Newriver Reit Share Discussion Threads

[fenners66] 01/12/2020 17:31

dhoult I know a Debs next door to a B&M in the exact same retail park.... so it DOES happen.

gbj - my post acknowledged that NRR are not likely to have any DEBS - it matters not - as I said what matters is the glut of empty retail property.

That brings down the market rent and all will have to fall with it.

[nickrl] 01/12/2020 16:38

Thomas they have low exposure to Arcadia at 0.3% of rent roll (June 19 update) and no exposure to Debenhams. Also whilst Debenhams maybe a car crash they still have hundreds millions spent in there shops every year this cash even if reduced by a recession will go somewhere and will benefit many of NRRs tenants.

Wet lead pubs in Tier 2&3 are getting a 1k cash grant can't see that making it to NRRs coffers. Of course they could buy a few scotch eggs!!

[dhoult12] 01/12/2020 15:16

Erm.. how many Debenhams have you seen in a cheap centre with a B&M home bargains and bargain booze?

[thomasearnshaw] 01/12/2020 15:00

How many arcadia and debenhams units in the portfolio

Deloitte will take landlord legs off

[dhoult12] 01/12/2020 14:57

Does anyone know the form of this wet pub grant?

Obviously helpful for the next few months

[gbjbaanb] 01/12/2020 14:27

Fenners, how many high street superstores does NRR own?

None?

It's like saying McLaren had sold few cars so Kia will suffer just as much. The stores are in different brackets, different areas, different sectors. This is why Shaftesbury and British land had suffered so much, they do own the big dept stores, and not the community shopping blocks and pubs.

We all know the issues facing the retail sector. You can stop now, go post on a share you have a positive interest in instead.

[diggybee] 01/12/2020 11:39

I still think this is an extremely compelling opportunity that may well double your money in 3years or so, even here 50% above lows of a few weeks ago.

[fenners66] 01/12/2020 09:42

Bloomberg saying Debenhams will close if there is no alternative offer.

That's another what 100+ stores looking for tenants.

It could be said they are not the same stores - does not matter - if the landlords slash rents to accommodate new tenants why pay more.

[m_kerr] 29/11/2020 12:12

i do wonder how you value the shopping centres given that there's no investment market for them. you cant place any value really on the valuations. especially as alternative use is well below even depressed values, unlike retail parks and pubs. and obviously, to keep up a moderate LTV with falling capital values, they are selling their best quality assets for which there is a liquid market, which further concentrates the portfolio's shopping centres %. there may be an arbitrage opportunity with the shares still at a low valuation, but going forwards, management have a poor track record of capital allocation which is a major determinent of returns. they've mostly got away with it in recent years, but any downtown exposes their mistakes.

[candid investor] 27/11/2020 18:50

Yes, I think 2021 will go down as ‘annus horribilis’ not just for NRR but for the whole commercial property sector in particular...patience will be rewarded though, because one day soon a vaccine will eliminate the effects of Covid and things will largely but not wholly return back to normal,. The reassuring thing is that even under this once in a lifetime pandemic , NRR will still make a profit which when you think about it is a huge advantage when compared to other investments..shareholders in particular benefit from the REIT regime which makes all profits tax free and requires at least 90% of those profits returned back to us as dividends...I like dividends because once they have been given, they can never be taken away...any capital growth can be seen as a bonus. Speaking candidly though I do think the levels of dividends will diminish in the future for several reasons, firstly, they are selling off 10% of their assets this year and probably nearly as much next year, this reduces the size of the business which will equate to a 10-20% drop in income, secondly rents are falling which will reduce income (and dividends) further...also, for several years they have paid out dividends which were not affordable from UFFO ..this combined with having to redistribute 90% of future cash profits leaves no funds for new acquisitions (don’t rule out a new fundraise in the future) and finally the redevelopments assets that they do have are mostly being sold off in one off transactions with no future revenue streams from them...yes they could be recycled into new assets but debt and LTV would remain an issue... I don’t see NRR as a ‘buy and hold forever’ share but I do see more financial returns in future which makes the share a worthwhile holding for the medium term..

[chucko1] 27/11/2020 17:55

NRR will be better off in 2022 when real recovery can be measured. For now, it's a little bit of guesswork, but should reward the medium-termers here.

