Newriver Reit Plc · LSE:NRR
Newriver Reit — FY2018 Earnings Presentation
60 slides from Newriver Reit's earnings presentation, May 24, 2018
Slide 1: Full Year Results Presentation 12 months to 31 March 2018
Full Year Results Presentation 12 months to 31 March 2018 24 May 2018 Allan Lockhart — Chief Executive Mark Davies — Chief Financial Officer www.nrr.co.uk
Slide 2: Introduction
Introduction Allan Lockhart, Chief Executive
Slide 3: NRR well positioned for continued growth
NEW RIVER NRR WELL POSITIONED FOR CONTINUED GROWTH ° Good set of results in the context of challenging headwinds impacting the wider retail sector e Announced acquisition of pub portfolio and operating platform ° Operating in growth sector of the market with good long-term prospects ° Carefully sele
Slide 4: Highlights for the year
NEW RIVER HIGHLIGHTS FOR THE YEAR Convenience & community strategy and active approach delivering growing cash returns * Funds From Operations (‘FFO’) up 4% to £60.3 million * Ordinary dividend per share increased by 5% to 21.0 pence; fully covered by FFO * QI1FY19 ordinary dividend per share increa
Slide 5: Operating in growth sector of the market
NEW RIVER OPERATING IN GROWTH SECTOR OF THE MARKET ° Wider UK retail market challenging — lack of Retail market growth forecast: 2017-2022e real wage growth, low consumer confidence, a £375bn online pressure 415% * Consumers increasingly focused on value for money NRR focus |” . 15% ° Essential spen
Slide 6: Carefully selected portfolio: a convenience & community focus
NEW CAREFULLY SELECTED PORTFOLIO: RIVER A CONVENIENCE & COMMUNITY FOCUS ° Retail spend in the UK was £327bn in 2017; in-store and click & collect £281bn ° Our retail and leisure assets are conveniently located in the heart of communities across the UK ° They are actively managed to provide the appro
Slide 7: Proven business model: well positioned for growth
NEW PROVEN BUSINESS MODEL: RIVER WELL POSITIONED FOR GROWTH ° Deliberately limited exposure to structurally challenged retail sub-sectors ° Department stores — 0.1% of rent roll e Mid market fashion — 3.1% of rent roll ° Affordable rents and low occupancy costs underpin the sustainability of our cas
Slide 8: Finance Review
Finance Review Mark Davies, Chief Financial Officer
Slide 9: Significant achievements in the capital markets
NEW RIV=R £1bn of capital raised in total during FY18 £225m of equity Raised at a 15% premium to March 2017 EPRA NAV Provided scale required to complete acquisition of BRAVO JVs and move to unsecured balance sheet LTV of 28% at 31 March 2018 vs guidance of <40% £730m of unsecured debt raised Unencum
Slide 10: Positive impact of achievements in capital markets
RIVER POSITIVE IMPACT OF ACHIEVEMENTS IN CAPITAL MARKETS I I I I Debt maturity (years) I I I I I I I | I | I | I Portfolio yield ; 7.2% I 4.0% I I I I I I I I I I I 3.9% 3.9% Cost of debt 3.8% fey 3.7% Arbitrage £730m of unsecured funding ! * Increased maturity l * Increased flexibility I * Reduced
Slide 11: Well-positioned balance sheet
NEW RIV=R ° Investment properties increased to £1.2bn at March 2018 due to acquisitions ° EPRA NAV of 292p in line with March 2017; ° Includes Special Dividend of 3p per share ° LTV of 28% at March 2018, increased to 34% following Hawthorn acquisition post balance sheet and remains well within guida
Slide 12: EPRA NAV per share (pence)
RIV=R EPRA NAV PER SHARE (PENCE) 21.2 (20.75) Cash break costs (1.3) Non-cash unamortised fees (1.1) Refinance costs (2.4) EPRA NAV Funds From Ordinary Special dividend Gain on bargain Property £225m equity Unsecured Other EPRA NAV Operations dividends paid paid purchase revaluation issue refinancin
