Portfolio Update

RNS Number : 1636L

NewRiver Retail Limited

02 July 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 first quarter ending 30 June 2014.

During the period, the Company has successfully grown and improved its high yielding portfolio through acquisitions, active asset management and risk controlled development.

Portfolio highlights

§ Assets under management increased by 2% to £609 million (March 2014: £597 million) following the acquisition of a portfolio of four retail parks (the "Linear Portfolio") for £17.3 million at a yield of 9%; one high street unit in Preston for £650,000; the former TJ Hughes unit adjacent to existing asset The Sovereign Shopping Centre in Boscombe for £550,000; and the disposal of the  Poundland Store in Crawley for £5,950,000

§ Exchange of over-arching agreement with The Co-Operative Group, to provide 54 convenience stores on new 15-year Full Repairing and Insuring Leases

§ Total rent roll under management increased by 1% to £55.5 million pa

§ Completed 44 new lettings and lease renewals securing a total of £613,000 pa in rent. New long-term leasing events achieved a rental income of 14.4% above valuation ERV with an average lease length of 13.0 years.

§ Maintained a stable retail portfolio occupancy rate of 95%

§ Weighted Average Lease Expiry ("WALE") for the retail portfolio increased to 8.31 years (March 2014: 7.94 years)

§ Sustained an affordable average retail rent of £12.14 per sq ft

§ During the period the top 10 retailers within the portfolio defined by rental income include strong national covenants: New Look, Poundland, Primark, Wilkinson, Superdrug, Tesco, ASDA, Iceland, Argos and Boots

§ Good progress of the Company's development pipeline, achieving two planning consents that will deliver 28,000 sq ft of new and refurbished retail space.

§ Footfall across the portfolio continues to improve year on year delivering a 2% increase during the period in April and May with a total annual footfall of over 100 million.

ACQUSITIONS AND DISPOSALS:

Linear Portfolio

As previously announced, NewRiver further diversified its high yielding portfolio through the acquisition of the Linear Portfolio which comprised three retail parks and an additional standalone retail warehouse property from a UK institution for a total of £17.3 million. The freehold assets were acquired at a net initial yield of 9.12% and the Company has identified a variety of substantial asset management opportunities to significantly enhance income and capital value. The portfolio provides a total rental income of £1.67 million pa.

The portfolio is let to six retailers providing an attractive weighted average unexpired lease term of 8.4 years and includes: Clough Road Retail Park near Hull which is a 95,000 sq ft retail warehouse let to Curry's, PC World and Smyths Toys; Wymondham near Norwich, which is a 26,334 sq ft modern retail warehouse let to Poundstretcher on a 10 year lease at an annual rent of £250,000; Halfords Paisley near Glasgow which is a 20,120 sq ft unit let on an eight year lease at an annual rent of £160,704; and Mount Street Retail Park in Wrexham totalling 54,902 sq ft anchored by Matalan.

40 Fishergate, Preston

Following the freehold acquisition of the 10,000 sq ft former HSBC bank in Preston in April for £650,000, listed planning consent has been granted to convert the building to a city centre convenience store. Having secured J Sainsbury on a new 15 year lease at a rent of £90,000 pa, NewRiver will commence works to convert the building to a new c-store with handover expected in late August 2014.

TJ Hughes, The Sovereign Shopping Centre, Boscombe

In May 2014 NewRiver successfully completed the freehold acquisition of the former TJ Hughes department store building adjacent to the Sovereign Centre from Receivers for £550,000. The formerly vacant 45,000 sq ft store is a key acquisition for NewRiver allowing the Company to advance its redevelopment strategy for the centre to unlock further potential value through a major re-configuration to create a new cinema, restaurant offer and new enlarged retail units. The company is already in discussions with national retail and leisure operators to secure pre-lets for the risk-controlled re-development.

Poundland, Crawley, West Sussex

The Company has completed the sale of the Poundland Store in Crawley following NewRiver's restructuring and extension of existing lease. The store was acquired in March 2014 and the sale, at a price of £5,950,000, generated an IRR of 320%.

ACTIVE ASSET MANAGEMENT:

NewRiver continues to create value through ongoing active asset management, successful growth of its risk-controlled development programme and the improvement of its food and beverage offer. The Company is on track to enlarge its retail footprint and enhance the retail and leisure offer and public realm of a number of its shopping centres:

Regents Court, Leamington Spa

Excellent progress has been made in the Company's strategy to reposition Regent Court as Leamington's principle food and leisure destination with the successful grant of planning consent and the completion of three new lettings complementing the already trading restaurant operators, Nando's and Turtle Bay, which the Company has introduced since its acquisition of the centre.

The combined rent for the three new lettings totals £167,000 pa at an average of 17% above ERV. Firstly, the surrender and re-letting of the former Strada unit to Las Iguanas for a lease term until June 2034 at a rent of £82,500 pa. Secondly, a new letting to Zou Bisou, a frozen yogurt operator, on a 10 year lease at £36,625 pa; and thirdly to De Montford Fine Arts on a new 10 year lease at a rent of £49,500 pa.

Following the successful planning consent awarded in February 2014 to refurbish and upgrade the public realm, plans are being finalised and tendered with works due to commence in August 2014.

The Deeping Centre, Market Deeping

NewRiver has successfully appealed and received planning consent to develop two modern retail units on land adjacent to the centre that is anchored by a 30,000 sq ft Co-Operative supermarket. The two units provide 8,000 and 10,000 sq ft respectively, create additional parking and will enhance and improve the retail offer and environment.

