Newriver Reit Share Discussion Threads

[tim1478] 07/12/2018 14:53

I am frustrated I could not get a short on this to protect my holding. I have just sold half but will buy back if this seems sensible.

[lord gnome] 07/12/2018 14:27

This has been on my watch list ever since I saw the company present at Mello in Derby back in the Spring. I've never hit the buy button because it has been one way traffic south for the share price. I won't be putting the farm on it just yet, but if it does ever get down to 200 then it will prove just too, too tempting.

[chucko1] 07/12/2018 14:05

Gorilla, I really have no idea about that. What is more is the risk of Woodford liquidating at some stage. So I keep a lot of dry powder on this one.

But, seemingly like you, I see no reason to stop believing in the ability of management to deliver over the medium and long term. I only have 2% of my overall portfolio in this one, but would happily take it to double that or more. Especially as most of the current 10% yield is safe in most foreseeable circumstances.

[gorilla36] 07/12/2018 13:14

One really has to wonder what this company needs to do to get it's share price moving? Paying almost 10% div now, well managed, cautious, in the right sector. When might it turn?

[chucko1] 07/12/2018 12:52

I agree entirely. Exactly the sort of deal a lowly-leveraged, excellently managed REIT should be engaged in when there is an abundance of fear.

NRR is a great long-term risk/reward, more so at these current levels. I have just started buying (adding) again.

[a0002577] 07/12/2018 11:59

Fantastic deal - Heinekin obviously not reaching the parts others can't reach. Suppose they didn't have the management bandwidth or the will to manage them properly so sold them off cheaply.

Apparently you have to sign up for these news flashes as they do not require an RNS

[fenners66] 07/12/2018 10:41

"predominantly let on short-term leases, with a weighted average unexpired lease term across the portfolio of less than one year"

So the 17% headline looks good - but no guarantees of any yield after the leases expire.

There was also a seller - you would think they can do the maths as well - knowing 17% is very high.

[spectoacc] 07/12/2018 10:29

NewRiver - the only company that seems to be able to make money from pubs these days.

[speedsgh] 07/12/2018 10:27

Just released on NRR website. No rns showing yet...

Acquisition of 76 community pubs from Star Pubs & Bars at a 17% yield -

NewRiver is pleased to announce the acquisition of a portfolio of 76 community pubs from Star Pubs & Bars for £12.0 million, representing a net initial yield of 17.1%. The acquisition will use part of the proceeds from NewRiver’s recent disposal of a portfolio of 22 community pubs in October 2018 for £14.8 million, sold at a net initial yield of 5.6%.

The portfolio comprises 76 wet-led community pubs located across the UK. The pubs are predominantly let on short-term leases, with a weighted average unexpired lease term across the portfolio of less than one year, which will facilitate immediate active asset management initiatives, such as signing new long-term leases with new and existing occupiers, and the deployment of targeted capex, including into risk-controlled development opportunities.

Mark Davies, Chief Financial Officer of NewRiver, and Executive Chairman of Hawthorn Leisure, said: “We are delighted to be acquiring this high-yielding portfolio of community pubs from Star Pubs & Bars. This is a great example of our disciplined capital allocation - following the disposal of 22 community pubs in October for a net initial yield of 5.6%, we have recycled part of that capital into a portfolio yielding 17%. Our integration of the Hawthorn Leisure business is well on track to complete in January 2019 and this acquisition will allow us to use our active asset management and risk-controlled development expertise to extract further value from this portfolio.”

[spectoacc] 03/12/2018 07:56

The debt levels held in the Peel vehicles that own c.29% of INTU are very interesting. Effectively gearing on gearing.

[hpcg] 02/12/2018 09:56

Don't forget the INTU consortium were already significant shareholders. It would be commercial suicide to rubbish the company. In this case actions speak louder than words.

[fenners66] 29/11/2018 14:05

Their RNS does say that they had done the due diligence - having been granted access and that did not bring anything to light.

Then they use the excuse of macro economic conditions - that part one would have thought applies to the whole market - but I urge anyone interested here to read the whole RNS

[chucko1] 29/11/2018 12:00

The fate of INTU was sealed prior to Brexit and the failure to complete the deal is more likely to do with the true state of INTU’s finances. I think this is why Odey have had a short on them for so long and always thought the deal was going to fail once Brookfield were in a position to take a closer look.

NRR unmoved on this.

[fenners66] 29/11/2018 11:28

Intu has announced their sale is off

"However, the Consortium has announced today that, given the uncertainty around current macroeconomic conditions and the potential near-term volatility across markets, the Consortium is not able to proceed with an offer within a timeframe which is manageable within the confines of the Code timetable."

