TIDMNRR
RNS Number : 4131G
NewRiver REIT PLC
26 July 2021
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 (as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018) and has been announced in accordance with
the Company's obligations under Article 17 of that Regulation. This
announcement has been authorised for release by the Board.
NewRiver REIT plc
("NewRiver" or the "Company")
Proposed Disposal of Hawthorn Leisure REIT Limited for GBP222.3
million
The Board of NewRiver REIT plc ("NewRiver" or the "Company"), a
leading real estate investment trust specialising in buying,
managing and developing essential retail and leisure assets
throughout the UK, announces that it has entered into an agreement
for the sale of the entire issued share capital of Hawthorn Leisure
REIT Limited (" Hawthorn "), the entity in the Group that holds,
either directly or indirectly through its wholly-owned
subsidiaries, NewRiver's entire community pub business (the
"Disposal"), to AT Brady Bidco Limited (" Admiral Taverns ") for a
gross aggregate cash consideration of approximately GBP222.3
million.
Allan Lockhart, Chief Executive of NewRiver, commented: "Over
recent years, we have grown Hawthorn to become the UK's leading
community and wet-led pub business. As a consequence of this, we
received significant interest from a range of potential buyers for
Hawthorn, following the divestment plan we announced in April
2021.
We have now agreed the sale of Hawthorn which, once completed,
will deliver on our key priority to reset Loan to Value,
strengthening our balance sheet and enabling us to focus on
executing our resilient retail strategy. I would like to thank the
entire Hawthorn team and, in particular, Mark Davies, who the Board
had previously mandated to lead the divestment of Hawthorn, for
their professionalism and dedication throughout the process, which
has delivered a great result for NewRiver shareholders.
Alongside the new dividend policy which we announced recently in
our full year results, and increased transactional evidence in the
parts of the retail investment market that we are focused on, we
look forward with genuine confidence."
Admiral Taverns is a wet-led community pub operator, with
approximately 1,000 pubs across England, Wales and Scotland.
The Disposal of Hawthorn, which as at 30 June 2021 comprised 674
leased & tenanted and operator managed community pubs,
represents the successful delivery of the Company's previously
announced strategic priority to divest itself of its community pub
business in order to reset its LTV and provide the firepower to
reshape its portfolio.
Highlights of the Disposal
-- Expected gross aggregate cash consideration of approximately GBP 222.3 million.
-- Net aggregate proceeds are expected to be used to reduce net
debt, significantly strengthening NewRiver's balance sheet by
resetting LTV to below 40 per cent on a 31 March 2021 pro-forma
basis, which is in line with Company guidance.
-- The disposal of the pub business, once completed, will enable
the majority of future proceeds from non-core retail disposals, of
which we currently have GBP73 million exchanged or under offer, to
be recycled into resilient retail assets and NewRiver's
regeneration portfolio which offer superior income and capital
growth opportunities.
In accordance with the Listing Rules, due to the size of the
Disposal in relation to the size of the Company, the Disposal
constitutes a Class 1 transaction (as defined in the Listing Rules)
and is therefore subject to Shareholder approval. Completion is
therefore conditional upon the approval of the Disposal Resolution
at the General Meeting. Accordingly, a Circular is expected to be
sent to Shareholders on or around 28 July 2021, containing further
details of the Disposal, the Board's recommendation and convening
the General Meeting at which Shareholders will be asked to approve
the Disposal. Completion is expected to occur in August 2021. A
separate announcement will be released on publication of the
Circular, setting out a detailed timetable for the General Meeting
and Completion.