[nickrl] 27/11/2020 17:38

There slide on ERV forecast is a bit optimistic I would suggest given the report tells us that this years lease and rent reviews are below current ERV. Anyhow even allowing for some slippage on NRI when we get back to normalcy they ought to be able to generate 10-12p UFFO although be surprised for them to get any better than 6-7p FY21 given there pub estate is heavily impacted by tier restrictions til Spring and CVAs/administrations are still washing through the retail rent roll.

[smidge21] 27/11/2020 07:21

Liberum:
NewRiver’s H1 results are c.2% ahead of our expectations. EPRA NTA fell 15% to 171p, reflecting an 8% LfL valuation decline, but this is once again an outperformance vs peers. LTV nudged up 1ppt to 48% thanks to c.£50m of disposals (ahead of target) reducing net debt. Retail rent collection continues to improve, with c.80% of Q1-Q3 cash collected. The Board intends to reinstate a covered dividend at the FY. We prudently leave forecasts unchanged, with possible upside risk to earnings. Proof of execution and lowering LTV should drive the shares higher. A 53% spot discount to NAV and 7% DPS yield on a trough payout that could double next year looks attractive. BUY.

[candid investor] 27/11/2020 00:08

Lord gnome, gbjb...thanks for your views on I.C. ..That reservation I had has been removed

[candid investor] 27/11/2020 00:02

Thanks Chucko, that was an excellent analysis all of which I agreed with , although I don’t think you can totally ignore UFFO even at this stage, because of the direct cash link it has with the affordability of any year end dividends and reduction of debt..I was interested in the half year position to try and roll that forward to the end of the year...It’s good that all non essential retail can open but pubs portfolio will encounter a further hit...Yes, I did note that they had moved up to risk scenario 2 which is good news, that I think could have been made more prominent in the report, particularly given that they began the year preparing for risk scenario 4... Totally agree that liquidity is the main priority which in itself leads to debt reduction and on that score there is no liquidity risk whatever happens (within reason).....yes NRR was hit by a meteor and yet they were still able to reduce debt (even excluding asset sales) , due to a positive UFFO unencumbered by a matching dividend.. I also agree with your gearing up of future dividend payments although I am less optimistic with the timescale you suggest..I think there will be a time lag due to lower rent receipts pending the recovery of retailing even after reopenings...Like you I think the pubs portfolio will recover more quickly going into the spring and summer...If you haven’t already, check out their business models with both the leased and tenanted and managed portfolios and you can see that NRR is not exposed to any risk with regard to staff costs within pubs...very shrewd and I also agree that the management are competent and fleet of foot..Finally, yes I agree that future revenue cash flows, once the pandemic is over, will ultimately lead to positive asset revaluations and restoration of dividends (albeit at a rebased level) but it will take the scenic route to get there....Having read your analysis and compared it with mine I have reached my own conclusion .. HOLD...

[chucko1] 26/11/2020 22:03

Selling £50mn of assets would have reduced the LTV by a few percent - except they just stood still (increase by 1%, in fact) owing to 8.6% fall in property values (by memory). The implied that they got some properties away which they were less fond of, and achieved March 2020 NAV minus 6% on these sales. A step in the right direction and I can see them selling more and soon.

That sounds OK so far. But a lot further to go in this respect which will start to hurt a little. There is already a lot of hurt discounted in the price - still at less than 50% of NAV - and the mid 40s is probably a thing of the past. I believe they can afford to pay a dividend of 8p (so 2ppq) at year end rising to 3ppq by year end 2021. This assumes 80% normality by mid year and improvement thereafter. I do not think they will pay such an amount in the near term, though, as they need to remain conservative until they know the coast is clear.

I was encouraged by the July numbers they cited and their gearing up with partners to transform properties into residential. There will need to be quite a bit of the latter and the former is merely what can be achieved in better, although not perfect times. They say they have moved up half a tier from scenario 2-3 to scenario 2. This is worth 4% of revenue and it's not as though their hospitality values have been treated kindly.

