Newriver Reit Share Discussion Threads

[janekane] 10/1/2022 13:54

Nice rise as predicted

[lord gnome] 10/1/2022 11:07

No - it was just a reference back to your post 3889. Delete the word 'Daily'.

[janekane] 10/1/2022 09:09

Gnome10 Jan '22 - 08:16 - 3890 of 3890
0 2 0
The Daily Mail speaks and the markets tremble - not.



Has the daily mail wrote an article about NRR as well today

[lord gnome] 10/1/2022 08:16

The Daily Mail speaks and the markets tremble - not.

[janekane] 09/1/2022 10:29

Nice article in today’s MAIL ON SUNDAY about our company very positive about the future
I will be looking at tomorrow’s trades with great expectations of a big rise

[lord gnome] 07/1/2022 13:16

I don't think the IC numbers stack up. This is a REIT, so capital and portfolio valuations moves are separate from EPRA income. The rent income and therefore the dividends we can expect should be better than IC has given. I doubt that the earnings quoted are EPRA figures and probably lower due to portfolio loses.Unless anyone else knows different.

[sphere25] 07/1/2022 12:13

Well, there was an opportunity to sell some at 97p and buy them back about 5p cheaper. A few sharp folk got some away but I wasn't on the ball.


Forecasts:
2022 EPS 7.9p DPS 6.4p
2023 EPS 8.1p DPS 6.7p

Probably too boring for some.


IC article

Tip style: Income
Risk rating: Low
Timescale: Long Term

Bull points
+Balance sheet has been repaired
+Slowing valuation declines
+High occupancy, better collections
+Shares at a big discount to NAV

Bear points
-Weak market sentiment
-Latest virus news


In theory, knowing when to buy a real estate investment trust (Reit) should be simple. “The best indicator of whether it’s worth investing is a discount to net asset value (NAV),” says one property industry veteran who buys and sell shares in Reits on behalf of a prominent UK billionaire’s family trust. “Normally when it is trading at a premium you risk paying the wrong price.”


But in recent years, shareholders have been rewarded for continually backing premium-rated landlords focused on logistics, GP surgeries and self-storage. Bets on a value-led bounce in the owners of retail parks and shopping centres have largely proved fruitless: share price declines have usually been followed by valuation falls, pushing up company indebtedness just as assets become harder to sell.

NewRiver Reit (NRR) is an example of the latter trend. The group, which operates 30 shopping centres and 18 retail parks across the country, aims to “own and manage the most resilient retail portfolio in the UK”. For the past few years, the portfolio has proved anything but resilient. Since March 2018, book value has more than halved from 292p a share as weak tenant trading and the pandemic clobbered investment values, further stretching an overextended balance sheet.

Currently, investors see little let-up in that trajectory. In November, the group reported net asset value (NAV) of 131p a share, down 13 per cent. The shares' steep discount to NAV suggests the market sees fair value a third lower still. This is perfectly understandable: calling the bottom in retail has been done many times, and with little success. Investors should always look to avoid catching falling knives.

Signal swings

That said, NewRiver no longer resembles the falling knife it did even six months ago. Although shareholder equity shrank in the half-year to September, most signs now point to repair.

For a start, the balance sheet looks far healthier. The first six months of the year included £236m of disposals, dominated by August’s sale of pub chain Hawthorn for £224m. Management described the valuation – 11.5 times pro-forma cash profits for the year to March 2020 – as at the “upper-endR21; of expectations. Even if the sale resulted in an 11p hit to NAV, recent deals in the sector and the subsequent fall-off in pub trade since the summer vindicate both price and decision.

This freed up cash to pay down a £170m revolving credit facility, cancel a £165m term loan and reduce the loan-to-value ratio to 39.4 per cent, from 50.6 per cent last March. Reassuringly, the only outstanding debt on NewRiver’s balance sheet is now a £300m bond maturing in 2028, and which was reaffirmed as investment-grade by Fitch three weeks ago.

However, selling assets to de-leverage only changes so much. A far more important question for any investor in the retail economy to ask is how much more harm can come from ecommerce.

