NewRiver Retail Limited Q3 Portfolio Update (3758M)

TIDMNRR

RNS Number : 3758M

NewRiver Retail Limited

20 January 2016

NewRiver Retail Limited

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

Q3 Portfolio Update

Highly active third quarter and post-period with transactions totalling GBP150 million including

GBP108 million of acquisitions, average yield of 8% and disposals totalling GBP41 million

Delivery of first Co-operative C-Store

Active asset management delivering value and creating retail occupancy uplift

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 third quarter, beginning 1 October 2015 and ending 31 December 2015.

HIGHLIGHTS

   -- Deployment of majority of proceeds of oversubscribed GBP150 million equity fundraise through Neptune Portfolio 
      acquisition (completed 18 January 2015), a portfolio of three shopping centres for a total consideration of 
      GBP92.3 million, equating to a NIY of 8.1% 
 
   -- Acquisition of three further retail assets for a combined total of GBP15.6 million at a blended net initial yield 
      of 7.3% 
 
   -- Three disposals totalling GBP31.9 million including Regent Court in Leamington Spa for GBP28.4 million, NIY of 5% 
      delivering an IRR of 129%; Ferensway, Hull for GBP3.0 million, NIY of 4%, an IRR of 112%; and a single pub for 
      GBP475,000, an uplift on purchase price, generating an IRR of 58% 
 
   -- Post-period sale of a retail warehouse site in Auchinlea, Glasgow, part of the Ramsay Retail Warehouse portfolio 
      acquired in July 2015, sold for GBP9.0 million, 177% IRR; and exchange on the sale of a single pub for 
      GBP925,000, an uplift on purchase price, expected to generate an IRR of 30% 
 
   -- Including post-period transactions, assets under management now total GBP1.1 billion (30 Sept 2015: GBP978.5 
      million) 
 
   -- Strong portfolio-wide performance from retailers during Christmas period, with majority of retailers reporting 
      increased sales and conversion versus comparable period 
 
   -- Total rent roll under management at 31 December 2015, following disposals during the period, totaled GBP85.3 
      million pa (30 Sept 2015: GBP85.3 million); following post-period transactions current rent roll now totals 
      GBP94.4 million 
 
   -- Weighted Average Lease Expiry ("WALE") for the retail portfolio steady at 7.1 years (30 Sept 2015: 7.4 years) 
 
   -- Improved retail occupancy rate of 97.3% (30 Sept 2015: 96.3%) 
 
   -- The average retail rent for the portfolio remained affordable at GBP12.45 per sq ft. (30 Sept 2015: GBP12.35 per 
      sq ft.) 
 
   -- 67 leasing events achieved during the period, of which 32 were long-term new lettings and lease renewals securing 
      a total of GBP1.8 million pa in rent, 3.3% above ERV (30 Sept 2015: 22.6%) with an improved average lease length 
      of 11.4 years (30 Sept 2015: 8.7 years). Occupier incentives continue to decrease, now at an average of 5.1 
      months equivalent rent (30 Sept 2015: 5.7 months) 
 
   -- Completion of first Co-operative convenience store on a 15-year lease at GBP73,000 pa which opens this week; 
      on-site for a further three. Jackie Moody-McNamara, formerly of Punch Taverns, appointed as new Pub Portfolio 
      Director 
 
   -- Exchanged contracts with Travelodge for a 71 bed hotel in Cowley, Oxford ahead of planning submission for a GBP64 
      million mixed-use redevelopment 
 
   -- Fifteen planning applications submitted during the period: in Worthing, Hastings, Erdington and 12 residential 
      applications within the pub portfolio. Five consents secured: in Morecambe and Blackburn with a further three 
      residential consents within the pub portfolio 
 
   -- Good progress across the Company's 1.25 million sq ft mixed-use development pipeline including construction 
      commencing on-site for Wallsend's Phase II to create a new Aldi and Burger King 

David Lockhart, Chief Executive at NewRiver Retail, said:

"Following a highly active period NewRiver has again demonstrated its track record in quickly deploying equity capital with acquisitions completed in Q3 and post-period totalling a combined GBP108 million, at an average yield of 7.94%.

The fourth quarter has got off to an encouraging start, with a GBP9 million post period disposal, reflecting our commitment to effectively recycling capital. We look forward to the opportunities that 2016 presents including our planned move to a Premium Listing on the Main Market in July."

ACQUISITIONS AND DISPOSALS

-- During the period, NewRiver announced that it exchanged contracts to acquire the Neptune Portfolio for a total consideration of GBP92.3 million, equating to a net initial yield of 8.1%, an equivalent yield of 9.6% and a reversionary yield of 10.5%. The acquisition completed on 18 January 2016. The portfolio comprises the Ridings Shopping Centre, Wakefield in West Yorkshire; the Cornmill Shopping Centre, Darlington in the North East of England; and the Capitol Shopping Centre, Cardiff in South Wales.

