Newriver Reit Plc · LSE:NRR
Newriver Reit — Investor Day (September 2021)
62 slides from Newriver Reit's investor day presentation, Sep 30, 2021
Slide 1: Capital markets event
v Capital markets event 30 September 2021
Slide 2: Our Purpose
Our Purpose To acquire, manage and develop retail assets across the UK that provide essential goods and services and support the development of thriving communities
Slide 3: Our Objectives
OUR OBJECTIVES To own and manage the most resilient retail portfolio in the UK Focused on three core sectors: To deliver stable income and capital growth Supported by: TARGETING 10% TOTAL ACCOUNTING RETURN
Slide 4: Today's Speakers
TODAY’S SPEAKERS Allan Lockhart Emma Mackenzie CEO Head of Asset Management & ESG Justin Thomas Will Hobman Development Director CFO
Slide 5: Progress since full year
Progress since full year
Slide 6: Now focused on resilient retail with LTV in target range
NOW FOCUSED ON RESILIENT RETAIL With LTV In Target Range March 21 September 21 pro forma Segmentation Segmentation Shopping Centres - Work Shopping Out 13% Pubs Centres - Work Shopping 25% Out 17% Centres - Core 30% Retail Parks 16% 50.6% 39.8% Retail LTV Shopping Parks 21% LTV* Centres - Shopping C
Slide 7: Strong operational performance with an improving market backdrop
STRONG OPERATIONAL PERFORMANCE With An Improving Market Backdrop • Rent collection returning to pre-COVID levels • FY21 rent collection rate increasing, prior year provisions being released 91% • H1 22 rent collection rate significantly ahead of FY21 +21% 86% • £2m Business interruption insurance re
Slide 8: Resilient rental income...
RESILIENT RENTAL INCOME… 1.9 1.1 2.2 67.0 65.1 3.8 1.9 60.5 1.7 3.8 58.5 4.4 1.5 53.1 51.6 FY20 Net FY20 LfL Deferral Rent Free Outstanding Admin / CVA FY21 at FY Collected FY21 at 16 Deferral Rent Free FY21 Pro FY21 disposals Pro forma Results post results Sept forma Annualised FY21 annualised incl
Slide 9: ...and stabilising valuations
…AND STABILISING VALUATIONS • Equivalent yields stabilising for shopping centres and retail parks displaying yield compression Retail Revaluation H1 FY21 (A) H2 FY21 (A) H1 FY22 (F) • Increasing liquidity across shopping centres and retail parks: 0.0% -1.0% • Shopping Centre transactions concentrate
Slide 10: Capital partnerships remain important to us
CAPITAL PARTNERSHIPS REMAIN IMPORTANT TO US • Enhance returns • Provide capital and risk diversification • Provide greater insight into wider capital markets Capital Partnership Assets £600m £500m £500m £400m “PIMCO and NewRiver REIT have a longstanding and £300m trusted partnership with an establis
Slide 11: Resilient retail is where we are focusing
Resilient retail is where we are focusing
Slide 12: Consumer spending & sentiment improving
CONSUMER SPENDING & SENTIMENT IMPROVING • Retail spending increasing; sales volumes in August 2021 5% higher than in February 2020 (pre-COVID) • Online retail growth is normalising; proportion of retail sales made online has dropped by 10% since peak-pandemic level of 36.5% reached in February 2021
Slide 13: Validating our portfolio positioning
RECENT CONSUMER BEHAVIOURAL TRENDS SURVEY Validating Our Portfolio Positioning… • 4,000 consumers surveyed to understand what they look for in retail, value and how they see the future • Survey identified key consumer post-pandemic trends, including: Workplace • Increase in flexible working, declini
Slide 14: ...and supporting our future retail strategy
… AND SUPPORTING OUR FUTURE RETAIL STRATEGY Key highlights What it means for NewRiver • Increased WFH and ‘localism’ support the shift of spend towards our community focused retail assets • Our assets are well served by public transport • Average travel time significantly lower than national average
Slide 15: Comprehensive strategic review covering all aspects of retail property
