TIDMNRR
RNS Number : 1131P
NewRiver REIT PLC
24 May 2018
NewRiver REIT plc
("NewRiver" or the "Company")
Acquisition of Hawthorn Leisure Holdings Limited for GBP106.8
million
NewRiver is pleased to announce the acquisition of Hawthorn
Leisure Holdings Limited ("Hawthorn Leisure") from an affiliate of
Avenue Capital Group for an enterprise value of GBP106.8 million.
This represents a net initial yield based on the value of the pub
portfolio of 13.6% and will be satisfied using the Company's
existing resources.
As well as a portfolio of 298 high quality community pubs, the
acquisition includes an established brand and pub management
platform, which could be applied across the Company's existing pub
portfolio, generating significant scale-based synergies. The
transaction will be immediately accretive to NewRiver's Funds From
Operations ("FFO") and net assets.
NewRiver has identified the pub sector as an attractive
investment to deliver on its business strategy. The sector
generates high levels of low-risk, diversified cash returns and
contains a number of in-built value creating asset management and
development opportunities, including the potential to build
convenience stores or residential units on surplus land adjacent to
pubs.
Having acquired its first portfolio of 202 pubs from Marston's
PLC in November 2013, NewRiver acquired its second portfolio of 158
pubs from Punch Taverns plc in 2015. The Hawthorn Leisure portfolio
provides attractive scale for NewRiver, increasing the size of its
estate to 629 pubs. The combined NewRiver & Hawthorn Leisure
estate will target scale-based synergies and other improvements in
purchasing and logistics, and the Company expects to realise
synergies of at least GBP3 million per annum.
Allan Lockhart, Chief Executive commented: "The acquisition of
Hawthorn Leisure is absolutely aligned with our strategy of
investing in retail & leisure assets at the heart of the
communities across the UK. The portfolio is highly complementary to
our existing pub portfolio and the combined portfolio remains below
20% of our total assets. We now look forward to applying our active
asset management and risk-controlled development expertise to
produce profitable opportunities for our occupiers, and growing and
sustainable cash returns for our shareholders."
Mark Davies, Chief Financial Officer commented: "We are
delighted to announce the acquisition of this high-quality
portfolio of community pubs and a well established platform which
will contribute significant funds from operations and be accretive
to our net asset value.
Having acquired our first portfolio from Marston's in 2013, we
are well aware of the attractiveness of the high cash returns
generated by pubs, as well as their inherent active asset
management and risk-controlled development opportunities.
Importantly, we have also retained cost discipline on this
transaction that we have tracked for some time, acquiring the
portfolio at an attractive net initial yield of 13.6% and
inheriting a strong brand and management platform.
Having taken over executive responsibility for our pub
portfolio, I look forward to working with our experienced
management teams to establish a market leading business which will
deliver synergies and drive highly accretive cash returns."
Financial information and impact of acquisition
-- In the year to 31 December 2017, Hawthorn Leisure generated
an Adjusted EBITDA of GBP9.9 million(1)
-- The transaction is expected to increase Funds From Operations
("FFO") in the year to March 2019 by GBP7.7 million
-- On a fully annualised basis FFO is expected to increase
further as the current pub portfolio EBITDA is projected to be in
excess of GBP16 million per annum
-- In addition, the acquisition is expected to generate
scale-based synergies of at least GBP3 million on an annualised
basis
-- At 31st December 2017 Hawthorn Leisure's total assets stood at GBP153.0 million(2)
-- On a proforma basis, NewRiver's overall property portfolio at
valuation will increase from GBP1.24 billion at 31 March 2018 to
GBP1.35 billion, and the total size of the pub portfolio will
increase from 331 pubs at 31 March 2018 to 629
-- On a proforma basis, NewRiver's proportionally consolidated
LTV will increase from 28% at 31 March 2018 to 34%
-- The transaction increases NewRiver's pub weighting from 12%
at 31 March 2018 to 19% which is within NewRiver's stated guidance
of no more than 20% of the overall property portfolio
-- The consideration payable for the shares in Hawthorn Leisure
will be GBP55.1 million, payable in cash upon completion, with the
balance of the GBP106.8m of enterprise value principally comprising
Hawthorn Leisure's net debt
-- Hawthorn Leisure's existing debt balances are being repaid on completion
The Hawthorn Leisure portfolio
The Hawthorn Leisure portfolio comprises 298 high quality
community pubs. The portfolio is geographically complementary to
NewRiver's existing portfolio, providing good diversification to
income streams.
The portfolio assets are extremely well located with the
majority on main street and high street locations which are
typically surrounded by densely populated urban communities. These
locations offer good roadside visibility, often surplus land and
are close to or next to good transport links such as bus and
railway stations.
The portfolio has been well managed with over GBP11 million of
capital expenditure invested since 2014. The business trades as
Hawthorn Leisure which is a well recognised and highly regarded
brand. Additionally Hawthorn Leisure runs a managed pub brand
called "Last Orders" which can leverage off live sports and music
events that will be very profitable when applied to high
performing, wet led community pubs in the Hawthorn Leisure and
NewRiver pub portfolios.
A further key attraction of the Hawthorn Leisure management
platform is its flexible model and unique ability to switch high
performing community pubs between tenanted and managed which has
the potential to deliver a higher rental income.
The Hawthorn Leisure management platform
An experienced management team was selectively recruited to run
the portfolio in 2014 and a head office function was established in
Birmingham in 2015 to insource all key business functions. Under
the direction of the management team, all key functions are now run
from Hawthorn Leisure's own platform and all major supply
agreements have been re-negotiated. The Management team has
recruited well from a talent pool in the Birmingham area and now
consists of 43 high quality people. Additionally, the Company has
invested smartly in its systems and infrastructure.
Hawthorn Leisure's Senior Management Team consisting of Gerry
Carroll, Mark McGinty and Matthew Ward will all remain with the
Company, working closely alongside the NewRiver pub management team
led by David Shipton.
Notes
(1) In the year to 31 December 2017, Hawthorn Leisure generated
an Adjusted EBITDA of GBP9.9 million and an IFRS profit before tax
of GBP1.9 million (which is stated after deducting GBP4.2 million
of financing costs associated with the debt which is to be repaid
on acquisition).
(2) At 31st December 2017 Hawthorn Leisure's total assets stood
at GBP153.0 million which comprised goodwill of GBP16.5 million,
property plant and equipment of GBP126.3m, cash of GBP7.2m and
other current assets of 3.0 million.
For further information
+44 (0)20 3328
NewRiver REIT plc 5800
Allan Lockhart (Chief
Executive)
Mark Davies (Chief Financial
Officer)
Will Hobman (Head of Investor
Relations)
+44 (0)20 7251
Finsbury 3801
Gordon Simpson
About NewRiver
NewRiver REIT plc (ticker: NRR) is a premium listed REIT on the
London Stock Exchange and a constituent of the FTSE 250 and EPRA
indices. The Company is a specialist real estate investor, asset
manager and developer focused solely on the UK retail and leisure
sector.
Founded in 2009, NewRiver is one of the UK's largest
owner/managers of convenience-led community shopping centres with a
property portfolio of GBP1.4 billion principally comprising 33 UK
wide shopping centres together with further nationwide retail and
leisure assets. The portfolio totals 8 million sq. ft. with over
2,000 occupiers, an annual footfall of 150 million and a retail
occupancy rate of 97 per cent. Visit www.nrr.co.uk for further
information.
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END
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