Albert Square Shopping Centre, Widnes

Redevelopment plans to extend the shopping centre are well advanced and on course for the scheduled hand over of a 10,800 sq ft store in late July to 99p Stores on a new lease for £135,000 pa on a 10 year term. The development reflects an attractive yield on cost of 10% whilst enhancing the retail offer of the existing asset. 

The Forum Centre, Wallsend

During the period, NewRiver agreed new lettings with three local retailers, increasing annual income by £46,000 pa. A3 planning consent was also secured on 1/3 High Street to facilitate a new letting to a national restaurant operator. The Company is also pleased to announce that the shopping centre footfall has increased by 23% and an increase in town footfall by 11% following the opening of Home Bargains, 99p Stores, Iceland and the new Community First Centre and Library in February 2014.

Phase two of the Centre's redevelopment is well underway with the demolition of the residential units on the adjoining site now complete. Detailed discussions are underway with a major food retailer, a drive thru fast food operator and additional retailers.

Locks Heath Shopping Village, Fareham

Following the success of the introduction of Waitrose to the centre, footfall has increased by 14% month-on-month in April. Development plans are progressing well to introduce further retail units within the centre with offers received from a variety of major retailers.

The Prospect Centre, Hull

NewRiver is advancing its strategy to re-position The Prospect Centre with an improved food and leisure offer. Following the opening of StrEAT, a multi-vendor food court in 2013, activating formerly disused space in the centre's atrium, the Company has further secured A3 planning consent with a simultaneous pre-let to a key food operator. Your Gourmet Burger has signed a 15-year agreement for lease at a rent of £35,000 pa.

Eurochange has taken a new mall pod generating £15,000 pa of additional income in line with NewRiver's strategy of maximising returns from underutilised mall space.

Hill Street, Middlesbrough

NewRiver has secured three new lettings and one lease renewal totalling over £215,000 pa in rental income. 

Warren James have relocated on a new 10 year lease paying £42,500 pa which will allow NewRiver to increase the food and beverage provision in the South Mall. Ramsdens has taken a five year lease at a rent of £45,000 per annum to launch their first 'Savvi' concept store in the UK. West Coast has taken a 10 year lease paying £55,000 pa with a turnover provision. Phone retailer Three has re-geared its lease for an additional five years at £75,000 pa, committing the tenancy to 2021.

The Beacon Centre, North Shields

NewRiver completed three new leasing events with Shoe Zone, Urban Fashion and Dickinsons Butchers at combined rents of £70,000 pa. A3 planning consent was granted for two units, one for a new 10 year letting to a regional café operator and the other to facilitate a freehold sale to a Costa Coffee franchisee improving the food and beverage offer and increasing dwell time. A programme of enhancement work is being finalised to rebrand the centre to improve and modernise the appearance internally and externally.

Unit 47, 5 Trinity Square, Hereford

Contracts have been exchanged with Poundland on a new 10 year lease at a rent of £200,000 pa. The letting was agreed simultaneously with the early surrender of TK Maxx who previously paid £185,000 p.a.

Growing portfolio restaurant offer

NewRiver has completed three long term lettings with CPL Foods trading as Burger King. The new restaurants will open in Llanelli, Carmarthen and Wisbech on new 20 year lease terms at combined rents of £180,000 pa plus turnover top up provisions. NewRiver continues to work closely with CPL to develop the portfolio restaurant and food court offer.

Car Parking

NewRiver has agreed terms with one of the UK's market leading car park operators, Smart Parking, to operate and manage the shopping centre car parks in Wallsend, Bramley, Market Deeping and Fareham on a limited stay free parking basis in order to improve vehicle circulation, signage and enhance the customer experience.

Wi-Fi

As part of NewRiver's commitment to drive innovation and enhance the customer experience within our shopping centres, NewRiver is installing free Wi-Fi to its recently acquired shopping centres with existing wifi provider for the portfolio, BSKYB's The Cloud.

Marston's Plc portfolio

The Company is progressing well on the conversion of its 202 pub portfolio acquired from Marston's in December 2013.

In April, NewRiver announced conditional agreements to lease 54 new convenience stores to The Co-operative Group. The majority of c-stores will be new-build projects constructed on surplus land adjacent to the existing public houses. The remaining part of the Portfolio will be conventional conversions from public house use to c-stores or redeveloped as standalone c-stores. It is expected that the majority of the completed assets will be delivered within two years.

In total, NewRiver is developing almost 200,000 sq ft of new c-store space for The Co-operative Group. The lease terms are 15 years with no break clause and an annual RPI-linked rental increase formula capped at 4% and collared at 1%. The rental income agreed varies between £15.00 per sq ft and £17.50 per sq ft.

Allan Lockhart, Property Director at NewRiver Retail, said:

"At the end of the first quarter of our financial year, we are delighted to report another highly active and successful period. We acquired the Linear retail warehouse portfolio, recycled equity through the profitable sale of the Poundland store in Crawley and are driving forward our risk-controlled development programme including securing two planning consents as well as completing a key acquisition in Boscombe to unlock further value within that existing asset. Our active asset management programme continues to improve the quality of our portfolio income stream through the enhancement of the retail, food and leisure offer. 

This highly active first period builds upon our successful track record and underpins NewRiver as the leading value-creating real estate specialist, committed to and delivering attractive long term returns for shareholders."

-Ends-

For further information

NewRiver Retail Limited  David Lockhart, Chief Executive Mark Davies, Finance Director	Tel: [phone]
Bell Pottinger David Rydell/Guy Scarborough/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 £609 million principally comprising 24 UK wide shopping centres, four retail parks, 17 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 1,118 occupiers, a total of 4.6 million sq ft, total annual footfall of over 100 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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