Newriver REIT plc (LON:NRR) was discussed by Gervais Williams, Co-Fund Manager of Diverse Income Trust plc (LON:DIVI) in a wide-ranging exclusive interview about the Trust and LSE-listed companies in his portfolio.
DirectorsTalk asked:
Another profitable and dividend-paying stock in your portfolio is the real estate investment trust Newriver REIT. It completed a couple of strategic acquisitions in 2024, and the recent acquisition of Capital & Regional increased its portfolio by 65%. Can you tell us more about this?
Gervais Williams commented:
What’s been interesting about the real estate sector, of course, particularly in the retail market, and Newriver has a bias towards the retail market, is there really haven’t been any new shopping centres built for probably 10 or 15 years. So, actually, this is an area where capacity is becoming constrained in some parts of the country.
Specifically, Newriver REIT, therefore, is well positioned not just to continue to deliver good resources to its customers, which are retailers, but many of them actually wanting to be in the Newriver retail developments.
I think the Capital & Regional acquisition was described by one analyst as transformational, so this actually scales up their opportunity overheads over a larger universe, but particularly with the sector not having much capital in it for many, many years. We think some of the lesser centres are closing down, this is only making it easier for a company like this. Again, terrific, one of the stronger balance sheets in the sector, which means if there is uncertainty, they can take advantage of the weakness of others.
That’s really the advantage of many of the quoted companies; they’re well positioned to survive perfectly happily. If things get tougher, and there may be periods of recession coming up, including in the UK, then these kinds of companies don’t just survive, they actually go on to thrive in these uncertain circumstances and the earnings upgrade and the potential for them is actually enhanced. We think New River Retail is exactly one of those stocks.
Allan Lockhart, Chief Executive of Newriver REIT said in their unaudited results update on 12 December 2024:
“This has been a transformational period for NewRiver marked by the successful acquisition of Capital & Regional which completed earlier this week. This transaction substantially increases our scale and will deliver significant benefits including a material increase in our earnings. This was clearly recognised by existing shareholders and new investors who overwhelmingly supported our equity raise to partly fund the transaction.
Our focus on M&A activity has not detracted from our operational performance which has been excellent with another good period of leasing activity. Consequently, occupancy and occupier retention rates remain high. We have a highly experienced asset management team, which has been further enhanced with the recent acquisition of Ellandi, and a portfolio that is significantly outperforming the market in terms of year-on-year consumer spending growth which is supporting the success of our occupiers.
For NewRiver the outlook is positive, despite the uncertain macro environment. We have a clear pathway to deliver growth from a portfolio that is performing well, our successful Capital Partnership business and the realisation of the significant benefits that flow from our completed M&A activities, all of which will drive significant recurring earnings accretion, enhancing our ability to pay a higher covered dividend.”
Diverse Income Trust plc invests primarily in quoted or traded UK companies with a wide range of market capitalisations, but a long-term bias toward small and medium sized companies.
