Real estate investment trust NewRiver Retail (NRR:AIM) rises 2.8% to 267p on interim results and the £90 million acquisition of 202 pubs from brewer Marston’s (MARS) which it intends to convert into retail units.

The pubs, which are located in residential areas, will be turned into convenience stores and restaurants. NewRiver, which specialises in the food and value retail property market, says it has already received interest from supermarket chains for the units.

The deal was part funded by the proceeds of NewRiver’s oversubscribed £67 million share sale (11 July) and brings the properties into a portfolio of UK-wide assets worth £450 million spread across 24 shopping centres, 16 high street units and a shopping parade.

Marston's will continue to manage the portfolio under a four-year leaseback deal for £12.2 million rent a year, representing 12.8% of the purchase price, and almost doubling NewRiver's rental income.

It has also agreed to buy shopping centres in Llanelli and Oxford from insurance group Axa for £34.3 million on a net initial yield of 7.78% .

Liberum Capital has upgraded its earnings forecasts for the group by 15.4% to £7.9 million this fiscal year and by 16.1% and 12.8% in the following two years to reflect the acquisition yields.

In the six months to October NewRiver collected 11% more rent year-on-year to £8.5 million, while its EPRA pre-tax profit (which strips out revenues not generated from its core business) jumped 60% to £3 million from £1.8 million a year ago. Its EPRA net asset value per share was 222p - 1.3% ahead of expectations - but its interim dividend remains at 6p a share.

Web - NewRiver Retail - 28 November

Issue Date: 28 Nov 2013