Newriver Reit Share Discussion Threads

[grahamburn] 09/8/2021 14:34

This may be of interest given NRR's concentration on retail parks. The two extracts are from an RNS this morning.
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LondonMetric Property Plc ("LondonMetric") announces that it has sold its retail park in Kirkstall, Leeds, for £25.2 million, to a UK institutional investor......

Andrew Jones, Chief Executive of LondonMetric, commented:

"This is a strong trading retail park and its sale is in line with our strategy to divest our last few remaining multi let retail parks. We have seen an uptick in investor interest for well let and located retail parks which is reflected in the sale price achieved.
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So, the question arises are NRR's properties "well let and located" to secure that "investor interest"?

OK, it should be noted that Londonmetric is gradually divesting its retail parks to increase its emphasis on logistics parks, but the key take away from this announcement so far as NRR is concerned is the general level and durability of that "investor interest".

[fenners66] 09/8/2021 14:28

"it seems they’re content to write off their customers money and vote with their feet quietly out the back door."

As long as all the insti's are doing much the same they can all hide in the crowd and point to the idea that they are performing at the average...so who cares....

I have been a stuck record here (since years before covid) , saying that bricks and mortar retail was in decline and there has to be a knock on effect to all retail. Why pay more for your store if next door is empty , and yes I know empty units at quality out of town with free parking easy access etc.

Still expect declining rents and valuations...

[mindthestash] 09/8/2021 14:08

Hello All -interesting discussion
New River Reit
Is this a takeover target as flagged in the telegraph a couple of weeks ago?
My take on this is that the business without the pubs is capable of generating UFFO of circa 12p per share if it were to maintain a 2019 profile. However rents and occupancy are depressed then something like 10p would be a good result. So a Divi of 8p is possible if this business were in the right hands. That’s my problem with this stock. I bought at 80p as a recovery bet without much homework (will I ever learn) but the more I hear and read from this board the more my confidence goes. The strategy isn’t coherent - its more like ‘seems like a good idea’– still buying pubs in late 2020 and shotgun them all in 2021 for the just under the price of the average 3 bed semi next door (zoopla) after having swallowed the lockdown pain
Their investment profile going forward is mostly development of high density residential built around shopping centres. So their latest idea is to tie our capital up for years in planning and development then hit the residential market when interest rates are heading up and private buy to let market in freefall over green energy specs.
There is no meaningful update on development activity and returns once the initial flag-waving announcement of promises.
This board have turned £3 into £2 before covid. I am pretty sure they’ll turn 80p into 40p post covid. It’s a shame because in the right hands it could wring out 10p divi a year and be worth £1.20 plus.
My suspicion is that lenders don’t want to see more of their cash sunk into the this resi/shopping punt and NRR needs more money to build these out?
The shareholding market cap is a mere £250m but the book value of the property assets is just under £1,000m with valuations at 31st march (borrowings will diminish on sale of pubs) -Is there any chance someone will buy this?
You would expect the institutional shareholders to have had a word and forced the changes at the board but if the share price is anything to go by it seems they’re content to write off their customers money and vote with their feet quietly out the back door.
Thoughts on takeovers or breakup sale of the rest of the assets?

[mikeyfernandez] 31/7/2021 02:40

Hi all,

Long term holder and previously quite bullish on nrr. For what it’s worth, after i’ve looked through the report, I’ve sold my holding.

Going through the figures, I struggle to see how they make more than 15-20 mill next year and a cap of 20-25 the year after.

7 million of their profit this year was from one off insurance or covid payouts.

They have to sell more shopping centres to keep the ltv down, as property valuations inevitably slide further which will lower rental income. Although existing rental collection and car park fees will bounce back a little the first quarter figures for rental collection appear similar to last year, more shops will go to the wall. Rents in general are falling in the sector with the balance of power going to the retailers.

So in 2021:2022 if they make an extra 4 mill car parking, 3 mill rental collection from existing clients, 1 mill from less cvs, minus the 3 mill overall drop in rents(both through reduced income per square metre and less centres) you are looking at approx 55 mill max revenue imo, if they cut admin costs to 16 mill (probs punchy) and finance to 19 mill… you are still looking at 20 mill profit max. Between 305 mill shares and only paying 80% of div that’s about 5p div split between 2 payments.