For further information
NewRiver REIT plc
Allan Lockhart (Chief
Executive)
Emily Meara (Head of +44 (0)20 3328
Investor Relations) 5800
Liberum (Sponsor to
NewRiver)
Jamie Richards
James Greenwood +44 (0)20 3100
Nikhil Varghese 2000
Kinmont (Financial Adviser
to NewRiver) +44 (0)20 7087
Mat Thackery 9100
+44 (0)20 7251
Finsbury 3801
Gordon Simpson
James Thompson
Important Notices
Information regarding forward-looking statements
This announcement contains statements which are, or may be
deemed to be, "forward-looking statements" which are prospective in
nature. All statements other than statements of historical fact are
forward-looking statements. They are based on current expectations
and projections about future events, and are therefore subject to
risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the
forward-looking statements. Often, but not always, forward-looking
statements can be identified by the use of forward-looking words
such as "plans", "expects", "is expected", "is subject to",
"budget", "scheduled", "estimates", "forecasts", "goals",
"intends", "anticipates", "believes", "targets", "aims" or
"projects". Words or terms of similar substance or the negative
thereof, are forward-looking statements, as well as variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "should", "would", "might" or "will" be
taken, occur or be achieved. Such statements are qualified in their
entirety by the inherent risks and uncertainties surrounding future
expectations.
Forward-looking statements include statements relating to: (a)
future capital expenditures, expenses, revenues, earnings, economic
performance, indebtedness, financial condition, dividend policy,
losses and future prospects; (b) business and management strategies
and the expansion and growth of the Company's operations; and (c)
the effects of economic conditions on the Company's business.
Such forward-looking statements involve known and unknown risks
and uncertainties that could significantly affect expected results
and are based on certain key assumptions. Many factors may cause
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Important factors that could cause actual results,
performance or achievements of the Company to differ materially
from the expectations of the Company include, among other things,
general business and economic conditions, industry trends,
competition, changes in government and changes in regulation and
policy, including in relation to taxation as well as political and
economic uncertainty. Such forward-looking statements should
therefore be construed in light of such factors.
Neither the Company nor any of its Directors, officers or
advisers provides any representation, assurance or guarantee that
the occurrence of the events expressed or implied in any
forward-looking statements in this announcement will actually
occur. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as at the date of this
announcement.
Other than in accordance with its legal or regulatory
obligations (including under the Listing Rules and the Disclosure
Guidance and Transparency Rules), the Company is not under any
obligation and the Company expressly disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
No profit forecast
No statement in this announcement is intended as a profit
forecast or a profit estimate and no statement in this announcement
should be interpreted to mean that earnings per Ordinary Share for
the current or future financial years will necessarily match or
exceed the historical published earnings per Ordinary Share.
Cautionary statement
This announcement is not intended to, and does not constitute,
or form part of, any offer to sell or an invitation to purchase or
subscribe for any securities or a solicitation of any vote or
approval in any jurisdiction. Shareholders are advised to read
carefully the formal documentation in relation to the Disposal once
it has been despatched. Any response to the Disposal should be made
only on the basis of the information in the formal documentation to
follow.
Important information relating to financial advisers
Liberum, which is authorised and regulated in the United Kingdom
by the FCA, is acting solely for the Company as sponsor and for
no-one else in connection with the Disposal and will not be
responsible to anyone other than the Company for providing the
protections afforded to its clients or for providing advice to any
other person in relation to the Disposal, the content of this
announcement or any other matters described in this
announcement.
Kinmont, which is authorised and regulated in the United Kingdom
by the FCA, is acting solely for the Company as financial adviser
and for no-one else in connection with the Disposal and will not be
responsible to anyone other than the Company for providing the
protections afforded to its clients or for providing advice to any
other person in relation to the Disposal, the content of this
announcement or any other matters described in this
announcement.
Rounding
Percentages in this announcement have been rounded and
accordingly may not add up to 100 per cent. Certain financial data
have also been rounded. As a result of this rounding, the totals of
data presented in this announcement may vary slightly from the
actual arithmetic totals of such data.
1. Introduction
NewRiver REIT plc (the "Company" or "NewRiver"), a leading real
estate investment trust specialising in buying, managing and
developing essential retail and leisure assets throughout the UK,
has entered into an agreement for the sale of the entire issued
share capital of Hawthorn Leisure REIT Limited ("Hawthorn"), the
entity in the Group that holds, either directly or indirectly
through its wholly-owned subsidiaries, NewRiver's entire community
pub business (the "Disposal"), to AT Brady Bidco Limited (the
"Purchaser") for a gross aggregate cash consideration of
approximately GBP 222.3 million (the "Consideration").
