Newriver Reit Share Discussion Threads

[eeza] 23/8/2019 22:43

So the smart money is now starting to see the bottom, but the less smart have gone blind.

[speedsgh] 23/8/2019 10:35

Interesting 7min piece in yday's edition of Radio 4's You & Yours which asked "What's the best thing to do with failing shopping centres?".

[1:04-8:10]

Transcript of most interesting excerpts:

1:04
What’s the best thing to do with failing shopping centres? Some are being offered at bargain prices and foreign investors are moving in, making the most of the falling value of the pound. The analysts JLL forecast that £55bn will flood into UK commercial property from abroad this year. So what will these investors do with the shopping spaces they are snapping up?...

1:39
Report from Nicholsons Shopping Centre in Maidenhead…

4:46
Mark Smith helps people buy and sell shopping centres. He is a partner at Knight Frank, the commercial property consultants.
WR, BBC: Mark Smith. Knight Frank is also predicting that more foreign investors will be buying British shopping centres. Why?
MS, Knight Frank: I think it’s a point in time in the cycle that we’ve got. Basically, if you look at the value you can get elsewhere, then shopping centres are beginning to look very good value. So what we’ve got is parties looking on a different basis. Historically it was UK institutions and listed REITs that bought shopping centres whereas now they are not seen as a core hold, so what we’ve got is opportunistic buyers from overseas looking where they can get a counter-cyclical acquisition or a high income return. Alternatively we’ve got people like Areli [Real Estate], who bought [Nicholsons Shopping Centre in] Maidenhead, who are looking at a repositioning play on great sites like Maidenhead.
WR, BBC: What are listed REITs?
MS, Knight Frank: Listed REITs would be companies like British Land, Hammerson. So the traditional kind of holders of shopping centres.
WR, BBC: I see. So, they are not buying up shopping centres any longer and these new people from outside, they’re coming in because they think that we’ve reached a kind of dip and then that values are going to start to rise. Is that right?
MS, Knight Frank: Precisely. I think essentially the REITs look at low risk, willing to accept lower returns, whereas the overseas buyers accept there is a higher risk and therefore they are kind of being dragged into the market where others aren’t willing to go.
WR, BBC: Now the anchor store in new shopping developments used to be a big department store. A John Lewis say, an M&S or a Debenhams. What are people looking to put in them now?
MS, Knight Frank: It’s difficult in a lot of cases. In terms of what people have looked at over the last year, year & a half, it’s generally been cinemas with food operators, but obviously we’ve seen the food market kind of peter out as well. So people are looking at different opportunities in terms of repositioning, looking at putting hotels in, looking at developing residential, looking at alternative uses such as the Ping Pong Parlour you mentioned before. Unfortunately in a lot of cases a lot of these centres… There’s 800 centres around the UK and the reality is there’s 30-40 of them, say, that could be repositioned, such as Maidenhead. There’s a number of others that are perfectly fit for purpose and just need new investment. But then equally there’s another 200-odd centres that simply aren’t fit for purpose.
WR, BBC: And they will just go?
MS, Knight Frank: I think over time they will just disappear unless local authorities do something about that. So the other trend we’ve seen, as well as overseas investors, we’ve seen a lot of local authorities take proactive action in terms of investing in the sector and looking to come in and influence what’s going to happen in their town centre.
WR, BBC: And what are they doing with them? Is it too early to say?
MS, Knight Frank: It’s too early to say in some cases but in a lot of cases there’s some good examples where they’ve come in, they’ve put investment in where the private sector can’t. For example, in Ashford they’ve invested in a cinema where the private sector couldn’t make that work, but they’ve got lower returns, they can borrow at a lower cost, and obviously there’s social and community benefits from introducing that as well. And then likewise, as your report mentioned, there’s a lot of local traders. So they can create the right platform and the right environment for local traders to come in and start shopping.
ENDS

[indalo] 23/8/2019 09:15

RC - 50% is the board policy, I’m not sure where the covenant level is, having searched for it in their disclosures I could not find the specific covenants. Usually the board policy would maintain a buffer beyond lender requirements. Happy to be corrected.

Fundamentals aside this looks like the start of a short squeeze to me.

[keffective] 23/8/2019 07:49

NRR balance sheet is unsecured so covenants should be less of an issue versus peers

[spectoacc] 23/8/2019 07:33

@RCT2 - it is, and it'll happen at the likes of CAL, INTU, probably HMSO.

NRR is at least one third pubs, and pub valuations have just received a boost from the GNK 50% premium agreed bid.

