Newriver Reit Share Discussion Threads

[candid investor] 20/9/2020 18:22:10

Manouk2....tell your friend that this is the most insightful and intelligently written article I have read on this website for a long time...I agree with almost everything he has said...the big problem as he says is further significant declines in asset values with big increases in LTV resulting in covenant pressures ..good news is I think lenders will waive these covenants in the short term .
I would add that I would sell more assets and announce a share buy back to flush out shorters and put a floor under current share price.

[candid investor] 20/9/2020 18:02:27

Debeege....I went on the Hawthorne Leisure website and saw them all available there...even as you say they are coming up for lease renewal then presumably it means that the current tenants are moving out or am I missing something ?

[fenners66] 20/9/2020 15:37:29

Reading the accounts published June 20 the reduction of EPRA NAV per share
201p
261p
-23%

so yes a 22% valuation fall has been done before.

Whilst loan to value went from 37% to 47% in the same period.

Referring to
"Already collected or agreed re-gears with 84% of Q1 rents and 80% of Q2 rents"

Is just falling for the spin B/S
I have the annual accounts open right now - so by way of example at that time

"Total collected or alternative payments agreed 75%"
sounds similar to the 80% figures mentioned....

But actually - Collected was just 52% !
4% already having been written off.

[spectoacc] 20/9/2020 13:26:22

Thanks for sharing. Haven't time to go through it line by line but some good (& not so good) stuff in there. Quick points:

1. S/he's down 10% already
2. CAL certainly isn't a peer (or pier!)
3. Re NRR achieving March valuation with disposals - what are they selling? Is it what they can sell, ie the good stuff?
4. The pubs comment has been rapidly and painfully superceded. A page in the paper today on why 900,000 jobs are now at risk in the hospitality trade [with a plea for renewed furlough over the two week Oct total lockdown, VAT cut extending into next year, and - bizarrely - a cut to beer duty. Getting more people into pubs is the opposite of the govnt's policy right now!]
5. A 22% valuations fall is mentioned as being needed for any covenant breach - I'd suggest that can occur inside 2 quarters.
6. Not sure relevance of B&M entering FTSE100. Next is well up the FTSE100 & they're getting 50% average rent reduction on renewal (they claim).


Don't get me wrong, not anti-NRR, not down here, and credit to your friend for mentioning some downsides too. I just don't think s/he has included enough of them :)

[manouk2] 20/9/2020 11:39:13

a friend sent me this well written analysis:



Thought I’d let you know I’m buying into NRR again. The discount is too big to ignore. I believe the market is mis-pricing the risk/return due to:
• Headlines of physical retail decline and demise of other retail-focused REITs (see Hammerson, Intu)
• Covid 2nd lockdown of non-essential retail (unlikely – but watching hospitalisations and deaths carefully – not just cases)
• Lack of clarity on true occupier ability to pay due to the moratorium on eviction proceedings
• Suspending of the dividend
• Brexit uncertainty

Portfolio valuation
1. NAV / share 201p. Current share price 51p (75% discount to NAV from 31 Mar-20 – which reported in June and already accounted for Covid to some extent)
2. LTV 47% and the issue of debt-level now an issue that needs to be resolved by management which they are addressing with disposals of £100m this year (already achieved £52m by Aug-20 at Mar-20 valuations)
3. I expect future valuation decline to be relatively modest through the rest of the financial year given:
a) Disposals already achieved in line with Mar-20 valuations (see above)
b) Tenant mix is focused on convenience and value/discounters who have fared well during lockdown and vs general online migration. E.g. One of their biggest tenants - B&M - has now been admitted to the FTSE 100
c) Retail park valuations (19% of the portfolio) are holding up in a post-Covid world (e.g. RDI disposal of 6 retail parks at 3% below Feb-20 pre-lockdown book valuations)
d) Pubs (23% of the portfolio) are open and were on an upwards like-for-like EBITDA trajectory before Covid
e) Shopping centres (51% of the portfolio) are the most vulnerable to valuation decline but are underpinned by alternative use valuations as residential (8% below existing use) should provide some further support. The business is already underway gaining planning permissions on many of these sites
f) NEY across the portfolio is already much higher than other property asset classes at 8.9% and rents are low compared to piers meaning there is less vulnerability to further yield drift which has affected other retail (e.g. LandSec retail down 20.5% vs. NewRiver down 12.3% over same valuation period to Mar-20).
g) Lettings conducted so far in FY21 are in line with Mar-20 valuation (Aug-20 operational update)
h) Savills monthly yield tracker for retail is showing just a c25bps blended yield drift for their mix of portfolio (shopping centres, retail parks and pubs) since April 2020
i) Average lot size of retail parks (£13m) and shopping centres (£20m) low compared to piers providing great access to liquidity. Pubs more liquid again (average value c£350k)
4. NewRiver has better metrics than piers (e.g. Capital & Regional LTV 57% and has breached covenants on a number of asset-specific debt, much less liquid assets but trading at same 75% discount to NAV)
5. Debt covenants are at 60% and 65% on a group-wide basis which would require a further 22% decline in valuations across the entire portfolio and no disposals to breach
6. As yields are high they collect a lot of cash for the portfolio value so interest coverage ratios will hold up easily
7. UK is already amongst the highest levels of online shopping penetration in the western world so the pressure of future shift is less acute from here than other countries
1. Online only really works for high-margin / high-value goods given the cost of operating a delivery network. NRR isn’t particularly exposed to online migration