As at 30 June 2021, Hawthorn owned, either directly or
indirectly through its wholly-owned subsidiaries, and managed 674
leased & tenanted and operator managed community pubs primarily
in suburban locations, residential neighbourhoods, towns, city
centres and communities throughout England, Scotland and Wales.
Hawthorn's pubs are almost all wet-led and operated by individuals,
typically as a family business and, at over two-thirds of the
sites, the operator lives in residential accommodation provided
above or adjacent to the pub. As at 30 June 2021, 95 per cent of
Hawthorn's pubs were owned freehold.
The Consideration is payable in full and in cash by the
Purchaser on Completion, subject to certain customary adjustments
in relation to the period between 28 March 2021 and Completion.
After adjustment for estimated transaction costs, the Company
expects to receive net aggregate proceeds from the Disposal of
approximately GBP216.1 million. The Company intends to utilise the
net aggregate proceeds of the Disposal to reduce net debt in order
to reduce LTV, allowing the Group to invest in its core Retail
Portfolio.
In accordance with the Listing Rules, due to the size of the
Disposal in relation to the size of the Company, the Disposal
constitutes a Class 1 transaction (as defined in the Listing Rules)
and is therefore subject to Shareholder approval. Completion is
therefore conditional upon the approval of the Disposal Resolution
at the General Meeting. Accordingly, a Circular is expected to be
sent to Shareholders on or around 28 July 2021, containing further
details of the Disposal, the Board's recommendation and convening
the General Meeting at which Shareholders will be asked to approve
the Disposal. Completion is expected to occur in August 2021. A
separate announcement will be released on publication of the
Circular, setting out a detailed timetable for the General Meeting
and Completion.
2. Background to and reasons for the Disposal
In the second half of the financial year ended 31 March 2021,
the Company undertook a thorough portfolio-wide strategic review,
which involved analysing every asset in its portfolio in terms of
current and projected resilience and value-creation opportunities.
The review examined current and emerging trends across the retail
landscape, including shoppers' changing behaviours and priorities,
to determine how the Company can ensure that its portfolio remains
as resilient in the future as it has proved to be during the
COVID-19 pandemic.
The strategic review and its findings culminated in the Board's
strategic aim that by 2025 assets in the Company's portfolio will
display only the characteristics of resilient retail. It is the
Board's belief that this will transform the business into a more
agile and resilient proposition and will provide the appropriate
balance of income and capital returns.
In pursuing this strategic aim, one of the Company's key
priorities included the divestment of the Pub Portfolio. The Board
believes that the Pub Portfolio is currently sub-scale in a sector
which could see significant consolidation opportunities which
cannot be unlocked under NewRiver's ownership due to its status as
a real estate investment trust. Furthermore, the divestment of the
Pub Portfolio will reduce the Company's LTV and provide the capital
to reshape the Company's portfolio.
In the Board's view, the Disposal delivers the best outcome for
the Shareholders and is a key step to achieving the Board's
strategic aim that by 2025, assets in the Company's portfolio will
display only the characteristics of resilient retail.
The Disposal proceeds will be used to reduce the level of the
Group's net debt, accelerating the delivery of the Group's target
to reduce Group LTV below 40 per cent. On a pro forma basis,
adjusting for the net aggregate proceeds of the Disposal and based
on the property valuation as at 31 March 2021, excluding the
Hawthorn portfolio, the Group's LTV ratio would be 39.8 per cent.
The Disposal will also allow the Group to invest in its core Retail
Portfolio and, together with other sales of non-core retail assets,
to recycle the resultant capital into resilient retail.
3. Principal terms and conditions of the Disposal
The Disposal is being made pursuant to the terms of the Sale
Agreement. Under the Sale Agreement, NewRiver has agreed to sell
the entire issued share capital of Hawthorn to the Purchaser.
The Consideration of approximately GBP 222.3 million is payable
in full and in cash by the Purchaser on Completion, subject to
certain customary adjustments in relation to the period between 28
March 2021 and Completion. In addition, there may be a further
amount of up to approximately GBP4.0 million, relating to a pending
insurance claim, that is received by Hawthorn following the date of
the Sale Agreement and such amount shall be payable by the
Purchaser to the Company pursuant to the terms of the Sale
Agreement.
