NewRiver REIT is eyeing reinvestment and expansion across the UK retail real estate market following a transformative year that saw the business complete its £151m acquisition of Capital & Regional, growth in earnings, and lower its loan-to-value ratio to 38%.
Following the financial results announcement earlier, Estates Gazette sat down with chief executive Allan Lockhart to discuss REIT’s strategy for its next phase of the growth.
“It’s been quite a transformative year for us,” he said of the Capital & Regional purchase. “In many ways, that acquisition was a perfect strategic fit for us because its six community convenience shopping centres were very comparable to our own portfolio, both in terms of customer and tenant profile.”
The acquisition, funded through a combination of cash and shares, resulted in a 65% increase in the size of the listed landlord’s portfolio with a mix of high-quality assets and low-risk tenant profiles.
NewRiver’s results bear out the impact of the deal. Portfolio valuation increased to £897m from £540m in September 2024 and a 0.6% increase in capital values.
Gross assets rose by 65% and net assets rose by around about 35%. The company’s underlying funds from operations – the company’s preferred measure of recurring earnings – rose by 25% to £30.5m versus the previous year. Profit after tax also jumped to £23.7m, from £3m the year before.
“The benefits of that transaction are really flowing through,” Lockhart said. “And there’s more to come in FY26 and FY27. We’re really pleased with our transaction.”
Lockhart added that NewRiver’s focus for the current financial year will be completing integration and delivering on identified operational efficiencies and cost savings from the Capital & Regional acquisition, which are expected to total £6.2m.
Making progress
“We’re making excellent progress to deliver that. But there’s still more to do so the focus will be around delivering those benefits to our shareholders over the next 12 months,” Lockhart said.
The REIT’s three other core strategies will be to deliver a consistent net rental income growth, portfolio valuation growth and reinvesting capital through asset recycling.
“We think our portfolio is set to deliver a consistent net rental income growth,” he said. “That will be positive around our P&L and increasing the value of our business. But valuation should follow. And with valuation growth, it allows us to access some of our untapped liquidity.”
The company also sees significant opportunity in its capital partnerships business, which involves managing assets on behalf of external investors. Lockhart said this side of the business has grown fee income by 19% annually over the past five years, with further expansion likely.
“We provide high-quality asset management services in return for the income,” he said, “so we think that’s a good area for us to continue growing our business.”
In a move announced alongside its results, NewRiver confirmed the sale of the Abbey Centre in Newtownabbey, Belfast, for £58.8m – in line with book value. This disposal is part of capital-recycling strategy and the proceeds from the disposal will be redeployed into new opportunities.
Following the post-balance sheet disposal of Abbey Centre, the REIT’s LTV of 42.3% on 31 March 2025 reduced to circa 8%.
With the lower LTV, the company believes it has the capacity for further acquisitions, both in the direct real estate market.
“Our team is constantly screening opportunities, whether that’s in shopping centres or in retail parks. We have the option of acquiring assets on to our own balance sheet. But, equally, we have the option of acquiring assets in joint ventures with other investors where we might take a smaller equity stake”, Lockhart said.
Positive outlook
When asked about expansion into other sectors in future, NewRiver remains firmly focused on UK retail real estate and is not currently looking to diversify into other property sectors.
“Over the years, retail real estate has become more and more operational. That requires having a platform where you have deep expertise and experience and access to data and good systems,” Lockhart said.
With £2.4bn of assets either owned or managed, 3,500 tenants and £225m of annual rent roll, Lockhart said the business has unmatched sector data and insight.
“We’re very positive around our sector. We think our sector today is in its best position for 10 years.”
Lockhart attributes this positivity around the sector to UK consumers, an improved occupational market, and the growing dominance of omnichannel retailers such as Next and Marks & Spencer.
On the investment side, sentiment towards the sector is also turning. “If you just look at the investment volumes for retail parks and shopping centres in 2024, it was up 70% versus 2023. So we’re seeing more positivity in the retail real estate capital markets,” he said.
New opportunities
Given this improving retail sentiment, NewRiver is positioning the business to capture acquisition opportunities and asset management. In terms of the asset management side of the business, NewRiver has been growing its business and providing services to other partners over the past five years. It has successfully grown its fee income by 19% per annum.
NewRiver’s ambitions to grow asset management business have also been bolstered by last summer’s acquisition of Ellandi, a retail-focused asset and development manager.
“That business is now fully integrated into the NewRiver platform,” said Lockhart. “We’ve increased the number of partners we have. So we have 14 partners that we work with from local authorities to private equity to major UK institutions and to banks.”
Lockhart is confident NewRiver will make further acquisitions. That might be into shopping centres, but also it could be into areas of retail.
“We’re pretty confident we will be able to redeploy our capital into opportunities that are just going to deliver better income and capital growth. And that’s something that we apply a laser focus on.”
Image from NewRiver
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