NewRiver REIT’s annual results show that its turnaround strategy is paying off and the retail property market is returning to growth.
The company reported a 5.0% drop in EPRA net tangible assets (NTA) to 115p in the year to 31 March 2024, which was mainly due to a modest decline in portfolio valuation of 2.3% – the vast majority of which occurred in the first half of the financial year, with valuations broadly stable in the second six months at -0.4%.
The portfolio was valued at £544m, delivering a total return of 4.8% significantly outperforming its MSCI All Retail benchmark which returned -0.2%.
Underlying funds from operations (UFFO) was £24.4m (7.8p per share), which was slightly down due to disposals in the year.
Dividends for the year were 6.6p (including a final dividend of 3.2p), which was 118% covered by UFFO.
The turnaround in NewRiver’s balance sheet has been impressive. LTV is now 30.8% (2023: 33.9%), while cash has increased to £133.2m (2023: £111.3m). Interest cover increased to 6.5x vs 4.3x at 31 March 2023, while net debt to EBITDA improved to 4.8x vs 4.9x.
The company refinanced its £100m undrawn Revolving Credit Facility during the year, extending the maturity to November 2026 at a reduced cost. Its cost of debt is fixed at 3.5% on drawn debt and it has no maturity on drawn debt until 2028.
This balance sheet strength has put the company in a position to grow, and it is in discussions to acquire listed shopping centre peer Capital & Regional.
Operational highlights
- Record occupancy of 98.0% (31 March 2023: 96.7%)
- Achieved 785,100 sq ft of leasing, with rent on long-term transactions +3.6% vs ERV and +1.8% vs previous rent
- Improving tenant retention rate of 94% vs 92%; average rent remains affordable at £11.82 per sq ft
- Asset management fee income from Capital Partnerships increased to £2.5m (from £1.5m), with the key driver being the mandate from M&G Real Estate
- Launched search for new Capital Partner to target UK retail parks> NewRiver will co-invest to generate rental income and asset management fees. Company says that early engagement has been positive
Allan Lockhart, chief executive commented:
“During the fourth quarter, we have seen a continuation of the positive operational momentum that has built over recent years, which is reflective of both the steadily improving health of the underlying retail market and the inherent strengths of our business. The retail sector is arguably in the best position it’s been in for several years following a wave of corporate restructurings and the successful repositioning of many retailers, which have created a healthier operating environment, as well as the increased market share of omnichannel retailers with physical retail playing a central role.
“Our retail portfolio, which demonstrated valuation stability in the second half of the year, is ideally positioned to benefit from consumers increasingly seeking value and convenience. The implementation of strategic key decisions over the last four years has reshaped our business, and we are entering an exciting time as we progress from resilience to sustainable growth. We have also continued to invest into our specialist asset management platform, meaning we are well placed to ramp up our Capital Partnerships activities, supported by our strong cash and liquidity position.”