COMPREHENSIVE STRATEGIC REVIEW COVERING ALL ASPECTS OF RETAIL PROPERTY • Our portfolio proved resilient throughout the pandemic. • Economic and behavioural trends changing – influencing retail supply/demand at a national and local level • Strategic review undertaken which: • Critically appraised cur
Slide 16: We identified key criteria of resilient retail
WE IDENTIFIED KEY CRITERIA OF RESILIENT RETAIL Across our portfolio we recognise specific criteria which underpin “resilient” retail assets LOCATION CONVENIENCE RETAIL SUPPLY ONLINE COMPATIBLE OCCUPIERS Strong demographic Easy access, customer Favourable demand vs Fulfils role in Occupier mix aligne
Slide 17: Creating a proprietary scorecard for all retail assets
…CREATING A PROPRIETARY SCORECARD FOR ALL RETAIL ASSETS… SCORECARD ASSET BY ASSET ASSESSMENT TARGETED CAPITAL TARGETED CAPITAL INVESTMENT RECYCLING STABLE INCOME, CAPITAL GROWTH, 10% TOTAL ACCOUNTING RETURN
Slide 18: To segment retail assets based on key characteristics
…TO SEGMENT RETAIL ASSETS BASED ON 4 KEY CHARACTERISTICS • We have assessed our current and future portfolio … RESILIENT Fit for purpose and affordable retail with strong local • …and it allows us to assess any UK retail asset to economic and consumer fundamentals support our capital redeployment ac
Slide 19: Today and tomorrow's scorecard assessment
TODAY AND TOMORROW’S SCORECARD ASSESSMENT…. Today Medium term Scorecard category Scorecard category To be fully exited by end of FY23 Reposition At Risk Resilient • 70% Reposition • Disposals Redeployment >90% Stable of total portfolio • Regeneration Resilient of total portfolio resilient/stable res
Slide 20: ...and portfolio segmentation
….AND PORTFOLIO SEGMENTATION Today* To be fully exited Medium term Segmentation by end of FY23 Segmentation Shopping Centres - Work Out Retail Parks 50% 90% Shopping Centres - Core Shopping Retail Core Shopping Core Parks Centres and Shopping Centres and Retail Parks Centres - Retail Parks Core Shop
Slide 21: Reshaping our portfolio to enhance resilience
Reshaping our portfolio to enhance resilience
Slide 22: Three strategic pillars
THREE STRATEGIC PILLARS Supported By A High-quality Operating Platform Disposals Redeployment Regeneration • Prioritise sale of assets which: • Redeploy capital into resilient • Supports reinvigoration of towns • are now mature and we retail, predominantly Retail Parks and communities have extracted
Slide 23: Disciplined disposal programme
DISCIPLINED DISPOSAL PROGRAMME • Disposals identified on analysis of 5 year forward looking returns and projected risk profile of assets • Disposals enable us to redeploy capital into assets which: 100m £93m • Enhance short and long term portfolio returns; and 90m £80m • Ensure we maintain a resilie
Slide 24: Clear redeployment targets
CLEAR REDEPLOYMENT TARGETS Based On Research, Data And Market Experience SCORECARD ASSET BY ASSET ASSESSMENT TARGETED CAPITAL INVESTMENT Redeployment Targets Size of market TARGET IRR % 300 RESILIENT 8-10% assets Option to acquire on balance sheet or via JV REPOSITION 70 assets 15-20%
Slide 25: Resilient retail in action
Resilient retail in action
Slide 26: Retail parks
Resilient retail Retail parks
Slide 27: Retail park portfolio key characteristics
RETAIL PARK PORTFOLIO Key Characteristics Retail CONVENIENCE ONLINE COMPATIBLE ASSET MANAGEMENT Parks (FY21*) Valuation £157m • Customer friendly • Click & Collect, home • Low services charges • Easy transport access delivery and returns space • Lower asset management Portfolio Weighting 21% and fre
Slide 28: Waterfront Retail Park, Barry
WATERFRONT RETAIL PARK, BARRY ASSET MANAGEMENT OCCUPIERS • Following Poundstretcher CVA quickly re-let to B&M at passing rent • Broad range of goods and • Lease extensions agreed with Halfords and Argos services; Discount, DIY, at terms ahead of ERV Home and plenty of F&B provision which has CONVENI
Slide 29: Resilient retail – Core Shopping Centres
Resilient retail – Core Shopping Centres
Slide 30: Core shopping centre portfolio key characteristics