Unsurprisingly, NewRiver has thought about this a lot. At a capital markets event in September, the Reit outlined a new framework to help categorise any UK retail asset and deploy capital accordingly. At present, 70 per cent of its assets are classed as either resilient or stable, meaning they are affordable retail sites backed by good fundamentals, but might require long-term intervention. Over time, NewRiver wants to increase this ratio to more than 90 per cent, with the remainder comprising assets whose values can grow via intervention or alternative use.

‘At risk’ assets – specifically underperforming shopping centres facing oversupply, and with limited alternative use and turnaround prospects – are to be sold off by March 2023. These so-called ‘work out’ sites are now worth £104m, following a 19 per cent downward revaluation in the first half of this year. Seven are on the block for sale in the coming months, with another four being repositioned for the ‘core’ shopping centre portfolio.

Why might a landlord still believe in regional shopping centres and retail parks? For one, a more liquid investment market for the kind of sub-£20m asset NewRiver specialises in has helped to stabilise estimated rental values.

Let's get physical

More importantly, consumers haven’t entirely disappeared onto the internet. Indeed, for many store types, physical retail is either the dominant sales channel or indispensable in the supply chain that supports online offerings. The rise of fulfilment centres and online returns will continue to drive footfall to shopping clusters. And if city centres are likely to be hit by a permanent shift to hybrid office working, the residential areas where NewRiver's sites are normally based should benefit.

A version of this thesis underpins premium ratings for some retail landlords, Supermarket Reit (SUPR) and LXI Reit (LXI) among them. NewRiver’s tenant base also stands out for its diversification (see table) and stability. At a group-wide average of £11.51 per square foot, rents are affordable and that explains why rent collections came to 90 per cent in the first half. A 96 per cent occupancy rate is also encouraging, as are recent demand trends: so far this year, long-term lease deals have been struck at a double-digit premium to estimated values.

Sadly, this doesn’t mean valuations won’t dip further by March. The Omicron variant is an unwelcome development for the entire UK economy, regardless of the relative resilience of certain retail sub-sectors. But chief executive Allan Lockhart is confident that he will be talking about portfolio growth by this time next year, a view that helps explain why broker Liberum thinks the shares should trade in line with NAV.

Until then, and following the reintroduction of dividends, investors will have to make do with a yield above 8 per cent. Sentiment looks behind the improving curve.

[lord gnome] 07/1/2022 11:04

I have been here for several years already, adding substantially at the bottom or thereabouts. I plan to be here for a while yet. The projected yield is just too tasty.

[chucko1] 07/1/2022 10:55

Play the long game - this stuff always crops up along the way!

[lord gnome] 07/1/2022 10:33

Time to sell indeed. Let me see if I've got this right.You know that IC is going to publish a bullish piece on NRR so you run up the price on minimal volume. When the article appears you dump your stock at an inflated price to take advantage of the buying it generates.Maybe I am being a tad cynical, but it certainly seems that way.

[marksp2011] 06/1/2022 22:14

It is the Top pick for Bounce back


(must be time to sell ) :)

[lord gnome] 06/1/2022 17:38

The recent share price action may be partly explained by tomorrow's IC. NRR receives a very positive right-up and makes it into the magazine Bounce-back portfolio for 2022. Every little helps.

[fidra] 06/1/2022 14:47

Would also add the dividend possibly likely to be 9p this year .puts this on a great income with almost 40p still to go to get net asset value .

[sphere25] 06/1/2022 14:11

Encouraging bullish moves here. Dividend in for free and now threatening a nice breakout higher.

92p under threat.

The closer it gets to 100p, the more likely it becomes a self-fulfilling thing.

Over to the algos.

All imo
DYOR

[vow] 06/1/2022 14:10

hxxps://www.stamfordmercury.co.uk/news/amp/decision-day-looms-for-housing-plan-9233662/

[fidra] 04/1/2022 08:51

Nice start to the new year .

[m_kerr] 02/1/2022 19:03

fenners - the reason marston's employ more per site is probably just because the sites are bigger, and food led. they've mostly been disposing of the tenanted pubs which tend to be smaller and less labour intensive given the lesser food offering.

back to NRR, what we do know is the dividend will settle at a much lower level than pre pandemic. plus it's only paid out twice a year instead of quarterly. NRR was a very widely held stock by retail investors previously, but they've moved on to the latest hot property sectors, things like logistics, and supermarkets. issue is that initial yields in those sectors are as low as 3-4%, not much above the cost of debt.