The Sale Agreement contains certain warranties and indemnities
given by each of NewRiver and the Purchaser which are customary for
a transaction of this nature.
Completion of the Disposal is conditional only upon (i) the
Circular being approved and stamped by the FCA, and the same being
published in accordance with the Listing Rules, and (ii) the
approval of the Disposal Resolution at the General Meeting. The
Board expects that, subject to the approval by Shareholders at the
General Meeting, Completion is expected to occur in August 2021
.
No transitional services arrangements will be required following
the Disposal, as the Disposal Group will be operating on a
stand-alone basis from Completion.
4. Information on the Purchaser
The Purchaser is a member of the Admiral Taverns group, a
wet-led community pub operator, with approximately 1,000 pubs
across England, Wales and Scotland.
Headquartered in Chester, the Admiral Taverns business was
founded in 2003 and in 2010 a new management team was appointed and
a new strategy launched to transform Admiral Taverns into a leading
community pub operation with a refined portfolio of sustainable
wet-led pubs. It has since won the Publican Award for Best Leased
and Tenanted Pub Company in 2019, 2016 and 2013, each time that it
has entered. In 2017 Proprium Capital Partners and C&C Group
plc backed the management buyout of Admiral Taverns and in 2019
supported the acquisition of 150 tenanted community pubs from Star
Pubs & Bars and 137 pubs from Marston's PLC.
5. Information on NewRiver
NewRiver is a leading real estate investment trust specialising
in buying, managing and developing retail and leisure assets
throughout the UK. As at 30 June 2021, the Company's GBP1.0 billion
portfolio covered nine million sq. ft. and comprised 33 community
shopping centres, 19 conveniently located retail parks and 674
community pubs.
The Company has hand-picked a portfolio of retail assets to
deliberately focus on occupiers providing essential goods and
services, and avoid structurally challenged sub-sectors such as
department stores, mid-market fashion and casual dining. The
Company closed the financial year ended 31 March 2021 with a
blended retail cash rent collection rate of 86 per cent across all
four quarters of the financial year. Including rent either deferred
or subject to regear, this blended rate rises to 93 per cent. As at
30 June 2021, rent collection in respect of the first quarter of
the financial year ended 31 March 2022 stood at 89 per cent
including deferrals and regears, ahead of collection at the same
point last year. The Company's active approach to asset management
and inbuilt 2.6 million sq. ft. development pipeline provides
further opportunities to extract value from its portfolio.
As at 31 March 2021, underlying funds from operations were
GBP11.5 million, compared to GBP52.1 million in the previous
financial year ended 31 March 2020, due to the restrictions placed
on the Company's business and its assets during the COVID-19
pandemic, particularly in the Company's pub business. The Company's
IFRS loss after tax was GBP(150.5) million, compared to a loss of
GBP(121.1) million in the prior financial year, predominantly
reflecting a non-cash reduction in portfolio valuation of GBP152.9
million.
As at 31 March 2021, the Company's proportionally consolidated
portfolio valuation was GBP974.2 million, compared to GBP1,197.1
million in the previous financial year ended 31 March 2020, due to
a 13.6 per cent like-for-like decline in valuations and the
completion of GBP81.2 million of disposals, in line with the
Company's strategy to complete between GBP80-100 million of
disposals in the financial year ended 31 March 2021.
The Company's EPRA NTA per share was 151 pence per share as at
31 March 2021, compared to 201 pence per share as at 31 March 2020.
The decrease in EPRA NTA and EPRA NTA per share was primarily due
to the 13.6 per cent like-for-like decrease in portfolio valuation.
As at 31 March 2021, the Company's IFRS net assets were GBP460.4
million, compared to GBP610.6 million as at 31 March 2020, reduced
for the same reason. The Company's portfolio outperformed the
MSCI-IPD All Retail benchmark on a total return basis by 120 bps,
driven by an income return outperformance of 180 bps.
6. Summary of the Disposal Group
Following the corporate reorganisation of the Company's
community pub business implemented on 23 November 2020, Hawthorn
owned, either directly or indirectly through its wholly-owned
subsidiaries, the Group's pub property portfolio, which included
674 leased & tenanted pubs and operator managed pubs as at 30
June 2021 (the "Pub Portfolio ").
