NewRiver buys out balance of four shopping centres

Retail and leisure property investor NewRiver REIT announced on Thursday that it had exchanged conditional contracts to acquire the remaining 50% share in its BRAVO joint ventures from subsidiaries of BRAVO II, for a cash consideration of £59.4 million.

The FTSE 250 firm said the transaction would allow it to gain control over four convenience-led shopping centre assets in Belfast, Glasgow, Hastings and Middlesbrough with a total gross asset value of £240m, representing a topped-up net initial yield of 7.3%.

It was able to go ahead with the transaction after raising £225m in a placing and open offer on 15 June.

The BRAVO joint ventures generated net rental income of about £16.5m for the financial year to 31 December 2016, and had net assets of approximately £120.8m, of which the group's share was £60.4m, as at that date.

They have indebtedness of £120m outstanding, which NewRiver said it intended to remain in place and bring onto its own balance sheet following completion of the acquisition.

The acquisition was conditional on obtaining funding, which the company said would be satisfied by £59.4m of the net proceeds of the capital raising, as well as obtaining consent from the BRAVO joint ventures' secured lenders to the acquisition by no later than 31 July.

“Following the recent announcement of our over-subscribed equity raise, I am pleased to report that we have now exchanged contracts to acquire the remaining units in our BRAVO JV, meaning that post completion we will own the four convenience-led shopping centre assets in full,” said NewRiver CEO David Lockhart.

“We are very familiar with the BRAVO assets with a clear understanding of their growth potential, having been responsible for their day to day asset management since the joint venture was established in 2013.

“Given the investment made into the BRAVO assets to date, we are confident that this acquisition will produce attractive long term returns for our shareholders.”

The board said the transaction was expected to increase funds from operations (FFO) in the year to March 2018 by £4.2m, with a £5.4m increase in net rental income and a £1.2m increase in net finance costs.

It was also expected to generate additional annualised accounting net rental income of £8.3m.

On a proforma basis, NewRiver's proportionally consolidated loan-to-value ratio would remain in line with March 2017 at 37%, the board claimed, and the proportionally consolidated cost of debt would reduce by 9 bps.

The assets being acquired included the Abbey Centre, Newtownabbey, Belfast, described as a 320,000 square foot shopping centre located six miles north of Belfast, as well as the Avenue Shopping Centre, Newton Mearns, Glasgow - a 202,000 square foot shopping centre located in an “affluent suburb” of Glasgow.

In Hastings, the acquisition included the Priory Meadow Shopping Centre, a 290,000 square foot shopping centre in close proximity to Hastings train station with a 1,000 space car park, and in Middlesborough it was purchasing the Hillstreet Shopping Centre - a 240,000 square foot shopping centre in the town centre.