NewRiver Retail Limited, the UK REIT specialising in value-creating retail property investment and active asset management, has announced that it has completed and expanded the agreement with The Co-operative Group Limited to lease a significant element of the public house portfolio acquired from Marston’s PLC in November 2013.
Highlights
- Completion and expansion of the conditional agreement announced 7 April 2014
- Agreement confirmed to lease 63 new convenience stores from public house portfolio – increased from original 54
- Total of 215,232 sq ft of new retail space to be created over two year phased development programme
- Some £3.85m to be realised in additional proceeds from incentivised completion programme
- Institutional quality lease length of 15 years with no break option with RPI-linked rental increases
- Rapid delivery of NewRiver’s stated strategy for the public house portfolio meeting the growing demand from major food store operators for C-Store portfolios
- Majority of C-Store developments to be constructed on surplus land and car park areas, thereby protecting ongoing pub operations
The majority of the C-Store developments will be constructed on surplus land and car park areas thereby protecting the value and income generated by the pubs. This will offer synergy between the new retail and existing pub use.
The remainder of the developments will involve conversions and new builds on the site of the existing pubs. In a few instances, and reflecting the wider potential within NewRiver’s pub portfolio, residential units will also feature alongside the C-Store development. NewRiver will be working closely with pub landlords.
The pub portfolio continues to perform well
The 202 pub portfolio was acquired by NewRiver in November 2013, for a total consideration of £90 million, from Marston’s PLC, the public house operator and brewer, with the primary intention of providing retail space to meet the growing demand from the UK’s major food operators for convenience store premises by converting land and buildings within the pub portfolio to alternative use, principally convenience stores.
Importantly, at completion Marston’s agreed a leaseback arrangement to lease the entire portfolio for a minimum term of up to four years for a total annual rent of £12.2 million reflecting a net initial yield of 12.8%.
Since the acquisition in November 2013, the pub portfolio continues to perform well benefitting from an increase in turnover and beer sales leading to an increase in the EBITDA that on an annualised basis is now higher than the guaranteed rent that Marston’s pays NewRiver.
The principle focus of NewRiver over the last nine months has been to complete the leasing portfolio with The Co-operative Group whilst progressing development plans to unlock further value for the remaining pub portfolio. Importantly during this time the Company has continued to receive a strong rental income from the portfolio.
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