As at 30 June 2021, across Hawthorn, approximately 80 per cent
of sites operated under a 'leased & tenanted' model, whereby
Hawthorn has an occupational lease with a tenant, who is
responsible for all operating costs of the pub, including staff
costs. Most of the leased & tenanted pubs are 'tied', meaning
that tenants are required to purchase drinks from Hawthorn and
lease games machines from Hawthorn-approved suppliers. In return,
Hawthorn receives rental income, a margin between the wholesale
price and sale price to tenants on drinks supplied, and a share of
machine profits.
As at 30 June 2021, approximately 19 per cent of Hawthorn sites
operated under an 'operator managed' model, whereby Hawthorn enters
into an operator agreement with a pub partner. Hawthorn incurs all
operating costs of running the pub, except for staff costs, which
are borne by the operator. In return, Hawthorn receives gross
turnover generated by the pub and pays a management fee to the pub
partner, which is on average around 20 per cent of net revenue.
The UK Government required the temporary closure of all
hospitality businesses on 20 March 2020, and the entire Pub
Portfolio was closed until 4 July 2020, when pubs in England were
allowed to reopen. During the lockdown period, the Company's focus
was on protecting Hawthorn's financial position and supporting
Hawthorn's pub partners. To protect Hawthorn's financial position,
Hawthorn accessed UK Government support packages which Hawthorn
invested directly in pub partner assistance and reduced
non-essential capex and operating costs. Hawthorn's BDMs were in
close contact with the pub partners and provided help in accessing
available government support, including the Retail, Hospitality and
Leisure Grant and the Coronavirus Job Retention Scheme. In
addition, over 86 per cent of Hawthorn's pub partners invested in
their pub during the lockdown, particularly in improving outside
space. Reflecting this level of support, 97 per cent of Hawthorn's
tenants said they were either satisfied or very satisfied with
Hawthorn's help during the lockdown period.
From 4 July 2020, pubs in England were allowed to reopen and,
within a week, over 90 per cent of the Pub Portfolio in England was
operational. Following the lifting of restrictions in Scotland and
Wales several weeks later, over 90 per cent of the entire Pub
Portfolio was trading by mid-August 2020.
The underlying performance of Hawthorn's pubs was strong
following reopening, with like-for-like volumes in the leased &
tenanted portfolio down only eight per cent and like-for-like sales
in the operator managed pubs down only 16 per cent compared to the
same period in 2019. This performance compared favourably to the
wider market; pub like-for-like sales were down 18 per cent over
the same period according to the Coffer Peach Business Tracker.
In order to support its pub partners' recovery following
reopening, Hawthorn did not charge rent for the months of July or
August 2020, and launched its Partner Investment Fund, through
which Hawthorn matched investments made by pub partners. Both of
these schemes were conditional on obtaining commitments from pub
partners that ensured Hawthorn was able to retain its tenants and
operators for the long-term.
From October 2020, pub operations began to face new
restrictions, initially in the form of new hospitality closures in
Scotland but culminating in further national restrictions for
England announced by the UK Government on 31 October 2020. The
experience gained during the first lockdown meant that Hawthorn
could act swiftly and effectively, offering financial aid and
practical advice, to support tenants and pub operators during this
period of fresh restrictions.
During the financial year ended 31 March 2021, Hawthorn invested
GBP1.3 million of grant income in support payments to its pub
operators in the operator managed estate. These support payments,
designed to cover operator living costs, were aimed at maintaining
high levels of operator retention and occupancy. This ensured that
its pubs were ready to welcome back customers on reopening and
removed the burden of vacant property costs. As at 30 June 2021,
only four pubs in the operator managed portfolio were vacant,
representing a 96.9 per cent occupancy level. This is a testament
to the targeted support and strong relationships that Hawthorn's
BDMs and wider team have forged with the pub operators.
Following decisive action to invest in Hawthorn's portfolio
during the first lockdown, and seeing the benefits of this on
reopening, Hawthorn took the opportunity to further enhance its
pubs during the second half of the financial year ended 31 March
2021 and invested a further GBP0.9 million in improving outside
space. An additional GBP0.3 million (matched by tenants) was also
invested via Hawthorn's Partner Investment Fund to support 110 new
schemes.