CORE SHOPPING CENTRE PORTFOLIO Key Characteristics Shopping • Core Shopping Centres - Assets with a high retention rate, local catchment areas, low vacancy Centres - rate and affordable rents with low rent to sales ratios Core (FY21*) • We select, manage and develop these assets with reference to ou
Slide 31: Core shopping centre case studies
CORE SHOPPING CENTRE PORTFOLIO Case Studies: Variety Of Size, Location & Occupiers Case studies: Total value of £81m, NIY of 10% (40% of Core Shopping Centre portfolio) FAREHAM - SMALL, OPEN AIR NEWTON MEARNS - MEDIUM, COVERED NEWTOWNABBEY - LARGE, COVERED Size: 97,900 sq ft Size: 201,500 sq ft Size
Slide 32: Locks Heath Shopping Village, Fareham
LOCKS HEATH SHOPPING VILLAGE, FAREHAM
Slide 33: Locks Heath Shopping Village, Fareham
LOCKS HEATH SHOPPING VILLAGE, FAREHAM ESG OCCUPIERS • EV charging points fitted to support our • Anchored by Waitrose decarbonisation plans • Healthy balance • “Connecting our community with nature” projects of goods & services partnering with local schools • Weekly market • No CVA/Administration CO
Slide 34: The Avenue, Newton Mearns
THE AVENUE, NEWTON MEARNS
Slide 35: The Avenue, Newton Mearns
THE AVENUE, NEWTON MEARNS CONVENIENCE LOCATION • 950 space free car park • Affluent Glasgow suburb • Short walking distance from local housing • 80k catchment in 10 minute drivetime ONLINE COMPATIBLE • Population growth outstrips national average • Click & Collect optimised; 50% of retailers now off
Slide 36: Abbey Centre, Newtownabbey
ABBEY CENTRE, NEWTOWNABBEY
Slide 37: Abbey Centre, Newtownabbey
ABBEY CENTRE, NEWTOWNABBEY ONLINE COMPATIBLE LOCATION • 83% offer Click & Collect • 6 miles from Belfast city centre • Centre of retail hub close to Tesco and M&S Food ASSET MANAGEMENT OCCUPIERS • Early upsize of anchors Next, Dunnes and Primark • Solutions quickly found for recent CVAs & • Fashion
Slide 38: Residential-Led Regeneration
Residential-Led Regeneration
Slide 39: Regeneration
REGENERATION • Reasons for engaging in “Regeneration” • Existing strategic ownerships • Historic under investment in town centres • Surplus retail space • Supportive Public Sector & active relationships with Local Authorities • Strong residential demand • Attractive returns available 39
Slide 40: Regeneration
REGENERATION • NewRiver is ideally placed to capitalise on “Regeneration” • Highly experienced internal development team • Ability to retain income during early project stages • Community facing asset management • Ability to pursue ‘capital-light’ masterplanning • Range of options for project delive
Slide 41: Projects nearing completion
REGENERATION Projects nearing completion Case studies: • Blenheim Shopping Centre, Penge • Templars Square, Cowley, Oxford
Slide 42: Blenheim Shopping Centre, Penge
BLENHEIM SHOPPING CENTRE, PENGE • Acquired in 2015 • Purchase price £6.9m • Centre occupies a strategic zone within Penge • Existing centre comprises 34,200 sq ft plus a 216 space car park in a site area of 1.7 acres • Initial Pre-Application Consultation undertaken with Bromley Council in 2018 • Ac
Slide 43: Templars Square, Cowley
TEMPLARS SQUARE, COWLEY • Acquired in 2012 • Purchase price £24.6m • Key retailing destination in Cowley, providing 292,700 sq ft of retail space across an 8 acre site • Regeneration planning started in 2015, with the acquisition of an adjoining pub, which allowed the entire frontage to be redesigne
Slide 44: Projects in early stages
REGENERATION Projects in early stages Case studies: • The Broadway Centre, Bexleyheath • Grays Shopping Centre
Slide 45: Broadway Square Retail Park, Bexleyheath
BROADWAY SQUARE RETAIL PARK, BEXLEYHEATH • Acquired in 2016 • Purchase price £120.3m • The Shopping Centre and Retail Park comprise 519,700 sq ft of commercial/retail space across an 11 acre site in the centre of Bexleyheath, 12 miles from central London • Bexleyheath is the primary commercial and c
Slide 46: Broadway Centre, Bexleyheath