NRR also not subject to much in the way of CVAs or shopping centre write-downs.

But a bad recession - or slump - and not impossible. But they do at least have a mighty big divi to cut well before covenants ever became an issue, even on individual assets.

[rcturner2] 23/8/2019 07:21

So according to the working below a 28% decrease in asset values brings us to a LTV breach. I can see why this is shorted and the share price is friendless. Such a fall is certainly possible in the current market.

[minerve 2] 21/8/2019 11:31

Could say the same thing about parliament. :)

[spectoacc] 21/8/2019 08:51

Saw a lovely quote at the weekend that the problem with retail is that it's "underdemolished" :)

[mikeyh1] 21/8/2019 08:50

Alternative use valuation on the portfolio is 90% ish of current NAV. This should provide a floor providing residential land prices hold.

[eeza] 21/8/2019 08:45

The 5% short position is there due to Barnett being viewed as the new Woodford.

[wskill] 21/8/2019 08:35

Not so sure of further falls in values I would think many centres are now valued less than a cost to build.

[hugepants] 21/8/2019 08:33

What happens if rents drop say 10%? The issue is declining footfall which will likely cause rents to reduce over time. NRR has been reporting footfall drop of 2% per annum for the last couple of years and the latest update suggests they are on track to continue that record this year as well. Fact is they are losing customers faster than INTU! And there's still a 5% short position on the stock.

[chucko1] 20/8/2019 16:08

Totally agree, Minerve 2.

[minerve 2] 20/8/2019 14:54

Essential

Lots of financial advice would steer director/founders away from committing more to an entity to which they are already very well invested. With the best intentions in the world they still need to manage their own risk through diversification.

[essentialinvestor] 20/8/2019 14:51

M, take your point, however perhaps also fair to say the BOD aren't
exactly falling over themselves to buy atm.

To be fair there are not many sector insiders buying lately
and it's also possible to read too much in to this.

[minerve 2] 20/8/2019 11:38

I don't think one should attempt to read into Allan Lockhart's share sale. The divorce settlement most likely involves the equivalent of the purchase of 50% of the family home - that is some financial chunk of outgoings regardless of financial status, for most anyway. It could also be emotional which could drive the objective of being 'done with it'.

So the 70,000 share sale is only likely to be a fraction of the sums that need to be raised and would answer the question raised by some on this thread why some loan arrangement wasn't made.

Anyway, why should Allan adjust his behaviour to appease investors who might be nervous? If his share sale is driving your investment decision I would say that either you haven't done enough due diligence or haven't the skills to fully assess the REIT or you doubt Allan's integrity. In this case I would advise not to invest. This isn't like a startup where there is yet to be earnings or anything like that. Also, Allan's cost base for the shares is pretty much zip so he will view the price he fetches today in a different light to someone who bought in at higher prices.

[minerve 2] 20/8/2019 09:59

eeza

"Uni's are for snowflakes, yet to experience life.
Pubs are for boozers coping with life."

Some go to uni's and pubs at the same time! Amazing, eh?

For many, university IS part of life.

All because you were not driven enough at that age to go to university doesn't give you the right to assume that you are more 'life aware'.

Also, I find the 'snowflake' reference rather distasteful. I would kindly ask for you to keep those ignorant opinions to yourself.

Thanks. :)

[spectoacc] 20/8/2019 08:08

GNK bid certainly helpful - strongly underpins valuations of a third of NRR's business, which at least is helpful to LTV.

NRR isn't CAL, INTU, or HMSO

[chucko1] 19/8/2019 17:50

On the Hawthorn estate: after a review, sell those that have less development potential for perhaps more than they were on average acquired for, keeping the remainder for the current rent or for future development.

Isn’t this supposed to be part of their business?

[eeza] 19/8/2019 16:42

Ha, just beat me to it, hp. I was about to mention the pub business.

MARS also up in anticipation.

[hpcg] 19/8/2019 16:39

Greene King takeover at a healthy premium is interesting here. I know the story is different, and there are secular trends that make this potentially less appealing to PE, but buying assets at a valuation that provides healthy forward returns is a traditional Ben Graham value approach.

[shawzie] 18/8/2019 22:22

shawzie - 17 Jul 2019 - 16:47:16 - 1424 of 1596 New River Retail - NRR
Taken from Hawthorn website,
"From traditional to contemporary, community or town centre, we own and operate 298 leased and managed pubs across England, Scotland and Wales."
Almost 50% seem to be available. Is thus a cause for concern?