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Morning Briefing for pub, restaurant and food wervice operators

Wed 25th May 2016 - Update: NewRiver Retail and Shaftesbury
NewRiver Retail secures consents for 26 convenience stores on spare land at pub sites: Property develop NewRiver Retail has reported it has now secured consent for 26 convenience stores on spare land within its pubs portfolio. It stated: “NewRiver has successfully completed and handed over its first three convenience stores (within our pub portfolio) to the Co-Operative, the first of which opened for trade in February 2016. The stores were delivered on time and within budget utilising surplus land adjacent to the existing pubs. The annual rent for the first Co-Operative store is £73,000 pa on a 15-year lease across 4,173 sq ft – NewRiver is on site for the construction of a further five. As at 31 March 2016, we had secured planning approval for 26 convenience store sites. Value-creating residential development continues to progress well within the pub portfolio with the submission of a total of 30 residential planning applications for the creation of up to 150 units. Of these, eight consents have been granted to provide up to 28 residential units, a combination of one and two bedroom apartments, as well as detached and semi-detached houses. The public house portfolio benefitted from considerable gain in the preceding year and is now producing steady valuation and income growth. The like-for-like valuation growth was £2.0 million, equating to 1.7%, driven by like-for-like income growth of 0.7%.” Of its portfolio of 158 Punch Taverns pubs, it stated: “The Mantle Portfolio comprised an estate of 158 pubs located across England and Wales which was acquired from Punch Taverns for a total consideration of £53.5 million which equates to a net initial yield of 13.61%. Once leveraged the cash-on-cash equity return will be in excess of 20%. The portfolio comprises 340,000 sq ft of total internal gross area, 1.8 million sq ft of total site area, 1,730 car parking spaces and has an estimated reinstatement value of £146 million. The quality and stability of the portfolio was reflected in it being 99.4% let and effectively 100% let for the last four years. The revenue arrears are negligible and beer volumes have increased by 2.24% per annum, compound, over the last four years. Significant asset management and development opportunities present themselves including unlocking and creating capital growth through the introduction of new and complementary uses, as well as offering existing occupiers longer, more sustainable leases. NewRiver has appointed a third party specialist pub management company to run the day to day management of the portfolio and deliver pre-identified efficiencies, allowing NewRiver to focus on the asset management and development programme. NewRiver’s pub portfolio accounts for 15% of total assets under management.” Profit before tax increased 76% to £69.5m in the year to 31 March.

Shaftesbury – demand for restaurant space in the West End remains strong: Property landlord Shaftesbury, which owns 589 restaurants, pubs, cafes and shops in the West End, has reported demand for restaurant, cafe and pub space in the West End remain strong. It stated: “Despite some emerging concerns regarding national economic trends and current political uncertainties, the West End’s economy continues to flourish, benefitting from London’s growing population and diverse economy. Importantly for us, retail and leisure spending generated by the visitor economy, and a very large local working population, continues to attract strong occupier demand across each of our locations. The focus of our proven, long-term management strategy is to create and foster distinctive, interesting and lively locations which attract footfall, businesses and spending, underpinned by the long-established strength of the West End’s economy. This enables businesses based here to benefit from a growing market, lessening the impact of increasing local and national taxation. The opening of Crossrail, now only two years away, will increase transport capacity and is expected to change West End footfall patterns significantly over time. With all our holdings within a short walk of the new transport interchanges at Tottenham Court Road and Bond Street, we expect to be a major beneficiary. Currently, we are undertaking three major refurbishment schemes, in Carnaby, Chinatown and Seven Dials, each of which is in close proximity to these new gateways to the West End.” The company added: “Restaurants, cafés and leisure choices are important to the mix of uses in our villages and are a footfall driver in their own right, particularly in the West End. Kingly Court, in Carnaby, is often highlighted in the trade and consumer media as a great example of an innovative food hub, complementing the retail on adjacent streets, drawing visitors from a wider catchment and encouraging longer dwell-times. We are the largest single provider of dining and leisure space in the West End, where the availability of space is constrained due to local planning policies and the reluctance of operators to relinquish sites other than for significant premiums. Occupier demand in the casual dining market remains exceptionally strong, as businesses are keen to establish in this exceptionally busy area. We receive numerous competitive offers for any available restaurant space and vacancy levels are minimal. With such strong demand, we are identifying further opportunities to secure vacant possession of space where we can make improvements and attract new operators with innovative concepts on more beneficial terms. During the period, we completed leasing transactions with a rental value of £4.5 million, equivalent to 11% of restaurants, cafés and leisure ERV. This included five lettings and renewals, and seventeen rent reviews.” Chief executive Brian Bickell said: “This has been a period of considerable activity across our portfolio. A combination of sustained demand for accommodation in our areas and our asset management initiatives continues to deliver growing current and future potential rental income, underpinning growth in earnings, the value of our portfolio and shareholders’ investment in our business. We are confident that, with the benefit of our proven strategy, together with our experience and forensic knowledge of the West End, our business will continue to deliver growth in income and shareholder value over the long-term.” Net income grew £3.4m to £42.1m in the six month to 31 March. 

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