After several months of temporary closure, Hawthorn opened over
60 per cent of its Pub Portfolio on 12 April 2021, following the
easing of restrictions on outside trading, and reopened the vast
majority of the remaining pubs following the easing of restrictions
on indoor trading from 17 May 2021. With a focus on well-located
community and suburban pubs, and with the benefit of more consumers
working from home and using their local services and facilities,
Hawthorn has been able to recover quickly on reopening and trading
is tracking significantly ahead of budget. In the period from 12
April 2021 to 21 June 2021, like-for-like volumes in the leased
& tenanted portfolio were up two per cent compared to the same
period in 2019. Like-for-like sales in the operator managed pubs
were down 13 per cent compared to the same period in 2019 but
Hawthorn is still ahead of budget and in line with the wider pub
sector as measured by the Coffer Peach Business Tracker.
In response to the revenue recovery in its pubs since reopening,
Hawthorn made the decision to repay funds received under the
Coronavirus Job Retention Scheme during lockdown last year. These
funds were repaid to HMRC in April 2021.
Pub net property income was GBP1.0 million in the financial year
ended 31 March 2021, compared to GBP24.3 million in the financial
year ended 31 March 2020, predominantly due to the mandatory
closure of the Pub Portfolio for the vast majority of the financial
year as part of the UK Government's response to the COVID-19
pandemic. In England, where the majority of Hawthorn's pubs are
located, Hawthorn experienced seven months of national lockdowns,
two months of the tiered system, and just three months of normal
trading over the Summer of 2020. When the pubs were open and able
to trade, performance was encouraging, with only a modest
like-for-like decline of GBP0.6 million, reflecting reduced
capacity, recovering customer confidence, some localised
restrictions, and the Government's Eat Out to Help Out scheme.
The direct impact of closing the Pub Portfolio throughout the
sustained periods of lockdown in the year adversely impacted income
by GBP14.6 million, with the support provided to partners,
predominantly in the form of rent waivers, further reducing income
by GBP8.7 million. The cost of destroying beer supplies adversely
impacted income by GBP0.4 million.
The impact of a full year of income from acquisition of Bravo
Inns Limited and 28 community pubs from Marston's plc in the
financial year ended 31 March 2020 added GBP0.8 million and GBP0.2
million respectively.
Disposal Group Income Statement
Year ended Year ended Year ended
31 March 31 March 31 March
2019 2020 2021
(GBP'm) (GBP'm) (GBP'm)
(unaudited) (unaudited) (unaudited)
-------------------------------------------- ------------ ------------ ------------
Revenue 41.9 51.4 18.1
Property operating expenses (20.1) (27.1) (17.1)
Net property income 21.8 24.3 1.0
Administrative expenses (6.5) (9.2) (9.6)
Other income - - 4.6
Acquisition and integration costs (4.2) (0.4) (0.1)
Net valuation movement (1.8) (26.6) (23.2)
Loss on disposal of investment properties (0.2) (0.3) (1.4)
Operating profit/(loss) 9.1 (12.2) (28.7)
Net finance costs (4.6) (4.3) (4.1)
Profit/(loss) for the year before taxation 4.5 (16.5) (32.8)
Taxation (0.5) (0.3) 1.3
Profit/(loss) for the year after taxation 4.0 (16.8) (31.5)
------------ ------------ ------------
Disposal Group Net Asset Statement
As at 31 March 2021 Disposal Group
GBPm
(unaudited)
------------------------------- ---------------
Non-current assets
Investment properties 197.5
Right of use asset 0.7
Property, plant and equipment 53.4
251.6
------------------------------- ---------------
Current assets
Trade and other receivables 3.0
Cash and cash equivalents 12.0
15.0
------------------------------- ---------------
Total assets 266.6
------------------------------- ---------------
Current liabilities
Trade and other payables (14.2)
(14.2)
------------------------------- ---------------
Non-current liabilities
Deferred tax liability (0.6)
Lease liability (2.5)
------------------------------- ---------------
(3.1)
Total liabilities (17.3)
------------------------------- ---------------
Net assets 249.3
------------------------------- ---------------
7. Use of proceeds, financial effects of the Disposal and
strategy of the Continuing Group
After adjustment for estimated transaction costs, the Company
expects to receive net aggregate proceeds from the Disposal of
approximately GBP216.1 million. The net aggregate proceeds are
expected to be used to reduce net debt, significantly strengthening
the balance sheet and accelerating the delivery of the Group's
target to reduce Group LTV below 40 per cent. The Group intends to
use approximately GBP100 million of the net aggregate proceeds of
the Disposal to repay all of the outstanding balance on the
Revolving Credit Facility.
