Newriver Reit Share Discussion Threads

[hpcg] 01/8/2019 11:30

fenners - the move yesterday was clearly on the back of INTU. The latter though is still in its own Woodford situation where John Whittaker through Peel group has 30% of the Marianas Trench underwater shares. These are also believed to be debt funded. So add that to an equity issue flag waving and for sure the shares went down a lot yesterday, today and tomorrow. Note that Intu is not paying the interim dividend but putting this against debt, and paying tax; details bottom. This remains an option for any REIT to de-gear.

D Tax on underlying profit

Tax on underlying profit includes £8.3 million in respect of corporation tax on the estimated current period underpayment of the minimum PID.

Current tax relating to the estimated prior year underpayment of the minimum PID of £7.9 million has been treated as an exceptional expense due to changes in the interpretation of REIT legislation. See note 8 for further details.

8 Taxation (continued)

In view of the announced short-term reduction of dividends it is anticipated that there will be an underpayment of the minimum PID, and therefore under REIT legislation, the Group will incur UK corporation tax payable at 19 per cent whilst remaining a REIT.

The UK ongoing current tax expense in the period of £8.3 million relates to corporation tax on the estimated current period underpayment of the minimum PID. The figure has been calculated using management's estimate of the UK effective tax rate for the full year. This amount has been included within the Group's measure of underlying earnings as it relates to a tax expense on current year UK rental income.

The UK exceptional current tax expense in the period of £7.9 million represents in full the corporation tax in respect of the estimated prior year underpayment of the minimum PID. This one-off tax expense in respect of prior year has arisen from changes in the interpretation of the REIT legislation and has been classified as exceptional. This is excluded from the Group's measure of underlying earnings.

[marksp2011] 01/8/2019 09:48

Fenners
Not sure they are really in the material end on rents, £12/foot is less than decent warehousing :)

[fenners66] 01/8/2019 09:08

Well speculation last week that Woodford was out and the share price had stabilized.

Share price has continued down.

So is that continued pressure on property companies ?

[fenners66] 01/8/2019 09:05

marksp - my reference was not with regard to the absolute costs of rent - but rents proportion of retail costs vs the proportion of income for the property companies.

Retail - buys stock (biggest cost) pays staff and overhead (including rent). So relative to overall costs (though not necessarily profit given some slim margins) a small rent reduction is a much larger % income reduction for property companies.

If your retailer is going to make more profit and survive , the property company takes a large profit hit.... and survives ?

[davvero] 01/8/2019 08:46

when is the next ex-dividend date? Anyone knows yet?

[marksp2011] 01/8/2019 07:46

Shawzie

I dont know where you have been but that has been a model for about 10 years. My Tesco Extra has a third party pharmacy and a third party cafe
Walmart have been doing it since 2002 to my knowledge even having tyre fitting, lawyers and pawnbrokers within the stores
All supermarkets tend to sub let. Kimberley Clark etc rent shelf space for their products and provide their own restockers- same with makeup brands, books etc

[shawzie] 31/7/2019 15:41

Surely further problems for the High Street.
My local Asda supermarket has now sublet parts of the store to a Dentist and to a Ladies Hairdresser.
The local Morrisons store has a Pharmacy.
Waitrose has a similar if more charitable model within our local store.
The smaller businesses can operate to supermarket hours and have increased footfall.
Perhaps a survival pattern for different forms of business.

[marksp2011] 31/7/2019 12:08

Hindsight

Many years or never.

[hindsight] 31/7/2019 11:52

Anybody know how long it takes for rent reductions to challenge ratable values so rates reduction too ?

[marksp2011] 31/7/2019 11:38

fenners

That is a peculiar question. If you looked at a Card Factory store they are probably less than 100 SM all up and the rent is probably around £130/SM
prime West End is c £14k/SM
Prime Glasgow c £2k/SM
Prime Cardiff c £1k/SM


The answer really "depends". If you are Bentalls in Kingston, with a multifloor sales palace - rent would be significant but - they are also the anchor tenant so they probably have a much lower rental load than if they were competitive in the high street. I saw only one empty unit in the whole mall last weekend and there must be 100+ and, they were all "proper" stores.

[rcturner2] 31/7/2019 11:09

In the Q1 update, NRR stated that the footfall in its retail centres had dropped by 2.5%. Is this versus the same period last year or is it a 3 month drop?

If the latter then that has to be a serious concern.

[fenners66] 31/7/2019 09:57

Conversely, less money in property companies pockets.