As for UFFO etc. this is barely relevant at this stage, IMO. Liquidity is first followed by debt reduction. Dependable pub re-openings and increased retail revenue will take the pressure off this as they get back to, say, 90% of previous rental income. This would support a reversal of asset price declines and also a return to meaningful dividend. I find for REITs that the quality of management, position of balance sheet and the macro prospects of the underlying property class are far more important in the long term than microscopic examination of cashflows.

NRR got smacked by a meteor and this has caused some damage. But in the medium term, much value can be restored, especially as the management are pretty good and I believe have shown this with their rapid balance sheet strengthening.

I tripled up at 67p (average) and my target is still around 120-130p. But that is some way away with lots of ups and downs on the way. I did sell 5% of my holding today at 82p or so - only because the overall REIT market has been on an epic rip and I just have to sell things from time to time on the way up. And NRR has rallied nearly 80% the past month or so.

Don't forget, the 46p level we saw was the result of the third of three sales representing nearly 65% of the stock. And a complete crisis in all of its business lines. I suspect anyone who has wanted to sell, for just about any non-trading reason I can think of, has now done so. Unless people start dying from the vaccine!

In terms of IC, their record is random. They can point to matters of concern, but unless they connect that to a flow of income and explain how that results in some sort of calculated price, it is of no value.

[gbjbaanb] 26/11/2020 21:21

IC says sell?
Buy as much as you can!

[lord gnome] 26/11/2020 21:09

IC still has this as a sell today. They seem unimpressed. Lazy bit of journalism though. Clearly only a very superficial knowledge of NRR.

[ccraig69] 26/11/2020 18:51

Well it's the prudent approach. Next year we hope will be a Covid better year as vaccine gets rolled out at boots on nrr estates

[candid investor] 26/11/2020 18:30

Chucko...what is your take on the half year accounts ?

[candid investor] 26/11/2020 16:46

The Investors Chronicle did an article on NRR this morning and recommended a SELL.. does anyone know whether or not the Investors Chronicle has a good reputation with its recommendations,,,the last time they looked at NRR they also recommended a SELL at £2.06. They are still recommending a SELL even at 80p...they point to rapidly reducing LTV with further more significant falls likely to come ..its worth noting that LTV barely changed even with £50 million of asset sales...they can’t keep selling off assets . I have to say that I wasn’t as impressed by the numbers as I was hoping ...at first sight it seemed that UFFO of £9 million was good..but this disguised the fact that this included £5 million of one off fire insurance receipts and dilapidation compensation from a brewery for prior acquisitions ...both of these should have been shown as one off exceptional items...not as UFFO, so true UFFO was closer to £5 million It also appears that the recent upward trend in share price is losing momentum. Apart from increasing LTV, the other hidden risk is their discreet acknowledgement that they hold a surplus of retail space, and that to re-purpose this will take time, there was no mention in the half year report about the repurposing value of retail assets which were apparently underpinning the value of retail assets on the Balance Sheet at the previous year end...well this didn’t prevent a further asset devaluation of 8.6% .. A few things to ponder over at the weekend...I am very concerned about the Investors Chronicle SELL recommendation...is this a reputable magazine or is it more like the Motley Fool with its superficial analysis...actually the M.F. had an article on NRR today recommending a BUY... I am genuinely torn with NRR whether to cash in my profits (bought in at 60 pence) or whether to remain invested and hold out for more profits....thoughts please..

[scrwal] 26/11/2020 13:00

Surprised that the quarterly div not reinstated even if it's 1p with the final making up any shortfall below the 90% criteria.

[hillock1] 26/11/2020 09:01

"Following Sprucefield disposal, BRAVO JV has made acquisitions totalling £143.7 million (NewRiver share: £38.5 million)"

I am pleased that the company has started to make some acquisition, hopefully to capture some assets at depressed price, especially the loss of some income after the disposal of the Sprucefield.

[dhoult12] 26/11/2020 08:37

UFFO was 3p for the half year so reasonable expectation of 6p for the full year which would mean a divi of ~5p.

Big question is when the memorandum of chasing is lifted that o/s rent comes in. Implied most of it is from major retailers who are just using the memorandum as a reason not to pay rather than cant pay.

Obviously if that comes in, falls straight to the bottom line so would have a big impact on UFFO. Of course believe it when i see it - personal expectation is they will cough up in return for signing a new lease, perhaps extended with favourable terms. we will see.