Share price fell around 35% in response.

Their RNS adds some detail and gives some read across for the current retail property market.

[spectoacc] 26/11/2018 19:23

Thanks for posting that, though as love-ins go, that one was epic!

As an aside - I note that if the recent bid for BTG goes through, Woodford clears a wad of cash, which should help meet a few redemptions.

He must be kicking himself tho - how much better to be building his portfolio in today's market, or at least adding to it at eg current NRR s/p.

Still a happy NRR holder here.

[speedsgh] 26/11/2018 17:30

Transcript of Half Year Results webcast...

3/3

Q (Keith Crawford, Peel Hunt) 44m17s
There’s quite a lot of interesting things here. It looks as though the Hawthorn acquisition has increased the value of the business and the savings that you’re expecting, or synergies, look significantly greater than the voluntary agreement [negatus], very significantly greater, so that’s very nice. The retail parks here have not fallen in value where as they have done in the other declared companies, the giants, partly because they bought from the same place frankly; that was always coming. But that’s good, that’s very good. You’ve raised the dividend; I’m assuming you wouldn’t do that if you had any discomfort about raising the dividend despite however uncomfortable some of us may be about some corners of the retail market. So that’s all interesting and all good. And the development surpluses of course, what you’re saying in potential is a very substantial figure; it’s 20%-ish of the existing market cap actually. I mean it’s interesting from two points of view. First of all whether you would expect that you have to sweat it out, wait 2-3 years, whether you can advance any of that and whether you would be thinking possibly about bringing down the loan rate at a time when you don’t have to but people like it?

A (Allan Lockhart, Chief Executive) 45m35s
In relation to going after the inherent development value within our portfolio, we do have options around that in terms of we could sell sites with the benefit of planning consent and take a capital receipt in excess of book value, that’s one way of crystallising profit and value. The second way is for us to procure the residential opportunities in strategic joint ventures with housing associations, residential developers, PRS institutional capital, and we have ot discussions running with a variety of those types of operators. And then the third option is for us to build it out ourselves. So as I said we’ve got the ability to crystallise value through the development cycle and we are working on our development projects as to what’s the most appropriate exit strategy, so… What was your second question, Keith?

Q (Keith Crawford, Peel Hunt) 46m33s
Whether you would thinking of bringing down the LTV effectively?

A (Allan Lockhart, Chief Executive) 46m38s
Yeah, I mean our balance sheet is in great shape as Mark was saying. The LTV is well within our stated policy. Obviously we’re recycling assets at the moment. We’re on track to sell 5% of our portfolio this year and we will maintain the LTV in accordance with our financial policy. So we’re comfortable at the current level, we have fantastic interest cover, amazing diversification through the portfolio as we were demonstrating earlier, we have been able to sell assets ahead of our March 2018 book value so I think we’re in pretty good shape and comfortable with the LTV.

Q (Keith Crawford, Peel Hunt) 47m22s
What’s also interesting is to see that both Land Securities & British Land are joining you in this; they’ve woken up to the fact that unfortunately post-Brexit however people will still have to live in the suburbs in the southern part of the United Kingdom; so they wish to do this as well. This does seem a strategy which is seen as to be coherent, or very coherent.

A (Allan Lockhart, Chief Executive) 47m41s
I think that’s true but I would think to be fair to ourselves we were way ahead of the curve on this because we’ve started our residential projects quite some time ago. We have invested with residential experience within our team so we’re well ahead of them on that but, yes it’s not a surprise to us that some of our peer group are starting to advance their own projects, particularly focused around residential. I think your first point was that clearly the Hawthorn leisure acquisition has added to the value of the business. We certainly concur with that. We like the income returns that we can get in the sector, we’re talking double-digit unlevered yields on the three key acquisitions that we’ve done. We also like the scale benefits that you get in the sector and the synergies that we’re already delivering. And of course then we think it’s highly defensive through change of use potential, whether it be convenience stores, restaurants, residential or even as I showed on one of the earlier slides the ability to change a pub to a private nursery operation. So it’s going to open up a whole range of opportunities, it’s very scalable and we’re also getting capital growth out of the pub business as well and we’ll see that coming through in the second half because the scale benefits and the synergies that we’ve talked about, you know that £3m that we want to get to, you know the way the valuation works in the sector, it’s all done off an FMT basis, you know the valuer will put a 7.5-8x multiple on that, so potentially there is £20-25m of value uplift in our pub business that we can create ourselves that we’re not dependent on markets to do that for us.

[speedsgh] 26/11/2018 17:29

Transcript of Half Year Results webcast...

