Newriver Reit Share Discussion Threads

[candid investor] 05/10/2020 22:56

Thanks for this Waterfall...at first glance this makes for very sobering reading..I will take a more detailed look to compare with NRR...other contributions welcomed .

[candid investor] 05/10/2020 21:43

Thanks for your comments Dhoult which have been duly noted..

[waterfall city] 05/10/2020 19:13

Worth looking at the CAL recent interims to see what's happened with shopping center valuations and the affect on LTV,and note most of their malls are around London.

[paulof2] 05/10/2020 14:58

All been doom and gloom here for a while but a half decent disposal rns and we see a fund top up and are now up about 8% for the week.

This may well struggle but I’m still not convinced the current share price is justified, the discount just seems too much for me.

[spectoacc] 05/10/2020 10:57

Next - comedy low rents to secure them.

Cineworld - maybe one day!

Hollywood Bowl - ditto, are they open, particularly in restriction areas?

But got to look forwards not back (or, erm, present).

[vow] 05/10/2020 09:51

A week ago in answer to how their Burgess Hill development is progressing.

“ Despite the challenges, amid Covid-19, proposed retailers for the town centre scheme, such as Next, Cineworld and Hollywood Bowl, are ‘very keen’, according to Mr Thomas.”

This week. “ The boss of Cineworld has said its plan to close its cinemas in the UK and the US "is not a decision we made lightly".

[dhoult12] 05/10/2020 08:18

@candid

"Can you explain why you think a substantial fundraise would be necessary given current liquidity ?"

The risk exists because they DONT have a liquidity problem - although i am not certain that current funding arrangements would allow access to CV19 government loans without the lenders permission etc.

They DO (potentially) have a debt problem, which taking on more debt isnt going to solve. As per the report we are looking at a 20% decline in asset values and we were at 47% LTV before. You dont want it heading north of 50% for obvious reasons.

Personally i think they need finger in the air number of £200m from asset sales at last prices to stabilise. I am not certain as discussed above they will get that. You can sell anything at a "price" but they need to sell at March20 valuations or within 20% of - to cash. Harder.

[candid investor] 05/10/2020 00:18

Thanks Essential..I hadn't come across SREI before but a brief look at the figures do look attractive and they are mindful of shareholder returns with the buy backs.
I need to look at them much more closely..can I ask why you pulled out ? Are you invested in NRR and what is your view of their prospects going forward ?

[essentialinvestor] 04/10/2020 22:50

Why go out on the risk scale?, look at a Trust like SREI (conducting a buyback)
with a current LTV below 30%, on a 43% NAV discount and cash resources
circa £80 million. They also locked in a longterm low cost of borrowing at under 2.5%, from memory.

I trade SREI and sold out on Friday, however if you are keen on
the sector and on a business currently buying back shares at a large NAV discount,
it might be worth a look and arguably with less risk.

[onjohn] 04/10/2020 18:29

It’s fuct rack rents are on a downward spiral due to vacancies being let for a shirt button


London is finished


Nrr will go to 15p

[candid investor] 04/10/2020 16:42

Dhoult..thanks for your reply which raises lots of different points which I will try and get through ..First of all I totally agree with you that NRR is a high risk,high reward share...recovery shares (as NRR is) always are, more so with Covid.. I don't subscribe to the 'world going to end theory' I think the world will just 'muddle through' as it always does(remember 2008/9?) Likewise I think NRR will manage to muddle through all this due to its ample liquidity , 50% margins and no tax.. It's important to note that selling assets which are not recycled reduces a company's footprint which reduces UFFO and therefore dividends ..asset devaluations also reduce NAV per share. Under such circumstances, share prices in my view aren't likely to rise substantially.. Can you explain why you think a substantial fundraise would be necessary given current liquidity ? Such an act at current share prices would surely destroy shareholder value and unnecessarily so ...doubling the number of shares to 600 million to raise less than £150 million (given required discounts) will dilute shareholder value by 50% and more so given the discount you will have to offer..Current asseta sold are £62 million with a further £38 million being progressed..this alone will raise £100 million...buying back shares on the other hand would increase shareholder value as my earlier calculations demonstrated due to their being fewer shares in circulation to match the reduced footprint.. ..if as you say , share prices fell , then all the better because it would then cost less money for the company to buy them back ..my fear would be that share prices would rise too much during this exercise because there would always be a buyer for shareholders wanting to sell so sellers could ask for more ..
The sticking point is being able to sell the London portfolio or similar.. I was hopeful this could be achieved but you think not..

[dhoult12] 04/10/2020 16:16

Yes agreed. Legislation as is doesn't work.

One thing I would say is in my view some of the risk is misplaced in this sector. Yes we all know retail isn't going ideally well.. Look at the huge discounts being applied. Sorting through the fine and the unsellable is key.

However look at some of those that hold London offices still valued at huge valuations. Just like retail there is no market for new leases at the moment. Gone down from 13.74m sq ft leased central London and west end in 2018 to under 3m so far this year. And most of that at start of year pre Cv19..

Will people want a huge London office in a tower block in 2021 and at what price? Same question as will they want a shop in a centre. However, one is being carried at £600m in the books the other £30m etc

[essentialinvestor] 04/10/2020 13:41

Fwiw would allow for 20-25% peak/trough declines for UK commercial property,
Before the effect of gearing. Within this expect significant divergence in terms
of asset class (this is contingent on the moritorium ending in H1 2021).

Every investor in listed UK commercial property should be aware of the moritorium. IF this does not end in 2021, it arguably creates systemic sector risk.

