NewRiver REIT is slowly clawing its way back into the black after last year’s monumental losses.
The shopping centre-focused REIT still made a loss – of £26.6m – in the year ending March, but that was a marked improvement on its fortunes during the pandemic. In 2021 it made a pretax loss of £153m, following a £121m loss the previous year.
Chief executive Allan Lockhart told EG that the REIT ended the year in the “best position” for “probably three years”, in a “very tough” period for retail real estate.
Lockhart said: “There can be no doubt that today we are in a far stronger financial and operational position than when we outlined our strategy to create the most resilient retail portfolio in the UK a year ago.”
Lockhart said the “decisive actions that we took last year”, including the sale of its Hawthorn pubs business at a loss of £25m, had delivered “a significant improvement in our financial and operating metrics”. The REIT’s LTV has reduced to 34%, from 51% last year.
The 8m sq ft REIT has boosted underlying funds from operations to £28.3m from £11.5m in 2021, while rental income also rose to £59m from £48.2m. “All of this was achieved despite the disruption from Covid-19,” Lockhart said.
The total value of the portfolio has shrunk to £649m, a result of the £224m sale of its Hawthorn pubs portfolio. In 2020 the portfolio was valued at £1.2bn, falling to £974m last year.
Thanks to the disposal of Hawthorn, NewRiver has pushed its net assets up from £402m to £414m. Stalling valuations for its shopping centres – which account for three-quarters of its portfolio – were also somewhat balanced by a rise in values for retail parks.
NewRiver said it had sold £77.1m of retail property at a 2.1% discount to latest valuation over the year as it continues to shed poor-performing retail assets.
In the year ahead, the REIT aims to offload around £55m of assets and invest £14m into its existing estate. It also said it is on track to dispose of its £90m “work out” portfolio, which lost 26% of its value over the year, by March next year.
Lockhart said: “In the near term, given the macroeconomic outlook, we believe that it is prudent to operate with a higher cash holding.
“The outlook is increasingly more uncertain, with the high inflation environment and slowing economic growth. But we’re in good shape and our portfolio is well positioned, being predominantly focussed on essential goods and services in local areas.
“We know from our years of experience operating in the market that in times of high inflation, consumers prioritise necessity-based spending over purely discretionary spending, so I think we’re in a good place.
“Uncertainty can deliver opportunities. We have put ourselves in a position where we can capitalise on opportunities as and when they emerge over the next 12 months or so.”
Lockhart also highlighted opportunities for the REIT to grow its capital partnership business, pointing to “real potential” to work with more partners. Beyond its jv with investment manager Pimco, its asset management mandate with Canterbury City Council has been extended to include its newly-completed Riverside leisure development.
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