NewRiver Retail is buying 158 pubs from Punch Taverns for £53.5m which equates to a net initial yield of 13.61%. The projected annual profit before tax of the portfolio is circa £6m, which will generate a cash on cash equity return in excess of 20%.
The acquisition of the portfolio includes circa £0.5m of fixtures, equipment and other assets and will be funded through existing financial resources, with a new debt facility available in due course. In November 2013 the Company acquired a portfolio of 202 pubs from Marston’s. Following completion of this acquisition, NewRiver’s pub portfolio will account for circa 15% of its total assets under management, which will total nearly £1bn.
The portfolio comprises 158 pubs across the UK, predominantly located throughout England, with 34% of sites in the South East and South West. The portfolio comprises 339,866 sq. ft. of total internal gross area, 1,844,766 sq. ft. of total site area and 1,730 car parking spaces and has an estimated reinstatement value of £146m.
They say the quality and stability of the Portfolio is reflected in it being 99.4% let and effectively 100% let for the last four years. The revenue arrears are negligible and beer volumes have increased by 2.24% per annum, compound, over the last four years.
They believe the portfolio has significant asset management and development opportunities, including unlocking and creating capital growth through the introduction of new and complementary uses, as well as offering existing occupiers longer, more sustainable leases. NewRiver has appointed a third party specialist pub management company to run the day to day management of the portfolio and deliver pre-identified efficiencies, allowing NewRiver to focus on the asset management and development programme.
NewRiver say it has identified a number of value-enhancing development opportunities within the Portfolio, which could include residential new builds on surplus land, extension or part-conversion of pub assets for residential use and the build of new convenience stores on surplus land.
NRR : NewRiver Retail buying 158 pubs from Punch