BROADWAY CENTRE, BEXLEYHEATH • Latest designs show 600 residential units on the Broadway Square Retail Park and car park • Anticipated date for submission of an outline planning application is end of 2022, then enter into a 50:50 JV with outline planning consent • NRR have already received strong in
Slide 47: Grays Shopping Centre, Thurrock
GRAYS SHOPPING CENTRE, THURROCK • Acquired in 2018 • Purchase price £22.1m • Located at the heart of Grays, comprising 177,300 sq ft of retail space. 23 miles east of central London, only 35 minutes by train to Fenchurch Street • Thurrock Council Regeneration Framework 2017 identified the centre as
Slide 48: Grays Shopping Centre, Thurrock
GRAYS SHOPPING CENTRE, THURROCK • Latest designs show 890 residential units and 73,000 sq ft commercial space • Planning pre-app discussions demonstrate council support for the dense residential led regeneration scheme • Outline planning application due in mid 2022 • Discussions ongoing with potenti
Slide 49: Regeneration set to deliver capital growth
REGENERATION SET TO DELIVER CAPITAL GROWTH Proposed new Town Square, Grays
Slide 50: Resilient financials
Resilient financials Will Hobman: Chief Financial Officer
Slide 51: March 2021 balance sheet: proforma for pub disposal & debt reduction
MARCH 2021 BALANCE SHEET: PROFORMA FOR PUB DISPOSAL & DEBT REDUCTION Proportionally Pub disposal March Pub RCF Term loan Pro Consolidated Less: 2021 disposal repayment cancellation forma • Reduced LTV by 10.8% to bring proforma LTV £m within LTV policy (<50%) and guidance (<40%) Properties at valuat
Slide 52: Conservative financial policies
CONSERVATIVE FINANCIAL POLICIES • Conservative financial policies form a key FY21 FY21 Improvement Financial Policies Policy Reported Proforma vs FY21? component of financial risk management strategy Guidance <40% • Impact of Covid on portfolio valuation and LTV 51% 39.8% EBITDA in FY21 meant that w
Slide 53: New dividend policy: sustainable, flexible and fully covered
NEW DIVIDEND POLICY: SUSTAINABLE, FLEXIBLE AND FULLY COVERED • • • • • • • •
Slide 54: March 2021 UFFO: proforma for pub disposal & debt reduction
MARCH 2021 UFFO: PROFORMA FOR PUB DISPOSAL & DEBT REDUCTION Guidance for FY22 and beyond Proportionally FY21 consolidated FY21 Pub Debt Pro • FY21 Retail NPI reflects a full year of Covid impact £m Reported Less: disposal reduction Forma • A proportion of £15.2m of Covid impact experienced in FY21 e
Slide 55: Delivering target returns
DELIVERING TARGET RETURNS REBUILDING UFFO FUTURE DRIVERS OF GROWTH Net property income recovery: £15m of retail income disruption in FY21 Disposal & redeployment due to Covid Admin cost savings: VALUATIONS Regeneration 15% of FY21 cost of £12m by end FY23 STABILISING Net finance cost savings: Capita
Slide 56: Shape of target returns
SHAPE OF TARGET RETURNS Retail Net property income £47.2m £60-70m Retail Admin expenses £(12.0)m £(10.0-10.5)m Finance costs £(16.7)m £(16.0-17.0)m Retail Portfolio valuation (15.2)% +1-2% PA
Slide 57: Capital allocation: return focused strategy
CAPITAL ALLOCATION: RETURN FOCUSED STRATEGY REGENERATION INVEST INTO EXISTING PORTFOLIO ACCRETIVE AM PROJECTS COMPLETED DISPOSALS SURPLUS ON BALANCE SHEET + CAPITAL INVEST INTO DIRECT LTV <40% MARKET IN CAPITAL PARTNERSHIP AUTHORITY TO BUY UP SHARE BUYBACK TO 10% OF SHARES
Slide 58: Summary
Summary • Financial position materially improved since March • Unsecured balance sheet with access to substantial undrawn liquidity • Dividend resumed and delivering cost efficiencies to support UFFO recovery
Slide 59: Conclusion
CONCLUSION
Slide 60: Resilient retail delivering attractive returns
CONCLUSION Resilient retail • Objective to own the most resilient retail portfolio in the UK delivering attractive • With a clear strategy to deliver growth returns • Supported by a best in class operating Looking to the future platform with confidence • Underpinned by a robust balance sheet • With
Slide 61: Q&A
Q&A
Slide 62: NewRiver REIT plc
NewRiver REIT plc 16 New Burlington Place London W1S 2HX www.nrr.co.uk