Slide 13: Dividend cover
• • • • • *Dividend cover calculation in FY17 includes 3.0p special dividend
Slide 14: Net property income (£m)
NET PROPERTY INCOME (£M) PUBS & RETAIL -STORES) (11.5) 6.0 2.5 (0.9) a 61 (1.8) 2.2 (0.7) ; o ma OO 78.2 | Retail L4L +0.9% FY17 Net Sheffield FY17 Net Acquisitions Disposals Held for L4t BRAVO JV Surrender Pubs & Other FY18 Net property transaction property development Promote premia c-stores prope
Slide 15: Our pub & c-store portfolio
NEW RIVER OUR PUB & C-STORE PORTFOLIO ° Our pub & c-store portfolio has been very profitable, delivering an unlevered IRR of 14% over the last 5 years * Pubs generate high levels of low risk, diversified cash returns and contain a number of value creating asset management and development opportuniti
Slide 16: Hawthorn Leisure: transaction summary
NEW RIVER * Post balance sheet acquisition of a portfolio of 298 community pubs * Acquisition includes a high quality specialist management team and platform Deal rationale * Accretive to FFO, dividend and NAV ° Scale benefits * Synergies ° Attractive entry price — yield 13.6% HAWTHORN LEISURE: TRAN
Slide 17: Pubs & c-stores: looking ahead
NEW RIV=R Community pubs are one of our core sectors, along with community shopping centres and retail parks We have a high quality management team with a platform in place to generate high cash returns Our portfolio presents good active asset management and risk-controlled development opportunities
Slide 18: Dividend track record: +5% growth in FY18
18.5 17.0 16.0 DPS (pence) FY12 FY13 FY14 FY15 FY16 DIVIDEND TRACK RECORD: +5% GROWTH IN FY18 Ordinary Dividend +5% Qi Ordinary Dividend +3% [— FY17 FY18 FY19 Total dividend cover 100% 102% 98% 16% 144% 108% 101%
Slide 19: Property Review
Property Review Allan Lockhart, Chief Executive
Slide 20: Robust operational metrics
RIV=R ROBUST OPERATIONAL METRICS 96% 5 97% 97% 95% I | | | : FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 £11.50 £12.36 £12.14 £12.45 £12.36 Total leasing of Long term retail leases 985,600 +1.3% 9 ° (e) Sq ft Vs ERV Retail rent collection of Shopping centre footfall % 130b 99.2% + ps FY14 FY15
Slide 21: Diversified and high quality income streams
NEW RIV=R DIVERSIFIED AND HIGH QUALITY INCOME STREAMS * Over 2,000 leases with >800 different occupiers oe % NRR rental | Number i : * Average retail rent of £58,000 per unit per income | of stores annum 1 Poundland’¢.) 2.2% 23 Oy * Policy that no occupier >5% of total rent 2 2 2.M% 27 (currently 2.
Slide 22: Resilient portfolio performance
NEW RIV=R RESILIENT PORTFOLIO PERFORMANCE As at 31 March 2018 i Valuation NRR Watt MERE oemedlors LFLERV surplus/ share NRR share a NIY movement (deficit) £m % % % % Shopping centres 798 65 (1.7) 6.7 7A 0.2 Retail parks 164 13 1.8 6.5 6.9 2.2 High street 26 2 (7.6) 8.3 73 (7.1) Pubs & c-stores 166 1
Slide 23: Profitable capital recycling
NEW RIVER PROFITABLE CAPITAL RECYCLING * Completed £57.5m of profitable capital recycling Acquired * 11% ahead of valuation for £7.5m Occupancy * 23% ahead of total cost ; » | from 85% to J de - 100% * IRR on disposals of 15% * Typically these were: * Mature assets where our estimates of forward loo
Slide 24: Disciplined stock selection
Completed £261m of acquisitions in core markets Includes £114m pub portfolio acquisition completed post balance sheet (Hawthorn Leisure) Average cash on cash return of 10% £17m of additional rental income to come in FY19 Offer opportunities to deliver capital growth through active asset management a
Slide 25: Risk-controlled development