Whilst the Company will benefit from a reduction of interest
payable in respect of the Revolving Credit Facility and of head
office costs, the Disposal is expected to be dilutive to normalised
EPRA Earnings and to EPRA NTA.
No transitional services arrangements will be required following
the Disposal, as the Disposal Group will be operating on a
stand-alone basis from Completion. This means that the Company will
not incur costs in implementing transitional services arrangements
and there will be no impact on the functioning of its continuing
business as a result of the fulfilment of its obligations under
such arrangements.
After the Disposal, the Group intends to sell other non-core
retail assets and recycle the resultant capital into resilient
retail whilst also transforming its regeneration assets to create
long-term value by jointly working with sector specialists and
appropriate capital partners.
8. Board changes
The Board intends that Mark Davies will step down as Chief
Financial Officer of NewRiver prior to completion of the Disposal,
and intends that Will Hobman, who has been NewRiver's Finance
Director for almost two years and with the Company for over five
years, will be appointed Chief Financial Officer of NewRiver at
completion of the Disposal.
The Board intends that Will Hobman will enter into a service
contract with the Company, terminable by either party on 12 months'
prior written notice or by the Company immediately in the case of
gross misconduct (amongst other circumstances). The contract will
contain provisions relating to pay, pension contributions payable
by the Company and holiday entitlement. On notice of termination,
the Company will be entitled to make a payment in lieu of notice
under the contract. The contract will contain acknowledgements by
Will on conduct requirements in respect of confidential
information, share dealings and conflicts of interest.
9. Current trading, trends and future prospects for the Continuing Group
The 2021 Annual Report and Accounts included the following
statements about current trading and prospects:
"COVID-19 has posed unprecedented challenges however our
operational and financial achievements have convinced us of the
underlying strength of our portfolio and platform. As a result we
have focused our efforts on ensuring that our portfolio remains
resilient over the longer term.
The macroeconomic environment is improving; in May the Bank of
England upgraded its 2021 growth outlook for the UK economy from 5%
to 7.25%, driven by anticipated consumer spending. Consumer
confidence in the UK economy has returned to pre-pandemic levels
and we are well placed to benefit from consumers' growing
preference for shopping locally and supporting community
assets.
In terms of the investment market, liquidity in retail parks has
improved during the year and investor demand for regeneration
projects has also increased over the second half of FY21,
especially for assets located in areas with attractive underlying
residential values. We are starting to see early signs of an uplift
in shopping centre liquidity and we expect the investment market to
improve further as we emerge from the COVID-19 crisis.
With the benefit of an improving market backdrop and the
insights gained from our recent strategic review we are looking
forward to the coming year with genuine optimism. "
Appendix - Definitions and Glossary
The following definitions apply throughout this announcement,
unless the context otherwise requires.
"2021 Annual the annual report and accounts prepared by the
Report and Accounts" Company for the financial year ended 31 March
2021.
"BDM" business development manager.
--------------------------------------------------------
"Board" or "Directors" the board of directors of the Company.
--------------------------------------------------------
"Companies Act" the Companies Act 2006, as amended from time to
time.
--------------------------------------------------------
"Completion" completion of the Disposal in accordance with
the provisions of the Sale Agreement.
--------------------------------------------------------
"Consideration" the gross aggregate cash consideration of approximately
GBP222.3 million for the sale of the entire issued
share capital of Hawthorn.
--------------------------------------------------------
"Continuing NewRiver REIT plc and its subsidiaries and subsidiary
Group" undertakings, being the Group following Completion
(excluding, for the avoidance of doubt, the Disposal
Group), with Group or Continuing Group being used
as the context requires.
