Investors in real estate investment trust NewRiver Retail (NRR: AIM) are taking a big punt on UK economic growth by backing a large fundraising. Plans to raise £67 million will see the group target expansion in the secondary shopping centre market.
The proposed issue of 32.6 million new shares will nearly double its £76.4 million market cap. Subject to a shareholder vote on 10 July, the new stock will be issued at 205p, a 10.5% discount to last night's share price. The market has already priced in a positive vote from shareholders, marking the stock down a mere 2.2% to 224.5p.
NewRiver’s shares trade on a 5.2% discount to net asset value (NAV) and it has improved by 9% in the year-to-date, albeit in line with the FTSE All-Share's performance.
The company owns or manages 23 shopping centres and other retail assets in a portfolio worth some £400 million. It targets secondary retail properties for retailers at the lower end of the market, such as Poundland, on 9% yields. This market has continued to perform despite the tough conditions for retailers and management is looking to invest in town centres that are under-represented by food retailers.
NewRiver has traditionally sought assets with enterprise values of between £5 million and £100 million, with debt gearing levels of 50%-65%.
The placing will dilute its earnings per share and dividend yield which is currently offering 7.1% based on the 16p declared for the financial year to March 2013. The shares go ex-dividend on 26 June, so the new shares will not qualify for the 10p final dividend for the 2013 financial period.