Rental income
1. Already collected or agreed re-gears with 84% of Q1 rents and 80% of Q2 rents
2. Lots of the remainder are big names taking advantage of the current government protection to conserve cash when they don’t actually need to
a) E.g. Boots, Superdrug, Sports Direct, etc. in the press
b) Just 1.2% of tenant rental income is currently subject to administrations or active CVA (agree likely to go up as furlough ends)
3. Portfolio is currently under-rented vs Mar-20 ERVs so there is some headroom to grow into
4. Net acquisitions in Mar-20 year are yet to see a full year of rent collection – meaning some further room to grow in FY21 vs. FY20 figures.

I expect the government to extend the commercial tenant eviction legislation to the end of 2020 or beyond. Some tenants will continue to take advantage in an unscrupulous way but NRR can simply match that by delaying the reinstatement of the (full) dividend. Ultimately the rents are simply deferred - tenants will have to pay later or do a CVA / go out of business.

I spoke with a couple of commercial agents selling retail property to gather their thoughts. Lots of tenants have taken advantage of the legislation to part-pay or refuse payment but are working out deals to bring themselves up to date over the next 6-9 months. This also allows them time to apply for business interruption insurance claims – the High Court has just ruled generally in tenants’ favour on this today in a landmark test case of business interruption insurance.

I’m also comforted by the other ways the business adds value beyond simply collecting rent on balance sheet assets, specifically through fees and profit shares of JV equity with BRAVO (PIMCO), active asset management and capital recycling capability (buy at 9-15% yields, sell at 5-7%), re-development capability, and asset management mandates.

I expect underlying cash flows from operations to be c8p in FY21 (starting at , rising to 16p in FY22 and NAV/share to fall to 150-170p over the course of the next two half year reporting dates. But I think that will be the bottom of the market.

The catalyst for a resurgence in the share price are:

- Re-instatement of the dividend and dividend guidance
- 1H21 results (Nov-20)
- Sales of assets and clear route to return to 40% LTV. [Given likely portfolio valuation declines against Mar-20 this will require a fair amount of selling and is probably the biggest risk to regaining a stabilised business]
- Covid-19 improvements:
o Realisation that ‘Covid 2nd wave’ is case-led and isn’t resulting in anything like the same level of hospitalisations and deaths even on a proportional basis
o Vaccine roll-out news / implementation

Although I do also expect further share price weakness on:
- The opposite or poor results on the above
- Extension of the commercial tenant eviction moratorium
- Retail business redundancies, CVA’s and administrations in the headlines
- Hammerson or other retail REIT administration / further equity raise / public distress / fire sales of assets

But I see those as opportunities to buy.

[zac0_4] 20/9/2020 00:15:32

“New 52 week low here” How about a new 10year low here. “No business is safe in these uncertain timeless” Tell that to Microsoft, Apple, Google, Zoom or any of the other tech companies making hay while the sun shines.

[zac0_4] 20/9/2020 00:08:31

“Even resumption of one third of the dividend will be huge” not to long term holders it won’t be!

[nickrl] 19/9/2020 18:15:52

noreply they are exposed in areas subjected to local restrictions so that won't help. However, i'd say that with New Look getting t/o rents away you can see all retailers wanting this arrangement and thats going to make certainty of income difficult to forecast. This is exacerbated by lack of transparency as to what these arrangements are - is there any base rent isn't disclosed the only thing that is clarified is service charges sit outside the arrangement.

Given income could be impaired for some years now will they need a cash raise to provide some breathing room?

As you say guessing the bottom is anyones guess currently!

[noreply1] 19/9/2020 17:17:38

New 52 week low here. No business is safe in these uncertain times.Might have a dabble in the future but no point trying to guess the bottom or trying to catch a falling knife

[chucko1] 18/9/2020 20:12:25

It will be tough and we may have to wait a while until we see 75p again, especially with a lower revenue winter than was originally forecast for the pub estate etc. But if the finances are in OK shape, then just wait it out. Even resumption of one third of the dividend will be huge, but I don't think we will see that this year now.