As one example, why should Greggs continue to pay their rents when similar businesses refuse to pay.


Given that some well capitalised profitable businesses are refusing to pay rents, I'm surprised rent
collections have held up reasonably well for many REITS.

That may begin to change the longer a moritorium remains in place.

Perhaps the government are happy to see a complete reset of rents accross commercial property
and will intentionally let this continue?. Cant be ruled out imv.

[gbjbaanb] 04/10/2020 07:48

I imagine selling shops will either be a almost full price (for those with good prospects) or unsaleable (for those without). Which is why there was so much emphasis on alternative use, those that cannot be sold will be converted. Turning them into flats will fetch decent prices (assuming homes under the hammer isn't fake!) so I wouldn't be too pessimistic about the valuation.

[dhoult12] 04/10/2020 00:46

I'm not in principle against much tbh. If it works it works.

On this I said when I came back in on here it's a high risk high reward bet on the world not ending nor changing beyond recognition from Cv19. I'm still of that view.

To remove the risk from this my view is you need to get the LTV close to or below 40%.If that's done even though you have sold assets the share price will rise significantly as the risk of a massive raise at these levels is reduced.

A share buy back in my view leaves the risk as even larger. Someone (or multiple) won't want that risk and sell so the share buy back won't shift the price much and damage the long term prospects.

As just discussed I can't see enough buyers of these assets now to do both.

[candid investor] 04/10/2020 00:17

Ah ok...so its not the principle of buying back shares that you have a problem with but the ability to execute it at the present time ...

[dhoult12] 03/10/2020 23:22

I just don't think it's viable as there is not a market to purchase NRR assets at close to last valuation over the next 6 months.

The material sale this year as announced was to a related party.

That's not to say in 12m time the world might look different and in 12m after that you can sell as people have confidence to buy. That's my personal bet...

[candid investor] 03/10/2020 23:11

Thanks for your comments Dhoult, which are much appreciated ..is your problem with the strategy itself or the difficulty of implementing it ?

[dhoult12] 03/10/2020 21:56

I wouldn't trust the march 2020 valuations match the price that could be achieved at auction tommorow.

Hence the market is pricing in such a discount. Personally over a 24month period I think the discount is overdone. But that doesn't mean you can liquidate to cash now.

I would say historically the takers have been councils for some of these centers. They will not be buying now.

As for free cashflow per share I'm pencilling in around 5p...rising once they can chase rent.

TBH I haven't seen their London asset, but zone 1 office space has no market at the moment. Sellers and waiting as are buyers,who are typically pension funds. They need consistent income on a 20year plus timeframe which is far from certain right now.

[candid investor] 03/10/2020 20:44

Dhoult, thanks for your post ..I don't think they will take this route anyway for probable reasons...if they did though then an extra £62 million in the bank will await ...yes it depends on how successfully they could offload the London assets...given that only a 6% fall in value last year, presumably a quality asset.as you say it might be difficult right now but only time would tell . If it took too long and the share price recovered significantly in the meantime, then the proposition would no longer be beneficial anyway ..have you seen the NRR assets there ? A full out concerted effort to sell depending on its attractiveness might still yield a positive outcome..

[dhoult12] 03/10/2020 19:20

I think some of your post doesn't appreciate quite how bad the market is for some of these assets.

Take the London head office who exactly is the buyer?

I am currently negotiating on behalf of an organisation in Mayfair. Office is 1.2m per annum. Without blinking they have offered return of full rental deposit and a 6m rent free period. Pushing for more.

There are no takers for leases right now. In 12months who knows.

[candid investor] 03/10/2020 18:13

Catsick...I think you and others mis-comprehend the purpose of and benefits to shareholders of conducting share buybacks in circumstances such as these. Take the position as at present ...net assets £610 million .(£2.03 per share) with current share price at 50 pence per share. net debt £563millon, LTV 47% and UFFO is £52 million or 17 pence per share.Given the discount on value of assets sold I think it's safe to reduce asset value of approx £1200 million by 5% or by £60 million...this reduces net assets by £60 million to £550 million which now reduces NAV per share to £1.83... The current plan is to sell £100 million of these assets ...this will reduce debt to £463 million = 45% LTV...selling the assets will also reduce UFFO though to approx £48million or 16 pence per share.i.e.both worse than at present ..
I want to buy back 20% of the shares at today's extremely low valuations...so how do I finance it ? NRR have sold £62 million to date...stop there but.sell the London shopping centres and head office relocating staff to Birmingham ...selling London assets will raise £150 million and only lose £9 million in net revenue .ignore opposition, NRR is a regionally based organisation ..no need for a head office opposite Mayfair..relocate to other office in Birmingham, it's cheaper.. total proceeds for both London and elsewhere amount to £215 million...I would pay off the £175million revolving credit facility (knowing it's still there in reserve)..this reduces net debt to £388 million and fixed assets to £925 million and LTV to 42%. With the remaining £40 million I would buy back 20% of the shares and put them in treasury leaving 240 million shares still in circulation
Net Asset value reduces from £610 million (by £60 million due to asset devaluation and by a further £45 million due to funding of share back) to £505 million but divided by only 240 million shares which gives revised NAV of £2.10 per share (rather than £1.83). I have also calculated that UFFO now reduces to approx £45 million or 18.5p per share thus actually increasing dividends...icing on the cake is to reissue the 60 million shares when share price reaches say £1.50 to get £90 million which in turn enables further capital investments of £150million...that is why companies buy back shares..