FTSE 250 rookie NewRiver outperforms market over Christmas

Retail property investor NewRiver REIT posted its third quarter update on Wednesday, declaring a dividend of 5p per share, up up 5.3%, payable on 27 January 2017.

The FTSE 250 firm said its dividend for the three quarters to date was up 9.1% to 15p per share.

NewRiver was a new appearance among its peers, having qualified for inclusion in the FTSE 250, FTSE All-Share and EPRA/NAREIT UK indices in December.

The board said its top portfolio retailers that provided Christmas trading updates - Primark, Superdrug, B&M and Sainsbury's - showed positive like-for-like income trends, with footfall across its shopping centre portfolio reported at 39 million in Q3.

On a like-for-like basis that was down 0.8% on the prior year, but outperformed the UK benchmark by 200 basis points.

Footfall was particularly strong at The Forum Shopping Centre, Wallsend, where like-for-like footfall was up 21% following the opening of a new 18,500 sq ft Aldi and 1,450 sq ft Burger King in the period.

NewRiver also reported a consistently high occupancy of 97%, up from 96% in September, underpinned by efficient rent collection with payment received for 99.3% of rent demanded in the period.

It had an affordable average retail rent of £12.70 per sq ft, in line with the second quarter, and a weighted average lease expiry of 6.8 years, down slightly from 6.9 years.

Draft rateable values across the retail portfolio in Scotland reduced by 13%, and with a previously announced decrease of more than 20% across England & Wales that meant a 19% reduction across over 90% of the retail portfolio, benefiting retailers greatly and reducing cost ratios further

Pub operators across NewRiver’s portfolio were preparing to save on average 37% on business rates from 1 April 2017 when the business rate relief threshold rises from £6,000 to £12,000, the board said.

During the period there were 69 leasing events across the retail portfolio across 314,200 sq ft, with long term deals up 2.4% on average against September 2016 ERV, with an average lease length of 9.7 years and securing annual rent of £2.8m.

That included a portfolio of seven lease renewals with Peacocks across 52,100 sq ft, with a weighted average lease expiry of 6.4 years and an increase in passing rent of 4.7%.

Significant progress was made at the Broadway Shopping centre, Bexleyheath, with London based Morleys Department Stores secured as a new anchor to replace BHS.

NewRiver said the new store is projected to open in April following significant investment by Morleys and a comprehensive modern fit-out, and is expected to be a significant footfall driver.

The company also secured contracted income on 21 pubs by surrendering the leaseback arrangement with Marston's, due to expire in December 2017, and agreeing new 15 year RPI linked leases with Marston's.

Further progress was reportedly made on the 1.6 million sq ft development pipeline, with a 44,000 sq ft Next anchor store at the Abbey Centre, Newtownabbey opened on 14 December with early trading encouraging.

The board said it was making good progress with the next phase of development works at the centre, constructing a 15,000 sq ft extension to create a 31,600 sq ft flagship unit for Dunnes Stores, the leading Irish department store operator.

Planning had also been granted on 86,500 sq ft during the period, includes 62,000 sq ft at Canvey Island Retail Park, which was already over 50% pre-let

A total of 246,500 sq ft of planning applications were submitted in the quarter, including 236,000 sq ft mixed-use regeneration in Cowley, Oxford.

“Against a backdrop of continued macro uncertainty, we remain focused on generating sustainable income returns from our well placed convenience-led portfolio,” said chief executive David Lockhart.

“I am pleased to report that we have once again delivered an increased dividend to our shareholders, with the third quarter dividend up by over 5% and the dividend for the financial year to date up by over 9%.

“Our underlying business is in good shape, as demonstrated by the operational metrics across our portfolio, with retail occupancy up to 97%, and footfall outperforming the national benchmark.”

Lockhart said NewRiver’s value and discount focused occupiers traded well over the Christmas period, with the vast majority reporting positive like-for-like revenue trends.

“In December 2016, we qualified for admission into the FTSE 250, FTSE All-Share and EPRA indices following our move from AIM to the Main Market in August 2016.”

Even at such an early stage, Lockhart said the company has seen improved liquidity in its shares and access to a wider pool of capital.

“Looking ahead to the final quarter of our financial year and beyond, we remain confident that with the convenience-led profile of our portfolio, affordable rents, conservative balance sheet and risk controlled development pipeline, our proven business model is well equipped to continue to deliver secure and sustainable cash returns to our shareholders.”