This may rise to 6p the year after perhaps, as rental collection stabilises.

In terms of future prospects, their whole business model is based on properties going up in value and acquiring more through leverage. At the moment they are forced sellers instead.

The lockdown periods I assume will only have pushed more people towards the trend of online home delivery for shopping. Plus I don’t know if you’ve been to any of these shopping centres, but they’re not in desirable locations and the alternate use is not worth much imo. No one wants to live in these places and offices - forget it. The alternate use was only for their pub estate and maybe their few out of town retail parks.

I think they have been well managed and clearly the board is trying it’s best in a really rough time period. You look at other reits like intu and hammerson and I think clearly nrr have done relatively well.

However ultimately they are caught in a tough spot, in a declining industry, with declining rents and valuations. I struggle to see how that turns around and would expect the share price to languish between 50-80p over the next couple of years all be it with perhaps 10p of dividends if the general market continues as is. They won’t benefit much from a stronger recovery as they don’t sell luxury goods - purely staples.

And in another downturn, well good luck - generic risk of a broader market crash, another covid variant developing that is vaccine resistant or inflation, when the rents are fixed for years with no pricing power.

I’m still relatively inexperienced as an investor and this was one of my biggest early holdings. I do wish any holders good luck and the people who run the company seem like good people, so I hope they prove me wrong. Maybe they can cut more costs or make some alternate use for managing other estates. Although from a purely brutal mr market perspective, with my tbh pretty green analysis, I struggle to see how this will go great in the next couple of years.

Apologies for the length and for rambling on, I’m a little hungover after a few too many last night!

[nickrl] 30/7/2021 18:20

No sign of the circular on the NRR investors website or have a missed it somewhere else?

[fenners66] 27/7/2021 12:35

I posted that 216m on here yesterday .

Like I said then , the only figure I was interested in, the only figure they did not want to tell , was what was the loss on sale, so I read all the way to the end of the RNS.

I was actually trying to help you guys....

[bondholder] 27/7/2021 10:59

This from some of the most desirable assets they have with apparently huge interest from buyers. Imagine when they try and shift the shopping centres...

[bondholder] 27/7/2021 10:55

216 million net proceeds from the sale of Hawthorn pubs business.

[nickrl] 27/7/2021 10:40

Spotted there were notes after the RNS yesterday which say forecast proceeds from Hawthorn are 216m. Also confirms valuation of Hawthorn as 249m and it was 674 pubs nothing about C stores. 100m of proceeds will be used to eliminate the RCF which I see from AGM statement released to day has already been reduced by using some of the cash.

This implies they will hold on to remainder of proceeds and leave other loans in place as I suspect they will have penalty payments for early redemption so maybe interest won't be down as much.

Still lets see if the circular tomorrow provides anymore detail about what the "new" NRR income and balance sheet looks like

[fenners66] 27/7/2021 09:38

"Our GBP1.0 billion portfolio covers 9 million sq ft and comprises 33 community shopping centres, 19 conveniently located retail parks and 674 community pubs. We hand-picked our assets..."

So that they could lose a fortune on the pubs ... ?

[fenners66] 27/7/2021 09:33

Despite the "presentation" they have only collected 82% of first quarter rents.

So 18% missing from the cash flow at least 3 months later.

March only had a 96% occupancy so they really have collections of 78% of the estate for the first qtr.

[fenners66] 27/7/2021 09:27

"most significantly, the Company has agreed terms to dispose of its Hawthorn pub business, which delivers on a key strategic priority announced in April 2021"

"Key strategic priority" - Losing another £30 odd million then.....

Was it a key strategic priority to lose £80+ million on pubs ?
Or just a right royal screw up , which of course no one will ever admit , or pay the price for?

BODs always seeking to portray huge mistakes as some kind of wonderful strategic decision. Never taking responsibility.

[gbjbaanb] 27/7/2021 02:45

What's the quote about jumping in when others are fearful? I jumped in when everyone was panicking, at 56p admittedly, and I thought the dividend might be good for the future post-recovery, but as you say you have to think to the future and I wonder now what the income stream from those will be more the pubs have gone. It might be worth starting to consider selling. Thoughts?

