NewRiver REIT wants to expand its asset management business as capital values continue to fall.
Despite this year’s total accounting return of -4.6%, and last year’s being -6.6%, chief executive Allan Lockhart said he was “confident of achieving our objective of a consistent 10% total accounting return in the medium term.”
Lockhart said NewRiver would continue to look for “opportunities to further expand our capital partnerships, as evidenced by our recent appointment by M&G Real Estate.”
The deal with M&G Real Estate handed NewRiver the mandate to asset manage 16 retail parks and two shopping centres.
Lockhart said: “This is a great endorsement of the quality of our asset management platform and also demonstrates the potential to grow our recurring earnings in a capital-light way.”
The REIT currently has three key capital partnerships, with Canterbury City Council and Bravo, in addition to the deal with M&G Real Estate.
Under the deals it asset manages a total of 19 retail parks and five shopping centres with a value in excess of £500m and annualised rent of more than £50m.
Underlying funds from retail were up to £25.8m from £20.5m last year, and rental income was stable at £50.5m.
But more than £50m was wiped off the portfolio’s value, as values sank from £650m last year to £593.6m, with net asset value falling to £378.6m.
NewRiver’s portfolio valuation was less impacted by rising interest rates and widening yields, though Lockhart acknowledged that this was “partly due to our already high portfolio yield”. The REIT recorded a like-for-like valuation movement of -5.9%.
The overall movement was focused on its “regeneration portfolio”, which is 23% of its portfolio but accounted for 62% of the decline, due to the impact of inflation on construction and finance costs.
NewRiver has planning consent for 187 residential units across the portfolio, with plans due to be submitted for more than 850 homes and a further 350 in the masterplan stage. It plans to unlock returns by selling or partnering with residential developers once planning consents are secured.
Lockhart said the REIT was in “a strong position” thanks to “a resilient set of operating and financial results”. Disposals over the year have built the REIT’s cash pile up to £111m.
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