2/3

Q (Sander Bunck, Barclays) 40m00s
I’ve got two questions. First one on the comment you made around alternative use and evaluation of that. If I understood correctly 85% of the current portfolio valuation is supported by current residential values. Does that mean it includes all the costs of knocking down the existing centres and building up the new residential? And how do valuers look at it? Do they take that into account in valuation? Should we see it as the worst downside that there potentially is? How should we look at that?

A (Allan Lockhart, Chief Executive) 40m38s
Well, in terms of the alternative use, what we did was, we looked at our entire retail portfolio (that obviously excludes pubs) and we then built up residual individual appraisals for each of our assets on the scenario that we remove the retail and we presominantly came forward with residential-led developments. So yes, it does include demolition and construction and what’s really pleasing is that in essence our retail valuations are only 15% higher than the alternative use value and we think that over time that gap is going to close. But that is not to say that we don’t have confidence in our retail portfolio; we do because we know how important the physical store is to a vast majority of retailers that are very much focused on that value-for-money to UK consumers on everyday essential items. So there is still a very strong future for our retail portfolio but we have that added benefit and reassurance that our retail values are very close to being underpinned by alternative use value.

Q (Sander Bunck, Barclays) 41m48s
Sorry, just to follow up on that, and valuers do take that into account in their valuations today or not quite yet?

A (Allan Lockhart, Chief Executive) 41m52s
No, they haven’t taken that into account. This is an exercise that we thought would be a very interesting exercise to look at to see what the relationship was and it’s very very reassuring from our perspective. Where the values do take account of alternative use and residential is where we’ve advanced a development project, particularly through a masterplan or securing of planning consents, and then they start to take that value into account.

Q (Sander Bunck, Barclays) 42m23s
And then the second question which relates to the dividend. Obviously you grew the dividend again today. It’s now by quite a margin the highest dividend yield player in the sector. You obviously need to grow into your coverage which is fine. Going forward do you expect to retain that growing dividend policy or actually do you allow yourself some room to give a bit of space and build up a bit of coverage, or are you quite happy with a persistent 100% dividend payout going forward and therefore also grow the dividend after this year?

A (Allan Lockhart, Chief Executive) 42m58s
I think there’s a number of questions within the question so I will try and deal with them all. I think with dividend the important thing is to recognise the track record and obviously by increasing the dividend by 3%, I think that’s probably a real measure of confidence that the management have in the sustainability of cashflows in the business. Clearly 77% cover at the half year. We recognise that that’s something that we want to move away from. It was one of the reasons why we put in the presentation pack a slide on how we can get to dividend cover. There are of course a number of ways that we can get there. All we can really say is that we’re committed to a growing and progressive dividend and as we always have done, with the exception of one year in our 10 year history, we’ve always had a fully covered dividend. We don’t have that in the half year so we’re very committed to get there and there are a number of ways that we can do it and we are confident we will get there.

Q (Sander Bunck, Barclays) 44m07s
And you are committed to retain a growing dividend policy beyond FY19?

A (Allan Lockhart, Chief Executive) 44m10s
Absolutely,yeah, absolutely, yeah.

[speedsgh] 26/11/2018 17:29

Transcript of Half Year Results webcast...

1/3

NOTE: Liberum & Peel Hunt act as brokers for NRR

Q (David Brockton, Liberum) 36m15s
Can I ask two, please. The first one relates to acquistions. You stated at the outset that you’ve deliberately held back through the period. Could you just give us some further insight into your expectations for where you will deploy capital over the course of the next 18 months or so. Firstly into retail, given the changing landscape there. Are you going to hold back & wait? Are you seeing any interesting opportunities to date? And secondly into the pub portfolio as well and your thoughts there in terms of expansion in the near term. That’s the first question. Then to the second question related to the performance fees in respect of the c-store programme. I think you stated those are £1.6m to date. Are we through the majority of those now? Should we expect a de minimis contribution from hereon.

A (Allan Lockhart, Chief Executive) 37m13s
We have so far deliberately held back our deploying capital into shopping centres. If you look at the capital we have deployed over the last 6 months and this calendar year, the majority of that has gone into pubs and also retail parks. And that’s just reflecting that we felt that the better buying opportunity from an entry price perspective in shopping centres was ahead of us but we are starting to see opportunities now coming through from a pricing perspective that we think will allow us to deploy capital very carefully and very selectively into shopping centres. We are confident that we will be able to source opportunities, both in terms of retail parks which has been a very successful and growing part of our business, and also pubs, particularly once we have really completed the integration of the Hawthorn leisure business into the NewRiver business. Do you want to comment on c-stores, Mark?

