally comprising 27 UK wide shopping centres, five retail warehouses, 16 high street retail units, one supermarket and a portfolio of 202 public houses mainly suitable for conversion to alternative uses. The portfolio has in excess of 1,298 occupiers, across over 5 million sq ft, a total annual footfall of over 110 million and a retail occupancy rate of 95 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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