-- NewRiver also completed the acquisition of three further retail assets comprising one shopping centre and two retail warehouses for a combined total of GBP15.6 million, at a net initial yield of 7.3%. The three retail assets comprise of the Blenheim Shopping Centre in Penge, in the London Borough of Bromley; a retail warehouse in Daventry, Northamptonshire; and a retail warehouse adjacent to the Clifton Moor Retail Park in York, currently let to discount retailer B&M.

These strategic acquisitions, totaling GBP108 million, demonstrate the Company's proven ability to swiftly deploy funds and deliver on its business model of acquiring strategically selected retail assets, that will generate attractive cash on equity returns with identifiable opportunities to deliver capital and income growth through the Company's active asset management and risk-controlled development.

The acquisitions have also grown the Company's core asset base, its Shopping Centre Portfolio, to 32 centres.

-- During the period, NewRiver completed GBP31.9 million of disposals, including the GBP28.4 million sale of Regent Court in Leamington Spa, NIY of 5%, generating an IRR of 129%. Regent Court was acquired in 2012 for GBP10.45 million, reflecting a NIY of 8.9% as part of the Camel II portfolio. The sale to an institutional buyer follows the Company's successful repositioning of the asset from a low occupancy thoroughfare, to Leamington Spa's leading food and restaurant destination.

-- The Company also disposed of 119-121 Ferensway in Hull for GBP3.0 million reflecting a NIY of 4.0% and equating to an IRR of 112% during the quarter and the sale of its first pub from the original Marston's portfolio, for GBP475,000, representing an IRR of 58%

-- Post period disposal of a retail warehouse site in Auchinlea, Glasgow - acquired as part of the Ramsey Portfolio in July 2015 - to an owner occupier for GBP9.0 million generating an IRR of 177%. Additionally, the Company exchanged on the disposal of a single pub for GBP925,000, expected to generate an IRR of 30%.

Disposals during and post-period total GBP41 million and demonstrate the Company's commitment to efficiently recycling capital.

KEY ASSET MANAGEMENT HIGHLIGHTS

NewRiver continues to enhance and drive the value of its portfolio through strategic active asset management. The Company successfully completed 67 leasing events during the period including exchange of contracts with Travelodge in Cowley, Oxford, as well key lettings with Burger King, Costa Coffee, EE, Card Factory and Groupe Gerraud.

Long-term leasing events achieved a total rental income 3.3% above valuation ERV at a significantly increased average lease length of 11.4 years, securing an annual rent of GBP1.8 million.

The Company has achieved an improved occupancy of 97.3% and increased total annual footfall to 130 million shoppers. The portfolio's top 15 retailers (defined by rental income) continue to be underpinned by successful national retailers including Poundland, New Look, Boots, Primark, Superdrug, Wilkos, ASDA, Argos and B&M. Key highlights include:

   -- Completion of the 20,000 sq ft Packhorse Kitchen in Huddersfield, introducing two new restaurants and modern new 
      food court anchored by a Burger King and re-activating formerly vacant space. Since opening in December The 
      Packhorse Kitchen has contributed to a 30% uplift in footfall and experienced strong early trade, repositioning 
      The Packhorse into one of the town's leading food and leisure destinations. 
 
   -- Two new lettings to Burger King, in Middlesbrough on a 20-year lease, at a base rent of GBP50,000 pa plus 
      turnover linked top-up; and in Wallsend for 20-year lease, at a rent of GBP60,800 pa plus a 10% turnover top-up 
 
   -- On-site for the delivery of Phase II in Wallsend to create an 18,500 sq ft Aldi and a 1,500 sq ft Burger King. 
      Wider centre refurbishments, roof works and improved signage have been completed alongside a new 25-year lease at 
      GBP175,000 pa across 20,000 sq ft, to leading market operator Groupe Gerraud to provide 52 individual traders, 
      with 48 already pre-let 
 
   -- New letting to Costa Coffee in Wallsend for a new 10-year lease at GBP37,500 pa 
 
   -- Two lettings with The Works: in Wisbech on a 10-year lease for GBP45,000 pa across 2,000 sq ft; and in North 
      Shields for GBP27,500 pa across 2,300 sq ft. 
 
   -- New letting to EE in Boscombe on a new 10-year lease for GBP32,500 pa, 9% ahead of ERV. 
 
   -- New Letting to Card Factory in Newton Mearns for a formerly vacant 1,600 sq ft unit at GBP50,000 sq ft pa 
 
   -- Planning application submitted in Erdington for change of use, refurbishment and rebranding; and also in Hastings 
      and Worthing for change of use from A1 to A3 
 
   -- Planning consent granted in Morecambe for A3 change of use beneath the existing Travelodge and adjacent to Market 

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