A (Mark Davies, CFO) 38m15s
Thank you, David. Yeah, you’re right. We received the significant performance pay of £1.6m last year. The way the arrangement works with the Co-op: from here onwards every single store that we deliver, we get a fee. The fee depends on the particular location and the site and would start at £75,000 and goes as high as £200,000 for locations that they would really want to be in so they are prepared to pay a higher fee. And I think I said earlier on in the presentation that we expect to complete another 4 convenience stores by the end of the financial year. So it all starts to add up. And I would just add to Allan’s comments about the ability to deploy capital into the pub sector. Clearly we’re really delighted with the Hawthorn acquisition; it is a profitable transaction for us. But what it also does for us, we believe, and there has been plenty of evidence of that in the 4 months or so of ownership, it’s going to open the door to opportunities that would not have been available to us historically. We’re getting approaches from brewers and private equity and the whole range of businesses that recognise that there’s value in this sector, and they’re trying to unlock a way of getting into the sector. Of course we’ve got a really great team, a great platform that we can use to leverage from those opportunities either on our own balance sheet or in joint ventures.

[salchow] 26/11/2018 12:43

The price assumes the dividend will be cut at some point.

[ramellous] 26/11/2018 11:00

Nearly at 216p where they will be paying a 10% divi. I’ll be in for more if it gets there.

[cc2014] 26/11/2018 10:46

Thanks for all your posts above guys. I found them very helpful. I have a pile of INTU which I hope the takeover will go through on this week and I'm looking for a home for the money. Looking for yield really although I have some appetite for capital risk at least on part of the proceeds.

I note Woodford owns either 24% or 29% of NRR depending on what sources I look at.

Which puts this in the wait and watch category for me. I'm worried he may become a forced seller if he gets continuing fund withdrawals. Wtf does he have so many large positions in percentages terms in so many companies? Doesn't he understand liquidity?

Anyways I shall continue to watch, wait and monitor. I guess I'm looking for a stupidly low price if Woodford starts selling. If he doesn't I guess I'll miss out.

[speedsgh] 23/11/2018 12:01

NewRiver tarred with the wrong brush -

The business model at NewRiver REIT (NRR) sets it apart from other retail landlords, but that doesn’t stop valuers taking a red pen to its portfolio. So, in the six months to September, its net asset value shrank, while headline profits virtually disappeared as the previous £2.2m valuation uplift was replaced with a downward valuation of £24.7m.

All this comes at a time when net rental income grew by nearly six per cent to £42.9m, with occupancy levels steady at 96.2 per cent. A total of 127 retail leases were secured covering 653,000 square feet on long-term deals at 10.7 per cent above previous passing rents.

This resilience largely reflects the fact that NewRiver remains focused on the convenience end of the retail market, where the non-discretionary spread of shops is less affected by the rise in online shopping. Tenants are also relatively sticky, too, because at £12.48 per sq ft, average rents are roughly half those prevailing in the retail sector. The May acquisition of Hawthorn Leisure for an enterprise value of £107m, representing an initial yield of 13.6 per cent, brings with it 298 pubs and potential synergies of £3m.

Analysts at Peel Hunt are forecasting adjusted net asset value at the March 2019 year end of 281.4p from 291.8p a year earlier.

IC VIEW
The dividend is uncovered because the disciplined approach to new investments meant that there is capital still to be deployed. Around 5 per cent of the portfolio will be recycled this year, and the residential portfolio is sitting on a potential £140m of development profits. At a discount to NAV and yielding over 9 per cent, the shares are worth having. Buy.

[skyship] 22/11/2018 08:13

CEO impressive on the SKY evening business programme with Ian King last night.

If I weren't so committed to HCFT & RGL I finally might consider buying now @ c232p!

An 18% discount and 9% yield suggests they may have found the bottom at this level.

[chucko1] 21/11/2018 10:40

A0002577, it’s not a problem (buying too soon) as no one can tell the path this will take a priori, whatever they may say! If you hold long enough (I intend doing so, for sure, unless a clear and permanent change of prospect is evident) you should do fine on NRR. I also bought “too soon”, but kept back a bunch of dry powder as I expected other investors to balk at the overall outlook for retail (and sell out), as well as the most unhelpful Woodford mega-holding - something which may well prevent a rerating of this for a long time.

[a0002577] 21/11/2018 10:28

I thought they were very presentable results apart from one little porky - namely that they haven't increased the dividend. It is still 5.4 pence - as it was during the first two quarters.

I like the story here and am hopeful of others seeing it soon - in the meanwhile I shall enjoy the near 9 and a half per cent yield. My problem is that I bought too soon!