Tue 23rd Sep 2014 - NewRiver Retail - our 202 Marston's pubs performing well NewRiver Retail – our Marston’s pub portfolio is performing well: NewRiver Retail Limited, the UK REIT specialising in value-creating retail property investment and active asset management, is to lease 64 new convenience stores to Co-op on land within the portfolio of 202 pubs it acquired from Marston’s in November 2013. But the majority of the C-Stores will be built on surplus land with the pub portfolio performing well. A total of 215,232 square foot of new retail space is to be created over a two-year phased development programme. Rental income varies between £15.00 per square foot to £17.50 per square foot. The majority of C-Store developments are be constructed on surplus land and car park areas, thereby protecting ongoing pub operations. The 63 new C-Stores across the UK let to The Co-operative Group is a 7.6% increase in space from the original conditional agreement of 54 stores announced on 7 April 2014. The lease terms remain at 15 years with no break clause and an annual RPI-linked rental increase formula capped at 4% and collared at 1%. The C-Stores will range in size from 3,000 square foot to 4,200 square foot and will benefit from dedicated and shared car parking spaces ranging from ten to 25 spaces. The company stated: “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. For the majority of the 63 C-Store developments, detailed planning applications will be submitted within the next two months and it is anticipated the phased construction programme will commence in the first quarter 2015. Given the average construction period of four months, NewRiver expects to start delivering for fit out the new C-Stores to The Co-operative Group in the summer of 2015.” The 202 pub portfolio was acquired by NewRiver in November 2013, for £90 million 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. 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 company added: “The principal 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. With the Co-operative Group Agreement now complete NewRiver Retail will continue to drive forward these value enhancing opportunities which will include preparing detailed planning applications to be submitted within coming months for the redevelopment of the surplus land of five of the pubs to residential. In total these five developments, subject to planning consent, will provide 42 detached and semi-detached houses.” Allan Lockhart, property director at NewRiver Retail, said: “This portfolio leasing transaction is the culmination of a tremendous amount of hard work by NewRiver and our design team. Following on from our pre planning application meetings with local authorities, we now look forward to the submission of formal planning applications over the next few months. On the back of this transaction, NewRiver is set to become the UK’s largest C-Store developer in what is the fastest growing area of the food market. We have established an excellent working relationship with The Co-operative Group and we are delighted to be in a position to provide them, with such a large number of new stores as they continue to expand in this competitive market. We believe that these modern C-Stores, operated by one of the UK’ s leading C-Store retailers, will provide excellent amenities to the local communities as well as the creation of 1300 valuable jobs.” Steve Murrells, chief executive of the Co-operative Retail Division, said: “The Co-operative Group has a clear vision to establish itself as the best local food retailer in the UK and over the coming years our focus will be to develop and grow our existing convenience estate of over 2,000 shops. The key to our focus is our new store opening programme where we intend to open 150 new stores each year. We are delighted to be working with NewRiver Retail and this significant portfolio is a great example of the innovative and industry leading transactions we are undertaking as a part of our ambitious convenience expansion plans.”