[kenmitch] 26/7/2021 17:32

Strongly agree chucko1. I ticked your post but as often happens these days, it didn’t record. The easy gains have been had now but it’s been great fun for the few of us who spotted the great sector buy opportunity.

e.g AEWU dividend (they even managed not to cut it) is 13% at my buy price. I would be happy with that and no capital gain but the share price has recovered strongly too.

[chucko1] 26/7/2021 15:59

Short and sharp: I only look at the future and the prospects for the business relative to the value of its underlying claims on cash flows.

Every REIT, including NRR, has had a period of suffering from investors and loudmouths who had no stomach for the fight. The valuers, frankly, wet their pants over the difficulty in making the sorts of assessments they are trained to do.

This is why we have seen huge rallies in every single REIT bar none the past year. Yes, some more than others, although 46p for NRR was a gift that I think has a fair amount more giving to do, never mind Barclays's indifference and stated inability to factor in the future Hawthorne sale.

Many of these REITs have also had the "oh - look at them - they only talk about the positive things". It was ever thus and I pity those who talked themselves out of the obvious and enriching investments that, to my eyes, were in rarified risk/reward territory. Or the "I am going to wait it out" brigade. Have they made 100% on NRR, or 75% on EPIC, or 70% on AEWU, or 40% on RGL? Before dividends. On asset-backed, LOWLY LEVERAGED (I repeat) assets. Some of these were priced as though it was 2007 again. It's not.

You should have seen the comments on the management statements from AEWU and RGL. And, to a lesser extent, RLE (although I kind of see the problems there, but still a 50% rally).

All that said, the easy tens of percent are in the past and it's now a game of more intense risk management.

[nickrl] 26/7/2021 15:16

fenners if you were owner pre April, and i wasn't because for i won't have pubcos in the portfolio, you've lost 50% but question now is what will be the income stream and scope for dividend to be increased or not.

In 2020 pubs generated 30% of income with retail the rest. However retail income whilst trashed in FY21 will maybe generate 40-45m after property costs. Admin costs will be reduced to c20m (can't see it separated out so pro rata pub staff costs out) and with reduced interest costs (say 6-7m less of 200m debt reduction) to 18m doesn't leave any potential for divi to be increased. However, this a crude analysis so need to work out what the UFFO is going to be and hopefully the circular will have some more detail in it before i can decide.

Perhaps others have a better handle on this as accounts not as straightforward as some REITs.

[1tx] 26/7/2021 12:38

On reflection the vital information missing from the announcement is how much NET CASH are NRR getting after deduction of all debt owed by Hawthorn Leisure REIT plus transaction costs.The accounts of Hawthorn Leisure REIT that I have seen are complex and date to March 2020;but I suspect a figure of circa £40 to £50 million area might be around the mark.How much net cash has been put in the pub business?

[1tx] 26/7/2021 11:16

Admiral are buying Hawthorn Leisure REIT & all its operating companies so surely this includes the C Stores & potential future sites.I can't see any statement that assets have been removed prior to sale.

[theprovosts] 26/7/2021 11:06

As far as im aware, they have been disposing C-Stores separately and are included in the figure below:

"We have already exchanged or are under offer on a further £79 million of disposals so far in FY22."

[fenners66] 26/7/2021 10:38

If you read back through my posts over years here I have challenged the logic of buying a pub estate as it was a business in serious decline.

Others continued to argue that , 1 they were well run, 2 they all could be converted and thus it was a property master stroke.....

Well its lost a fortune.

[fenners66] 26/7/2021 10:35

chucko on their own figures they started writing off the value in 2019.
More to follow and they have been telling us for the last 2 years how everything was fine since all the properties had alternate use anyway.

Meanwhile some were asking just how did they expect to deliver that ?

Read the accounts - far more emphasis placed their on a development pipeline (and pipe dream) of these assets compared to no reference here on the Loss on disposal.

I read the headline and the one figure I was interested in was How much will they lose?

To answer we have to scroll down to the bottom of the article and work it out for ourselves - we know full well it would have been the first line if it was a profit on disposal.

[frazboy] 26/7/2021 10:14

I think the LTV is stated at 39.9% (or thereabouts) somewhere in the published document. So under 40%, but only just!