Expanded NewRiver reports stable half-year performance

(Sharecast News) - NewRiver REIT reported a solid financial position and stable operational performance for the six months ended 30 September on Thursday, following the recent acquisitions of Capital & Regional and Ellandi. The London-listed real estate investment trust said that during the first half it maintained a robust balance sheet, with a Fitch reaffirmation of its investment-grade credit ratings.

It said its proforma loan-to-value ratio stood at 42% following the Capital & Regional acquisition, compared to 21.6% as of 30 September.

Modest asset disposals of around £30m were planned, to bring the loan-to-value within the company's guidance of below 40%.

Cash on hand was reduced to about £70m post-acquisition, from £184.8m at the end of September.

Underlying financials showed resilience - the company reported an underlying funds from operations (UFFO) of £11.5m, or 3.7p per share, down from £12.3m a year earlier due to asset disposals over the last 18 months.

The dividend per share for the period was maintained at 3p, reflecting an 80% payout ratio and coverage of 125%.

Portfolio valuations remained stable at £540m, with a minor decline of 0.4%.

Profit after tax improved to £8.2m, swinging from a £2.6m loss a year earlier, while EPRA net tangible assets (NTA) per share decreased by 8% to 106p, reflecting valuation changes and the impact of recent acquisitions and equity raising.

Operationally, NewRiver reported a strong performance with a 97% occupancy rate and tenant retention improving to 98%.

New lettings and renewals totaling 406,400 square feet were completed at an average premium of 5.3% to estimated rental value.

The company said its average rent of £11.90 per square foot supported its low-risk tenant profile, adding that its sustainability efforts gained recognition with an improved GRESB score of 80, maintaining 'Gold Level' certification.

NewRiver said the acquisition of Capital & Regional this month for £151m expanded its portfolio by 65%, creating a combined portfolio valued at £900m.

The transaction, priced at a 14% discount to net assets, was expected to generate mid- to high-teens accretion to underlying funds from operations per share through £6.2m in annual cost synergies, achievable within 12 months.

It partly funded the deal through an oversubscribed equity placing and retail offer in September, which raised net proceeds of £48.9m.

The company added that the acquisition of Ellandi in July for an initial £5m had meanwhile strengthened its capital partnership business, with Ellandi's expertise in managing retail and regeneration projects complementing NewRiver's strategy to deliver capital-light earnings growth.

"This has been a transformational period for NewRiver marked by the successful acquisition of Capital & Regional which completed earlier this week," said chief executive officer Allan Lockhart.

"This transaction substantially increases our scale and will deliver significant benefits including a material increase in our earnings.

"This was clearly recognised by existing shareholders and new investors who overwhelmingly supported our equity raise to partly fund the transaction."

Lockhart said the firm's focus on merger and acquisition activity had not detracted from its operational performance, which he described as "excellent" with "another good period" of leasing activity.

"Consequently, occupancy and occupier retention rates remain high.

"We have a highly experienced asset management team, which has been further enhanced with the recent acquisition of Ellandi, and a portfolio that is significantly outperforming the market in terms of year-on-year consumer spending growth which is supporting the success of our occupiers."

NewRiver's outlook was positive, Allan Lockhart added, despite an uncertain macro environment.

"We have a clear pathway to deliver growth from a portfolio that is performing well, our successful Capital Partnership business and the realisation of the significant benefits that flow from our completed M&A activities, all of which will drive significant recurring earnings accretion, enhancing our ability to pay a higher covered dividend."

At 1028 GMT, shares in NewRiver REIT were up 0.19% at 78.75p.

Reporting by Josh White for Sharecast.com.