NEW RIV=R Achievements in FY18 * 49,400 sq ft completed * 62,000 sq ft started onsite * 161,700 sq ft of residential pre-sales * 469,400 sq ft of planning consents secured 1.9m sq ft risk-controlled development pipeline RISK-CONTROLLED DEVELOPMENT Targets for FY19 Deliver 7 further c-stores to the C
Slide 26: Risk-controlled development: Basingstoke leisure park
NEW RIV=R ° Exchanged contracts on a development agreement for a 66 acre leisure park in Basingstoke * Conditional on achieving planning consent and pre-lets as well as a viability assessment, NRR will be granted a 250 year leasehold interest * Proposals comprise c.200,000 sq ft of designer outlet a
Slide 27: Opportunities in a changing environment
Cost efficiencies for occupiers Short-term strategies Enhancing existing income streams Extracting maximum value OPPORTUNITIES IN A CHANGING ENVIRONMENT Asset management platform Additional uses Long-term strategies Evolution of click & collect 27
Slide 28: Looking ahead
NEW RIVER LOOKING AHEAD Focused on growing sub-sectors of the retail market Affordable rents and well diversified income streams In-built growth potential and a clear strategy Strong balance sheet metrics 28
Slide 29: Appendix
Appendix
Slide 30: Presentation team
NEW RIVER PRESENTATION TEAM Allan Lockhart — Chief Executive * Co-founded NRR in 2009 as Property Director. Appointed CEO effective 1 May 2018 * Started his career with Strutt & Parker in 1988 advising major property companies and institutions on retail investment and development In 2002, Allan was
Slide 31: Management track record
NEW MANAGEMENT TRACK RECORD @ December 2014 @ December 2016 @ 1991 - @ June 2013 £75m equity raise Qualified for FTSE Halladale plc established, . to acquire 250/EPRA indices backed by 3i £67m equity raise BRAVOs stake in to finance acquisitions fst JV January 2007 cornerstoned by July 2017 March 20
Slide 32: Introduction to NewRiver
NEW RIVER INTRODUCTION TO NEWRIVER NewRiver REIT plc is a specialist Real Estate Investment Trust whose management team have a strong track record in the U.K. retail property sector ° NewRiver has focused on convenience-led, community retail assets, which typically are: * — In-town or on edge of tow
Slide 33: UK leader in convenience-led retail
£1.2bn of assets Context UK LEADER IN CONVENIENCE-LED RETAIL — Highly diversified with over 2,000 tenancies where the top 10 represent <20% of total gross rent — Largest tenant on contracted basis 2.2% of income Convenience-led, community-focused — NewRiver’s strategy is the disciplined buying and m
Slide 34: UK shopping centre market
NEW RIVER UK SHOPPING CENTRE MARKET 850 * The UK shopping centre universe is large UK shopping centres! and diverse * Retail is purpose driven and demand is | typically driven by either “needs” or “experience” 30 600 220 Super regional centres ‘The squeezed middle’ Community shopping . . . centres!
Slide 35: Retail portfolio
NER RETAIL PORTFOLIO @ 33 Shopping Centres * Acquired remaining 50% in four community shopping centres for £59.4m * Exchanged conditional contracts for pre-sale of entire residential element of Burgess Hill regeneration * Obtained planning consent for 236,000 sq ft mixed use development scheme in Co
Slide 36: Top assets by value
NEW RIVER TOP 10 ASSETS BY VALUE Floor area Gross rent Occupancy Key occupiers ‘000 Sqft The Broadway Shopping Centre & Broadway Square Retail Park, Bexleyheath 525,000 £11.2m 100% M&S, Sainsburys, Wilko, TK Maxx The Abbey Centre, Newtownabbey 320,000 £5.8m* 94%" Primark, Dunnes Stores, Next, New Lo
Slide 37: Reconciliation of IFRS profit after taxation to FFO
RIV=R RECONCILIATION OF IFRS PROFIT AFTER TAXATION TO FFO 31 March 2018 31 March 2017 £000 £000 IFRS profit for the period after taxation 45,732 36,201 Adjustments: Revaluation of investment properties 12,902 15,030 Revaluation of joint ventures’ investment properties 564 419 Revaluation of derivati
