NewRiver REIT’s new strategy focused on ‘resilient retail’, mainly retail park assets with essential goods and services retail tenants, is starting to pay off with the company reporting strong operational performance in annual results to 31 March 2023.
The group posted a 26% increase in underlying funds from operations (UFFO) to £25.8m, with UFFO per share of 8.3p versus 6.7p in 2022.
Dividend per share for the year was 6.7p, including final dividend of 3.2 pence, which was 125% covered. The 2022 dividend was 7.4p, but included a 2.1p contribution from the Hawthorn portfolio sale.
The group’s portfolio valuation was impacted by rising interest rates, as with the wider real estate market, and was valued at £594m, a 5.9% decline over the year.
This contributed to a 9.7% fall in EPRA NTA per share to 121p.
Financial update
- LTV of 33.9% vs 34.1% at 31 March 22
- Fully unsecured balance sheet with interest rate fixed at 3.5% on drawn debt and no maturity on drawn debt until 2028
- Cash increased to £111.3m vs £88.2m at 31 March 22
- Interest cover improved to 4.3x vs 3.5x in March 22
- Net debt to EBITDA of 4.9x vs 4.6x in March 22
Operational highlights
- Rent collection improved to 98% vs 96% in FY22
- 979,200 sq ft of leasing with long-term transactions 9.7% ahead vs previous rent and +1.1% vs ERV
- Retention rate improved to 92% on lease expiry or break
- Occupancy increased to 96.7% vs 95.6% at 31 March 22 and is the highest rate for five years
- Completed £23m of disposals
- Business rate reductions of -16% for portfolio tenants, effective from 1 April 2023
- Significantly expanded Capital Partnerships with new mandate from M&G Real Estate
- GRESB score improved to 70 and maintained Gold Level for EPRA Sustainability Best Practice
Allan Lockhart, chief executive, commented:
“We ended our financial year in a strong position having delivered a resilient set of operating and financial results reflecting the active occupational demand for space in our portfolio that has led to another good year of leasing performance.
“We have consistently expressed our confidence in our portfolio positioning which is predominately focused on essential goods and services. Our operating and financial results last year, and indeed the prior year, demonstrate the underlying resilience that we have in our portfolio and our platform, further evidenced by our valuation outperformance relative to the wider market.
“We are in an excellent position with a strong balance sheet that is not exposed to refinancing and rising interest rates until 2028. With over £110 million of cash available, we have a range of deployment options to deliver future earnings growth as well as opportunities to further expand our Capital Partnerships as evidenced by our recent appointment by M&G Real Estate. As such we remain confident of achieving our objective of a consistent 10% total accounting return in the medium term.”
NRR : NewRiver REIT’s resilient retail focus paying off