NewRiver REIT PLC (LON:NRR) today announced that its joint venture with BRAVO Strategies III LLC has exchanged contracts to acquire Poole Retail Park in Dorset, from LS Poole Retail Limited for total consideration of £44.7 million, reflecting a net initial yield of 8.0%.
NewRiver will hold a 10% interest in the asset (NRR share: £4.5 million) and NewRiver will benefit from 10% of the net rental income (NRR share: £0.4 million per annum). NewRiver will be appointed as asset manager, in return for a management fee calculated with reference to the gross rental income of the asset, and will also receive a promote based on financial performance.
The gross asset value subject to the transaction is £44.7 million and NewRiver’s share of the transaction will be satisfied from existing resources and available credit facilities.
Poole Retail Park is located between the town centres of Poole and Bournemouth in Dorset, adjacent to the A35 and in close proximity to a large residential area. The fully-let retail park comprises 14 units offering 208,000 sq ft of retail space, with a tenant line-up including John Lewis at Home, DW Sports, Next Home, Homesense, Boots and Home Bargains, and a free car park providing 805 spaces. The asset currently has an attractive weighted average unexpired lease term of 6.7 years, an affordable average rent of £18.24 per sq ft and an average Rent to Sales ratio of 7.8%1. The acquisition provides a number of opportunities to extract further value and enhance income streams through active asset management and risk-controlled development, including the expansion and adaption of units to better meet the needs of current and prospective occupiers.
Including this acquisition, the JV established in May 2019 will have acquired £105.1 million of assets (NRR share: £34.7 million), reflecting a net initial yield of 9.0%.
Allan Lockhart, Chief Executive of NewRiver REIT commented: “We are delighted to announce the acquisition of Poole Retail Park, demonstrating further progress with our strategies to deliver Underlying FFO growth, by recycling capital from lower-yielding assets into higher-yielding acquisitions, primarily through joint ventures. Acquiring through this JV ensures we can maximise our returns on capital deployed through the receipt of rental income, asset management fees and promotes, while maintaining a conservative balance sheet. Poole Retail Park is a high performing asset that benefits from a very convenient location and a strong and diverse tenant line-up, and presents a number of exciting opportunities to extract further value and higher rental income through active asset management and risk-controlled development.”
1 Source: Rental affordability analysis undertaken by Harper Dennis Hobbs’ Retail Consultancy team for NewRiver