The convenience store property group NewRiver Retail has transferred from Aim to London’s main market despite dual threats to the retail real estate sector from the Brexit vote and ecommerce.
The seven-year-old real estate investment trust, which runs £1.2bn of shopping centres, stores and warehouses, has attracted income investors such as Neil Woodford with its dividend yield — currently 6.5 per cent — and focus on the unglamorous world of local stores selling consumer essentials.
The group expects to join the FTSE 250 index this year, but its transfer to a premium listing on the London Stock Exchange comes at a time when the vote to leave the EU has cast a pall over the UK property sector, while retail property had already been thrown into flux by the steady rise of digital commerce.
“We genuinely believe our business model is resilient to the threat of online,” said Mark Davies, chief financial officer. “This is about where the UK family budget spends its money — what people require, rather than what they desire.”
He added that NewRiver’s store portfolio was dominated by “offline retailers” such as Primark, the most visited clothes retailer in the UK, and budget supermarkets Aldi and Iceland.
It is also developing 40 Co-op convenience stores on land acquired when it bought a portfolio of more than 200 pubs from Marston Group in 2013.
David Prescott, analyst at Barclays, said: “In our opinion, discount retailers’ models will remain rooted in physical stores as the low-value product struggles to bear the cost of online fulfilment.”
NewRiver has grown steadily since it launched with £25m of seed capital in 2009. Mr Woodford, a fund manager with a strong following among retail investors, first bought into the fund about a year ago and now owns a quarter of its stock.
“We believe we can continue to grow, albeit perhaps at a more modest rate than historically,” said Mr Davies.
He added that it appeared to be “business as usual” for NewRiver after the Brexit vote, with footfall holding up and the group continuing to strike new leasing deals.
Capital values in the retail sector fell 3.6 per cent in July as part of an overall drop in property values after the referendum, according to CBRE, the property advisers, while analysts have lowered their projections for the sector in expectation of a Brexit effect on the economy.
However, UK retail spending in July was 1.9 per cent higher than a year earlier, the biggest rise in six months, according to data released on Thursday by the British Retail Consortium.
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