NewRiver REIT is aiming to grow its new joint venture with opportunistic fund Bravo Strategies III, managed by US investor Pimco, to £500m of retail assets within the next few years.
The REIT has launched the joint venture with the acquisition of four retail parks for £60.5m, its share of which amounts to £30.3m, reflecting a net initial yield of 9.8%.
Allan Lockhart, chief executive of NewRiver REIT, told EG: “Together with Pimco we are aiming to take advantage of the current market dislocation and to quickly grow the joint venture to around £500m of assets over the next couple of years.
“The current market dislocation is delivering, and will deliver, very attractive buying opportunities. We wanted to be prepared and get ahead of the curve on it.”
Lockhart said the REIT, which this morning reported a like-for-like portfolio valuation decline of 6.4% in the year to 31 March, has been “deliberately” holding back capital in terms of investing into retail for around 18 months.
“Most of the capital we invested last year we invested into pubs, which has been consistently delivered attractive returns,” he said.
“We said to shareholders in 2018 that the opportunity in terms of capital allocation in retail is still ahead of us. We are starting to see some very interesting opportunities.”
The REIT already has ties with Pimco, having previously set up a joint venture with the US investor in 2012, which Lockhart said later grew to around £600m assets.
“Retail from a fair value perspective has started to look attractive, versus other real estate sectors that look expensive, such as logistics and distribution and industrial,” added Lockhart.
“So the sector is attracting these new sources of capital that are seriously evaluating investment into retail.”
Earnings at the REIT fell during the year to 31 March, with EPRA NAV per share down 10.6% to 261p. Its LTV stood at 37%.
However, because its debt book is fully unsecured, Lockhart said there is a minimal chance of the banks getting involved if things took a turn for the worse. The REIT does not plan to refinance until 2023.
Lockhart said: “We are confident around our market positioning and future growth prospects. We have made a great start with that with our jv.
“The market is definitely challenging, but we will be one of the winners within the retail real estate market.”
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