But since rents are only a part of the cost of retail - a small uplift in decreased rents for retail (which may not help them much) translates into a significant loss for property companies.

What % rent reduction do you think makes a difference to retail ?

[hpcg] 31/7/2019 09:41

SpectoAcc - yes good news from Next. What every property companies need more than anything is healthy tenants and rent reductions in prime areas means more money in retailers' pockets.

[spectoacc] 31/7/2019 08:38

INTU wending it's merry way to zero, taking and talking sensible action c.4 years too late. Whilst Next again reports bumper figs and goes back over 60 quid a share. I remember when it was 13p...

Edit - have to laugh at INTU. "We are perceived as having too much debt". No, you have too much debt. "Mulls an equity issuance" with the shares at all-time lows. (Par value appears to be 50p, and they're nearly there).

Do hope this "Mulls a.." has been checked with Mr John Whittaker, whom the market believes has substantial debt secured against his c.29% holding in INTU. Another 17% off the share price today won't be helping covenants.

Can they raise money without him?

Edit #2 - from December, no need to register, 3rd para the relevant one:

[spectoacc] 30/7/2019 09:02

Agreed @Bondholder but - NRR benefits from being a buyer now, rather than too much of a legacy holder (like HMSO, INTU, CAL etc). You want to be the one buying at £350k in your example, not the one who paid £20m (tho think of the empty rates!).

Can it all get a lot worse? Of course, particularly with a recession long overdue. But a lot is in the NRR price already IMO.

For an interesting "bought too soon" co, have a look at EPIC - they switched into retail warehouses about 18 months ago, and have been paying the price.

[bondholder] 30/7/2019 08:58

The danger for secondary assets like those owned by NRR is that locations become unprofitable at any rent. The shopping center sold for 350k this year in Kirkcaldy (which cost £20m in 1980) is an extreme example of what could happen.

[rcturner2] 30/7/2019 08:46

Focusing on the income is a mistake IMHO. The danger for NRR lies in a general market downturn for these types of assets which undermines their valuation.

[finkie] 30/7/2019 08:43

NRR Average rent is £12.50 sqft that’s pretty cheap overall for retailers, it could go down a little more but unlikely in my view. If it went down by another 10% but leases were extended the valuation impact might be minimal.

[fenners66] 29/7/2019 01:07

"they were alive to the risks of mid market fashion and department stores"

Do you think they are all the problem.

My nearest town had 1 department store - it still has one - however there perhaps more than 50% vacant shops around it.
Of the rest sooooo many are hairdressers/barbers/nail bars, they cannot all survive.
Then there are charity shops and bookies. The charity shops must pay minimal rent , the bookies are going to close.
Many pubs have already closed.
Population of the town continues to grow - but they are not using the shops.

[m_kerr] 28/7/2019 23:35

it's a reasonable question from primark. why should they be punished for not going into admin?

as to the impact on NRR, on the whole rents are already at realistic levels that reflect the structural challenges, and acquisitions are screened for rental affordability. you have to give some credit to NRR, they were alive to the risks of mid market fashion and department stores, and positioned their portfolio accordingly. they have had minimal exposure to debenhams, HoF and arcadia.

[fenners66] 28/7/2019 23:28

I have been saying this for some time.

If properties are empty or rents are reducing elsewhere at such a pace - no property company is immune.
Since Primark for example are successful does anyone think they will let the opportunity slip to negotiate hard on rent reductions ?

The rest will follow or they will not survive - either outcome is a disaster for the landlords.

[bondholder] 28/7/2019 17:56

Primark is demanding 30% rent cuts on dozens of stores in an effort to close the gap with struggling rivals that have used insolvency procedures to slash liabilities.The budget fashion retailer is asking landlords for reductions on shops where the leases have several years to run, and in return is offering to extend the lease or invest in refurbishment. Most of Primark's 189 UK stores are held on leases.The chain is among a small group of stronger retailers bargaining hard with landlords. This year, Sir Philip Green's Arcadia Group, Debenhams and Monsoon Accessorize have used company voluntary arrangements (CVAs) to close stores and slash rents."Primark's property team has been told by senior executives to go and get rent reductions. They are looking...

[hugepants] 28/7/2019 15:59

Kenmitch, yes you're right but so far they are reporting like for like footfall drops much smaller than NRR. That's what doesn't really add up for me about NRR. They are supposedly positioned at the least risky end of the retail market. No evidence for that so far!