[fenners66] 24/12/2021 23:57

m_kerr
I looked at the Marstons results recently and commented that their own pubs ran with on average over twice as many staff per pub, over the I guess self employed estate.
(terminology may be slightly different) even allowing for 2 people owning the business and perhaps not counting as employees that seemed excessive. I also made allowances that some of their own may have been more food than wet led, but given that they had made a decision at the same time to abandon doing breakfast food (and the staff that takes) there did seem to be a glaring difference in the efficiency.

That from one of the "specialist operators" you mention.

So what chance did NRR have?

Still chucko believes management could do no wrong and just got unlucky with covid related valuations.

But any recession would have left them in the same place - not to blame for a general malaise in the entertainment industry either ?

As I said above if it was a short term valuation problem good management would have left themselves with a buffer to ride it out - NRR did not.

[m_kerr] 24/12/2021 22:49

fenners, i still think pubs can be solid investments over the long run, but NRR had no business at all stepping outside their core competency of being a property REIT (i.e. they should have sticked to their tenancy model). it's a difficult business to make a return in even for the scaled and specialist operators like marston's, m&b etc.

to sum up, i think the marston's acquisition of 202 pubs wasn't a bad deal. it was a portfolio NRR themselves handpicked for their objective, with plenty of asset management opportunities, and solid income. the hawthorn deal was a poor one, as the estate was underinvested, and offered very little asset management opportunities. the bravo deal of managed pubs was just bizarre, as that took them into directly operating pubs where they have no expertise. again, beware of buying off private equity. chances are they are underinvested.

[fenners66] 24/12/2021 21:09

Chasing the high yield brought NRR to my attention in the first place.
But the pub strategy left me cold ...

"Mon 26th June, 2017 The smoking ban decimated England's pubs and hurt local communities, according to a report published today. New figures obtained by the smokers' group Forest show there are 11,383 fewer pubs in England compared to 2006, a decline of 20.7 per cent since the smoking ban was introduced on 1st July 2007."

That news item was pre-covid and just continued all the more since.

[m_kerr] 24/12/2021 16:27

fenners - the big mistake NRR management took was chasing yield when they were trying to maintain an unsustainably high dividend, so as not to disappoint the equity income funds holding the shares. this meant they rotated away from defensive and secure income streams to more uncertain ones, including a bizarre move into the managed pub sector (as opposed to sticking to development and collecting rents), at the worst possible time. it's a good example of how taking a short term approach to running a business can cause you to come unstuck.

[m_kerr] 24/12/2021 16:15

chucko - your previous post is a good one which had a lot of interesting info. it doesnt correspond to much of what I've said on here so I can only assume you're talking about others.

I don't hammer any management team for shares falling out of favour, which is beyond their control. those here irk me because their schtick is totally at odds with NAV and dividend performance. they keep telling you what a great job they're doing and
annoy me with their self promotion. it wasn't too long ago they modestly described themselves as "the best REIT platform in the Ftse' (I'm paraphrasing). this company started to lose its way when Lockhart snr stepped back, though I do accept the retail landscape was changing too.

as I've repeated, NAV is notional where buyers don't exist for many of the assets here.

[chucko1] 24/12/2021 13:14

And what is the evidence for the Lockhart family unduly enriching themselves? For many years, they have been rewarded not out of line with the impressive rewards their investors have enjoyed. "Modern here today, gone tomorrow management" - they've been in this game for 50 years and with conspicuous success with retail being their particular speciality. Hence the asset mix being what it is.

FY 2020 Allan Lockhart received a zero bonus. As did Mark Davies irrespective of the work done to sell Hawthorne. It is a competitive market and their base salaries of £400k to £470k are hardly excessive for an enterprise of this scale. That said, such numbers often attract the kind of comments you made above, but that is likely because you do not understand the pay market for this level of expertise/experience.

The other comments you made are not worth responding to.