--------------------------------------------------------
"Disclosure the disclosure guidance and transparency rules
Guidance and as set out in the
Transparency FCA's handbook of rules and guidance, as amended.
Rules"
--------------------------------------------------------
"Disposal" the proposed disposal of the Disposal Group pursuant
to the Sale Agreement.
--------------------------------------------------------
"Disposal Group" Hawthorn Leisure REIT Limited, a company incorporated
or "Hawthorn" in England and Wales with registered number 08045171,
and its subsidiaries and subsidiary undertakings.
--------------------------------------------------------
"Disposal Resolution" the ordinary resolution to be proposed and considered
at the General Meeting to approve the Disposal,
to be set out in the Notice of General Meeting.
--------------------------------------------------------
"EPRA Earnings" the IFRS profit after taxation excluding investment
property revaluations, fair value adjustments
on derivatives, gains/losses on disposals and
deferred tax.
--------------------------------------------------------
"EPRA NTA" EPRA Net Tangible Assets, being the balance sheet
net assets excluding the mark to market on effective
cash flow hedges and related debt adjustments,
deferred taxation on revaluations, goodwill, and
diluting for the effect of those shares potentially
issuable under employee share schemes.
--------------------------------------------------------
"Facilities the facilities agreement dated 9 August 2017 between
Agreement" the Company as borrower, Barclays Bank plc, The
Royal Bank of Scotland plc, HSBC Bank plc and
Santander UK plc as arrangers and lenders and
HSBC Bank plc as agent, as amended and restated
pursuant to a deed of amendment and restatement
dated 20 February 2018.
--------------------------------------------------------
"FCA" the UK Financial Conduct Authority.
--------------------------------------------------------
"General Meeting" the general meeting of the Company at which the
Disposal Resolution will be proposed and considered.
--------------------------------------------------------
"Group" in respect of any time prior to Completion, the
Company and its consolidated subsidiaries and
subsidiary undertakings and, in respect of any
time following Completion, the Continuing Group,
with Group or Continuing Group being used as the
context requires.
--------------------------------------------------------
"IFRS" the International Financial Reporting Standards
as adopted by the International Accounting Standards
Board and the EU.
--------------------------------------------------------
"Kinmont" Kinmont Limited, the financial adviser to the
Company.
--------------------------------------------------------
"Liberum" Liberum Capital Limited, the Sponsor to the Company.
--------------------------------------------------------
"Listing Rules" the listing rules made by the FCA under section
73A of FSMA, as amended from time to time.
--------------------------------------------------------
"LTV" loan to value.
--------------------------------------------------------
"Ordinary Shares" the ordinary shares of one pence each in the share
capital of the Company.
--------------------------------------------------------
"Pub Portfolio" the Group's pub property portfolio, which included
674 leased & tenanted pubs and operator managed
pubs as at 30 June 2021.
--------------------------------------------------------
"Purchaser" AT Brady Bidco Limited, a company incorporated
in England and Wales with registered number 10935753.
--------------------------------------------------------
"Retail Portfolio" the retail property portfolio owned by the Group,
which included 33 community shopping centres and
19 conveniently located retail parks as at 30
June 2021.
--------------------------------------------------------
"Revolving Credit the Company's revolving credit facilities of GBP215
Facility" million pursuant to the Facilities Agreement,
for general corporate purposes, of which, as at
31 March 2021, GBP170 million was drawn, GBP70
million of which was subsequently repaid voluntarily
by the Company on 30 June 2021.
--------------------------------------------------------
"Sale Agreement" the conditional sale agreement in respect of the
Disposal Group.
--------------------------------------------------------
"Shareholder" a holder of Ordinary Shares from time to time.
--------------------------------------------------------
All references to legislation in this document are to the
legislation of England and Wales unless the contrary is indicated.
Any reference to any provision of any legislation shall include any
amendment, modification, re-enactment or extension of it.
For the purpose of this announcement, "subsidiary" and
"subsidiary undertaking" have the meanings given by the Companies
Act.
Words importing the singular shall include the plural and vice
versa, and words importing the masculine gender shall include the
feminine or neutral gender.
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END
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