NewRiver REIT returns to capital value growth

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NewRiver REITsRetail assets have returned to capital value growth, with a new strategy starting to pay off.

Last year, the company announced its intention to concentrate its wallet entirely on “resilient retail” – which would see its portfolio composed mainly of retail parks.

Its retail portfolio was valued at £649m as of March 31, 2022, with values ​​up 2.6% in the second half of the year (after a long period of declining valuations). Valuation gains helped the company achieve an after-tax profit of £7.0m (2021: loss of £122.1m).

That of the group EPRA net tangible assets (NTA) fell 11% to 134p, due to the sale of its pubs business for £224m under the new strategy, but rose from 131p in September 2021 in due to growth in capital value.

Underlying funds from operations increased to £28.3m or 9.2p per share from £11.5m or 3.8p a year ago. This allowed the group to pay a dividend for the year of 7.4p (against 3p the previous year).

As well as selling the pub business, the group also sold £77.1million of non-core retail assets, allowing it to gain control of its gearing, which is a measure of a company's debts to its net assets.

For example, if my company has assets of £100 and them borrows another £100 it now has total assets of £200.

Its Loan to value ratio is 0.5 or 50% = 100/200.

Its gearing is expressed as 100% = 100/(200-100) though remember this can also be expressed as 200 - see the gearing definition.

 

" class="glossary_term">loan to value (LTV), bringing it down from 50.6% to 34.1%.

His balance sheet - i.e. all the sources of finance a company is using including the equity.

" class="glossary_term">capital structure has been significantly strengthened, with group debt reduced to £335m and no maturities before 2028. It has cash and liquidity of £213.2 million.

Operational Highlights

The group achieved just over 1 million square feet of rentals and renewals in the year at an average of 7.4% above estimated rental value (ERV), while the occupancy rate remained stable at 95.6%.

Allan Lockhart, Managing Director, said: “The decisive actions we have taken over the past year have resulted in significant improvement in our financial and operational metrics, with LTV down from 51% to 34%, underlying funds from operations up 146% to £28.3 million, the portfolio valuation is returning to capital growth, maintaining a high occupancy rate, improving volumes and rental prices and finally, the total dividend more than doubled to 7.4 pence per share, fully covered by the UFFO. All of this was achieved despite the disruptions caused by COVID-19.

“There is no doubt that today we are in a much stronger financial and operational position than when we laid out our strategy to create the most resilient retail portfolio in the UK a year ago. As such, we are optimistic about our future prospects and our strategic objective of delivering consistent total book returns of 10%, although it is clear that UK economic growth is slowing due to inflation. high and monetary and fiscal tightening. Uncertainty creates opportunity and we have put ourselves in a position of strength where we have a real option.”

NRR: NewRiver REIT Returns to Capital Value Growth

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