Retail REIT NewRiver hints at further growth of pubs portfolio

RETAIL REIT NewRiver has given a strong indication that it may continue looking at the pubs sector as a means of boosting its property portfolio.

With major pubcos looking to rid themselves of many of their under-performing or wet-led pubs, NewRiver has stepped in and looked to take advantage.

The company has already acquired a portfolio of more than 200 pubs from Wolverhampton-based Marstons and earlier this year it increased its presence in the market with a £53.5m deal with Burton-upon-Trent-based Punch Taverns to acquire a further 158 venues.

NewRiver said in its latest set of interims that it saw a lot of opportunity in the pubs sector.

“Management view the public house market as a highly desirable sub sector of the retail property market,” it said.

“It generates secure long term income streams and offers significant asset-management and development opportunities. To date, nearly 50 planning applications have been submitted, 22 receiving approval principally for developments on surplus land adjacent to the trading public house.

“The company has also identified further value-creating opportunities in its pub portfolio to develop up to 200 residential units on surplus land.”

It said the purchase price of the Punch portfolio reflected a net initial yield of 13.5% which management expect to generate an attractive cash on cash equity return in excess of 20%.

Latest interims show that pre-tax profit increased by 243% to £42.2m (H1 2014: 137% to £12.3m). EPRA adjusted earnings per share increased by 95% to 13.2p (Sept 2014: 6.8p) with basic earnings per share of 28.3p, a 128% increase on the prior period of 12.4p.

David Lockhart, chief executive of NewRiver, said: “I am delighted to report another strong set of financial results following one of the most active periods for NewRiver since its incorporation in 2009.
 
“We have achieved record profit growth and strong sustainable income returns, delivering increases in all our key financial metrics. These are excellent results and demonstrate that our business model is delivering.

“Following the over-subscribed £150m equity fundraise, we efficiently deployed the proceeds into £230m of strategic acquisitions at an average yield of 9.6% simultaneously growing our assets under management to the landmark £1bn mark.”

He said the company’s move to the Main Market was targeted for July 2016 and would mark another important milestone for the company.