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NewRiver REIT PLC

NewRiver REIT plc Joint Venture and acquisition of four retail parks for £60.5 million

NewRiver REIT (LON: NRR) has today announced that it has agreed terms, in principle, relating to a new 50:50 joint venture with BRAVO Strategies III LLC, a fund managed by the Pacific Investment Management Company, and also announced that it has exchanged contracts on the acquisition of a portfolio of four retail parks for total consideration of £60.5 million, reflecting a net initial yield of 9.8%, from Zurich Assurance Ltd. It is intended that the acquisition of the portfolio will be completed by the JV, once established. NewRiver’s share of the transaction will be satisfied from existing resources and available credit facilities.

Once established, it is intended that the JV will acquire and manage a portfolio of retail parks in the UK, as well as identifying and pursuing other opportunities in the UK retail sector. Initially, NewRiver will hold a 50% interest in the gross assets of the JV (NRR share: £30.2 million) and NewRiver will benefit from 50% of the net rental income (NRR share: £3.1 million per annum). It is intended that NewRiver will be appointed as asset manager to the portfolio, in return for a management fee calculated with reference to the gross rental income of the portfolio, and will also receive a promote based on financial performance.

The portfolio comprises four retail park parks: Kittybrewster Retail Park, Aberdeen; Telford Retail Park, Inverness; units in Kingsway East Retail Park, Dundee and Wakes Retail Park on the Isle of Wight. The retail parks have an affordable average rent of £14.77 per sq ft, an Affordable Rent to Sales ratio of 6.5%1 and a WAULT of 6.3 years, and are let to a high quality and well-diversified line-up of occupiers that complements NewRiver’s existing portfolio.

Allan Lockhart, NewRiver REIT plc Chief Executive, commented:

“We are delighted to be forming this joint venture with BRAVO, re-establishing a successful partnership that dates back to 2012, and has a track record of delivering growing returns to our shareholders. Recycling our capital from disposals into joint ventures enables us to secure a superior return on our capital and provides us with significant additional firepower to take advantage of the current dislocation in the retail real estate market. The portfolio of retail parks we have contracted to acquire is highly complementary to our existing portfolio, providing a low entry price, robust cashflows and opportunities to extract further income through active asset management and risk-controlled development opportunities.”

Kittybrewster Retail Park, Aberdeen

Kittybrewster Retail Park is situated approximately one mile north of Aberdeen city centre, beside the A96 and in close proximity to a Sainsbury’s superstore. The 13-unit, fully-let retail park offers 154,400 sq ft of retail space and 402 car parking spaces, and has a convenience and value-led line-up including B&M, TK Maxx, Sports Direct, Halfords and PureGym. The asset has a low Rent to Sales ratio of 6.5%, which provides significant headroom to the asset’s Affordable Rent to Sales ratio of 8.1%1.

Telford Retail Park, Inverness

Telford Road Retail Park is located to the north west edge of Inverness city centre, in close proximity to the A82. The retail park provides 179,500 sq ft has a value and convenience-led line-up and is anchored by B&M, Go Outdoors, Oak Furnitureland and Poundstretcher. The asset has a low Rent to Sales ratio of 6.0% which provides significant headroom to the asset’s Affordable Rent to Sales ratio of 7.5%1, and has alternative use potential for hotels and light industrial.

Units at Kingsway East Retail Park, Dundee

Kingsway East Retail Park is situated two miles north east of Dundee city centre, close to the junction of the A972 and A92, and is anchored by an Asda food store. The acquisition comprises two units: a 34,500 sq ft store currently let to B&M and a 14,700 sq ft store let to home furnishings retailer Harry Corry, which face out onto the retail park’s 374-space car park. The asset has a low and sustainable average rent of £6.45 per sq ft and a very low land capital valuation of £23 per sq ft.

Wakes Retail Park, Newport, Isle of Wight

Wakes Retail Park is situated to the north of Newport town centre, beside the A3020 and is located in the main retail park concentration on the Isle of Wight. The retail park provides 40,800 sq ft of retail space across three units, and is anchored by Pets at Home and Currys PC World. The asset has a low Rent to Sales ratio of 7.6%, which provides significant headroom to the asset’s Affordable Rent to Sales ratio of 9.0%1. In addition, the asset has alternative use potential for hotels and residential, supported by a land capital valuation of £66 per sq ft.

1 Source: Rental affordability analysis undertaken by Harper Dennis Hobbs’ Retail Consultancy team for NewRiver