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NewRiver Retail swallows 200 pubs to turn into convenience stores

Retail property group NewRiver Retail has bought 202 pubs from Marston’s for £90mln, which it plans to convert into convenience stores and restaurants
NewRiver Retail swallows 200 pubs to turn into convenience stores

Retail property group NewRiver Retail (LON:NRR) has bought 202 pubs from Marston’s for £90mln, which it plans to convert into convenience stores and restaurants.

The company says it has already received strong interest from national supermarket chains and convenience store operators for the retail space.

Marston’s will continue to run the pubs until it decides to sell or until NewRiver finds a buyer.

The pubs, spread across the UK, are located mainly in residential areas with good roadside visibility and car parking, the company said.

The pubs have also been identified as possible locations for branded restaurants, drive-through food outlets, residential homes, and medical centres.

It added that the acquisition is underpinned through a leaseback arrangement with Marston’s for a minimum of up to four years, paying total annual rent of £12.24mln, reflecting a net initial yield of 12.8%.

The purchase was funded through its BRAVO II joint venture with a fund advised by Pacific Investment Management, with both parties taking a 50% equity stake.

It also said it used a “significant element” of July’s £67mln placing.

NewRiver is hoping to benefit from the supermarkets’ push towards convenience stores, which are proving a more profitable way of selling groceries and essentials in town centres.

Sainsbury’s and Tesco have both invested heavily in convenience stores, but Morrisons has been criticised for not opening more of the smaller shops.

NewRiver chief executive David Lockhart said: “With increasing demand from all of the major supermarket groups for convenience stores substantially outstripping supply, the portfolio provides a very attractive opportunity to generate capital profits through the conversion of the public houses into convenience stores underpinned by an attractive cash on equity return from a FTSE 250 company.”

This was accompanied by the acquisition of shopping centres in Llanelli and Oxford for a combined £34.3mln.

It has paid £29.2mln for the Elli centre in the Welsh town, which includes an Asda supermarket, Argos, Poundland and Sports Direct.

The company believes the Gloucester Green centre in Oxford’s city centre, which it has bought for £5.1mln, has the potential to attract more restaurants.

The acquisition from insurance group Axa is also being funded through its BRAVO II partnership.

NewRiver’s first-half results, also unveiled today, showed net rental income rose 11% to £8.53mln on last year with a jump in pre-tax profits from £479,000 to £5.22mln. The interim dividend remained at 6p.

“Whilst the shares trade on a 14% premium to spot NAV, we see further upside potential given the strong growth outlook,” said broker Liberum Capital.

NewRiver shares rose 2.5% to 266p each on Thursday.


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