Slide 38: Performance track record
NEW RIV=R PERFORMANCE TRACK RECORD FY18 FY17 HY17 FY16 FY15 FY14 FY13 Annualised rent roll £100.1m £96.5m £97.1m £85.1m £56.2m £31.2m £19.2m Admin cost ratio 15% 14% 14% 19% 23% 22% 24% Funds From Operations (‘FFO’) £60.3m £58.2m £24.5m £47.1m £20.9m £9.5m £5.2m FFO per share 21.2p 24.9p 10.5p 26.6p
Slide 39: Gross rental income
NEW RIV=R GROSS RENTAL INCOME Accounting basis £m 12 months to 31 March 2018 Annualised as at 31 March 2018 Group JVs & Funds Group JVs & Funds Shopping Centres 59.6 4.6 64.2 66.2 0.7 66.9 Retail Warehouses 10.3 - 10.3 12.6 - 12.6 High Street (Big Boxes) 24 03 2.7 2.5 03 2.8 Pubs & Convenience Store
Slide 40: Net rental income
NEW RIV=R NET RENTAL INCOME Accounting basis £m 12 months to 31 March 2018 Annualised as at 31 March 2018 Group JVs & Funds Group JVs & Funds Shopping Centres 47.5 44 51.9 53.7 0.5 54.2 Retail Warehouses 9.8 - 9.8 12.1 - 12.1 High Street (Big Boxes) 2.2 03 2.5 2.2 03 2.5 Pubs & Convenience Stores 11
Slide 41: Retail lease profile
_ RIV= RETAIL LEASE PROFILE Passing rent of ERV of leases Passing rent ERV of leases leases expiring expiring subjecttoreview subject to review £m £m £m £m FY19 6.3 6.8 3.9 4.2 FY20 5.9 6.3 41 4.2 FY21-23 13.8 13.7 8.8 8.9 Total 26.0 26.8 16.8 17.2 41
Slide 42: Adjusted funds from operations (AFFO)
NEW RIV=R ADJUSTED FUNDS FROM OPERATIONS (AFFO) wwe £m £m £m Gross property income (GPI) 107.0 106.7 60.8 FFO before void costs for repairs 61.3 58.8 47.2 Net contribution to R&M through service charge attributable to vacant units (A) (1.0) (0.5) (0.1) Funds from operations (FFO) 60.3 58.2 47.1 Esse
Slide 43: Debt summary
IV=R DEBT SUMMARY Financial Policies Proportionally consolidated 31 March 2018 31 March 2017 Net debt £344.7m £417.9m Principal value of gross debt £469.0m £470.9m Weighted average cost of drawn debt 3.1%! 3.5% Weighted average debt maturity of drawn debt 7.9 yrs? 2.5 yrs Loan to value Guidance <40%
Slide 44: Debt maturity profile
250 200 150 100 50 0 2018 2019 2020 2021 2022 2023 2024 2025 44
Slide 45: Loan to value
RIV=R LOAN TO VALUE 31 March 2018 31 March 2017 £7000 £7000 Borrowings 456,952 403,079 Cash and cash equivalents (115,801) (45,956) Net debt 341,151 357,123 Equity attributable to equity holders of the parent 892,380 684,538 Net debt to equity ratio (‘Balance sheet gearing’) 38% 52% Share of joint v
Slide 46: Number of shares
NEW RIV=R NUMBER OF SHARES Number of shares (m) As at 31. March 2018 = As at 31 March 2017 Weighted average — basic! 285.0 233.8 Weighted average — diluted? 286.1 235.8 Year end — basic? 303.7 234.1 Year end — diluted? 305.3 237.4 (1) For the purposes of Basic EPS, FFO and EPRA (2) For the purposes
Slide 47: Conservative financial policies and guidelines
NEW RIV=R CONSERVATIVE FINANCIAL POLICIES AND GUIDELINES ° Key financial policies well established Financial Policies Policy Reported ° LTV guidance <40%, 28% at year end j 9, g © y' Ltv Guidance <40% 28% Policy < 50% * Now include Net debt:EBITDA as an Balance sheet gearing <100% 38% additional mea
Slide 48: Shopping centre acquisitions
Abbey Centre, Belfast: Dunnes extension opened August 2017 Gross asset value (share acquired) Net equivalent yield Net operating income (share acquired) Occupancy Weighted average lease length Average rent Key anchors ‘Including Primark deals signed in August 2017 (to open 2018) £41.0m 7.6% £2.7m* 9
Slide 49: Active asset management: reactivating space