But I want to be holding these when it does restart.

[chucko1] 18/9/2020 17:39:53

Was that Norges throwing in the towel? 16mn traded today. They stated they were getting out of all sorts of UK things. They had 7.5mn as of yesterday having recently dumped over 1mn. Terrible close - good sign.

[tole] 18/9/2020 16:37:18

Big print after the close. Is that the seller cleared.

[debeege] 18/9/2020 15:58:59

The bots would happily take this to 0.1p if they could. Mr 100k on the offer now changed to Mr 20k. Over 6 million volume. The suppression of level 2 hasn't stopped for weeks, no amount of buying has been able to push this up for longer than 30 minutes before the bid gets nuked. How many more shares do they have!? The elastic band is being stretched though. Keeping a keen eye on developments.

[diggybee] 18/9/2020 15:05:50

Broken down it has

[debeege] 18/9/2020 12:55:28

Gunnyboy...you are right about the number of either empty or pubs for sale ..NRR isn't immune from this ...go on to the Hawthorne Leisure website and you will see that 1 in 5 of their pubs is currently up for sale

--------

Are you referring to the approximate 16% of NewRiver's pubs that are coming to the end of a lease? Not for sale.

[fenners66] 18/9/2020 09:25:05

brwo349
17 Sep '20 - 17:37 - 3216 of 3217

"I don't understand that. Why would any property owner agree to a 50% rent reduction?"

I have been sounding this warning for years now.
It's supply and demand.
If there is no demand for the empty properties , even at zero rent , then the property rents for those that are occupied has to come down.

This is exacerbated when the shop next door - see New Look for example - has agreed rent free.

If you are a successful business and Next are - you already know the tricks so you are going to use the threats of exiting leases and saying your competitors have gained an unfair advantage over you.

There is no sentiment its just business.

[brwo349] 17/9/2020 17:56:33

These stores must be anchor tenants that the shopping centre can't afford to lose.

[brwo349] 17/9/2020 17:37:02

I don't understand that. Why would any property owner agree to a 50% rent reduction?

[zho] 17/9/2020 15:33:26

This is from Next's results this morning:

"Based on our negotiations so far we anticipate that, on average, rent in these stores will fall by -50%, saving £9.9m per annum. Eighteen of these lease renewals are linked to store turnover, rather than a fixed rent, meaning that we can be more confident in the store’s longer term future."

[candid investor] 17/9/2020 15:23:04

Gunnyboy...you are right about the number of either empty or pubs for sale ..NRR isn't immune from this ...go on to the Hawthorne Leisure website and you will see that 1 in 5 of their pubs is currently up for sale...no matter which way you look at this, it isn't a positive sign..

[essentialinvestor] 16/9/2020 17:48:36

GB, very decent of you, respect.

My concern is the ...at least...phrase used.

There is no sign of the moritorium ending in to 2021.

What I hoped for was some clarity of an end date, had expected another roll over,
but nothing on that front.

[gunnyboy] 16/9/2020 17:45:06

I am not sure if this will be much of an issue to those the size of NRR. It will have more of an impact on those that owner smaller high street units (such as me:-(

The larger sites will have paid their quarters rents up until the end of this month and will have already agreed with NRR what they are doing for the next quarter. They didn't have that many non payers this qtr.

I already agreed in March to deffer this years rent to be paid off over the remaining term of my tenants leases. They were all very happy with that and to be honest what else could I do? Threaten to kick them out and they carry the business rates and utilities while I find another tenant?

The worry I have is the pubs. They have people living in them so even if NRR want to liquidate them they can't evict them from the living quarters or the commercial aspect. They should see if anyone wants to buy a chunk of them as a going concern rather than individual sales. Almost all the pubs around us have been on the market from well before the pandemic with no buyers. You can't easily develop them and no one wants to run a pub any more.

[speedsgh] 16/9/2020 15:24:52

Government extends commercial evictions ban until the end of 2020 -



The government has extended its moratorium on commercial tenant evictions until the end of 2020 in a move that will likely further deepen divisions between retailers and landlords.

In a statement this afternoon, the government said it had extended its ban on landlords evicting commercial tenants behind on their rent payments until at least the end of the year, in a bid to protect jobs.

The secretary of state for housing Robert Jenrick said extending the ban until the end of the year would give struggling high street retailers and restaurant chains a chance to “focus on rebuilding their business over the autumn and Christmas period”.

Jenrick, however, said that “where businesses can pay their rent, they should do so” as the measure was only designed to support those “struggling the most during the pandemic”.