“The current market dislocation is delivering very attractive buying opportunities. We wanted to be prepared and get ahead of the curve on it,” cries one REIT chief executive after forming a new retail joint venture with US investor Pimco, which it plans to grow to £500m over the next few years.
“Beds, sheds and meds continue to be clear winners, while operational shopping centres, department stores and retail parks have been the undeniable losers,” cries another, fresh from making a recommended offer for industrial and distribution company A&J Mucklow.
Winning and losing may well be in the eye of the beholder of course, but a look at the results of these two REITs – both published at the same time as their grand new “opportunities” – does offer a little idea as to where to place the most sensible bet.
Let’s look first at NewRiver REIT: funds from operations, down by 7% to £56.4m; EPRA NAV per share down by 11% to 261p.
And now LondonMetric: net income up by 3.5% to £93.8m; EPRA NAV per share up by 5.7% from 165.2p to 174.9p.
For shareholders, there is a definite winner and a definite loser there. But that is today, what of tomorrow?
Has the retail market seen the worst of the malaise as NewRiver and Pimco’s new Bravo jv may signal? A 9.8% yield on four retail parks doesn’t sound too crazy, but does out-of-town retail in Aberdeen, Inverness, Dundee and the Isle of Wight with a WAULT of 6.3 years sound like a reliable, repetitive and growing income stream?
With retail rents only heading in one direction and the CVA environment in the other, it doesn’t feel quite like a winner to this unprofessional non-investor.
LondonMetric’s £415m proposed takeover of A&J Mucklow and its 65 investment assets with an annual income of more than £26m and a WAULT of 7.2 years, with a heavy weighting towards urban logistics, a sub-sector of the already booming industrial market that has outperformed and is expected to continue to outperform the market, on the other hand, feels slightly more reliable and repetitive. Not as exciting as the potential asset management activities that come with retail, but reliable. Safe.
With retail taking a constant kicking, perhaps NewRiver’s Bravo jv should be celebrated. Maybe it is time to be brave with retail. Maybe. But with more and more tales crossing EG’s desks about loan breaches on regional shopping centres and retail parks, an uptick in the number of LPA receiverships and even the nation’s favourite Essex boy having to put his eponymous restaurant chain into administration, I can’t quite muster the enthusiasm for that bravado just yet.
“We can’t always predict but we can prepare,” says LondonMetric’s Andrew Jones, channelling his inner Warren Buffet in his chief executive’s statement. “If we avoid the losers, the winners will look after themselves.”
There are always going to be winners and losers in life. And, actually, sometimes you have to lose to win. And, coincidentally, that is a lesson that will be made abundantly clear if you’ve managed to bag yourself a ticket to our special private screening of General Magic – a documentary about epic failure – that forms part of our upcoming Tech Live event on 4 June.
Click here to find out how to get your ticket and join us for some popcorn and the debate.
To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