NEW ACTIVE ASSET MANAGEMENT: RIV=R REACTIVATING SPACE BHS/Primark New Look * Replaced BHS with Primark ° Belfast: a new store (opened June 2016) and will * Expect Primark to generate significant footfall continue at same rental level * 15/20 year lease length, rents in-line * Hastings: will continue
Slide 50: Risk-controlled development pipeline: summary
NEW RISK-CONTROLLED DEVELOPMENT PIPELINE: RIV=R SUMMARY — Shopping Retail Residential Total vs Retail& Residential Centre Warehouse March Leisure Pre-sold 2017 Pre-let (000) (000) (000) (000) (000) (000) sq ft sq ft sq ft sq ft sq ft sq ft Gompleted in period/ 15.0 76.8 - 38.2 - 130.0 +26.9 88% nla
Slide 51: Development pipeline by portfolio
NEW RIV=R At 31 March 2018 Retail portfolio Completed in period/ Shopping Centre (k) sq ft RISK-CONTROLLED DEVELOPMENT PIPELINE: BY PORTFOLIO Retail Park (k) sq ft Residential Retail & Leisure Pre-let Residential Pre-sold Under construction 15.0 76.8 - - 91.8 84% n/a Planning granted 286.8 15.6 87.7
Slide 52: C-store developments
NEW RIV=R C-Store developments Agreement to deliver up to 40 c-stores to Co-op Further 10 handed over in year; 20 handed over to date Received premium payments from the Co-op following delivery of 15" c-store, expected in early 2018 Received £750k on delivery of 15"" c-store, and then between £75-20
Slide 53: Estimated development cost phasing
NEW RIV=R Pre-let & in solicitors Key projects hands’ £m Retail portfolio RISK-CONTROLLED DEVELOPMENT PIPELINE: ESTIMATED DEVELOPMENT COST PHASING Current market value + TDC to come Total development cost to come (TDC)? £m £m Burgess Hill redevelopment 261 3.6 14a 54.4 75.7 Canvey Island retail park
Slide 54: Estimated development cost phasing
NEW RISK-CONTROLLED DEVELOPMENT PIPELINE: RIV=R ESTIMATED DEVELOPMENT COST PHASING Key projects Estimated development cost phasing Total development FY19 FY20 costs to come £m £m Retail portfolio Burgess Hill redevelopment 54.4 3.6 38.5 12.3 Canvey Island retail park 8.7 8.7 - - Cowley, Oxford 59.5
Slide 55: Canvey Island retail park
* Acquired site in July 2015 as part of Ramsay portfolio + Value of £1.0m attributed to brownfield site at acquisition, next to existing Morrisons * Planning consent received in November 2016 for a 62,000 sq ft retail park * Scheme is 75% pre-let and preferred contractor appointed 55
Slide 56: Planning granted: Burgess Hill
NEW RIV=R On-site progress to date * Demolition works underway at Leylands Road site to relocate Lidl * Iceland relocated to former Store 21 unit Planned next steps * Inthe second half of 2018, demolition works will commence at the shopping centre on the former Iceland unit and the former library (w
Slide 57: Templars Square, Cowley
i i! i t i il f F| 2=mmce ceo =m + Acquired Templars Square Shopping Centre for £24.6m in December 2012 * — Planning consent received recently for a 236,000 sq ft development + Retail & leisure element 82% pre-let * 226 residential units * 71bed hotel, Agreement for Lease signed with Travelodge * 2n
Slide 58: Pub and c-store development example
Asset type Acquisition / build date Acquisition / construction cost EBITDA / Rent Current Yield on Cost CAPEX Current valuation Development potential Pub C-Store Community Local Co-Operative 18 December 2013 23 September 2016 £503K £799K £92K £73K 18.3% 9.1% £A2K £0.00 £895K £1.3M This site has a la
Slide 59: Disclaimer
NEW RIVER DISCLAIMER The information in this presentation may include forward-looking statements, which are based on current expectations and projections about future events. These forward-looking statements reflect the directors’ beliefs and expectations and are subject to risks, uncertainties and
Slide 60: NewRiver REIT plc contact details
NewRiver REIT pic 16 New Burlington Place London WIS 2XH nrr.co.uk