Annual Report and Accounts 2021 NewRiver REIT plc Annual Report and Accounts 2021 NewRiver is a leading Real Estate Investment Trust specialising in buying, managing and developing retail and leisure assets across the UK. Every day, our shopping centres, retail parks and pubs provide essential goods and services to communities. NewRiver has a Premium Listing on the Main Market of the London Stock Exchange (ticker: NRR). Contents Strategic Report Governance Financial Statements Our investment case ...................................2 Chairman’s letter ........................................77 Independent Auditors’ report ............. 122 Chairman’s statement ................................3 Our leadership team ................................ 78 Consolidated Statement Our business at a glance ..........................4 Board leadership of Comprehensive Income ...................134 How we create value ..................................8 and Company purpose ...........................82 Consolidated Balance Sheet ...............135 Stakeholder engagement ......................10 Division of responsibilities .....................88 Consolidated Cash Flow Chief Executive’s review .........................16 Composition, succession Statement ...................................................136 Our marketplace .......................................20 and evaluation ...........................................90 Consolidated Statement of Changes in Equity ...............................137 Our strategy ................................................22 Audit , risk and internal control.............95 Notes to the Our KPIs .......................................................24 Remuneration Committee report ........99 Financial Statements ..............................138 Business review ........................................28 Directors’ report ........................................118 Glossary ......................................................183 Finance review ..........................................38 Directors’ responsibilities statement .....................................................121 Company information ............................ IBC Our ESG approach ...................................46 Principal risks and uncertainties ..........66 STRATEGIC REPORT 2021 Highlights REVENUE UNDERLYING FUNDS (PROPORTIONALLY CONSOLIDATED) FROM OPERATIONS £95.7m £11.5m FY20: £148.2m FY20: £52.1M GOVERNANCE IFRS LOSS UNDERLYING FUNDS AFTER TAX FROM OPERATIONS PER SHARE £(150.5)m 3.8p FY20: £(121.1)M FY20: 17.0p ORDINARY DIVIDEND PORTFOLIO VALUATION PER SHARE (PROPORTIONALLY CONSOLIDATED) 3.0p £1.0bn FY20: 16.2p FY20: £1.2BN FINANCIAL STATEMENTS Presentation of financial information The Group financial statements are prepared under IFRS where the Group’s Real Estate Association (`EPRA’) measures, prepared in accordance interests in joint ventures are shown as a single line item on the income with the EPRA Best Practice Recommendations reporting framework. statement and balance sheet. Management reviews the performance of the We report these measures because management considers them to business principally on a proportionally consolidated basis which includes improve the transparency and relevance of our published results as well the Group’s share of joint ventures on a line-by-line basis. as the comparability with other listed European real estate companies. In addition to information contained in the Group financial statements, Reconciliations between APMs and their nearest IFRS measures are Alternative Performance Measures (`APMs’), being financial measures that provided on page 182, and definitions are provided in the glossary are not specified under IFRS, are also used by management to assess the on page 183. The measures used in this report are all APMs presented Group’s performance. These APMs include a number of European Public on a proportionally consolidated basis unless otherwise stated. NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021 1 OUR INVESTMENT CASE Our community shopping Our assets are centres, conveniently-located integral to the retail parks and community pubs are a key part of daily life for communities consumers, providing value for they serve money on everyday essential goods and services. Our portfolio is focused on We are focused retailers providing essential goods on essential sub- and services alongside wet-led community pubs. These sub-sectors sectors of the retail are growing and are online resilient. and leisure markets Our portfolio is diversified by asset Our income type, geography and tenant base, is diversified with over 800 different occupiers across our retail portfolio and over and sustainable 530 individual tenants across our pub portfolio. Our active approach to asset We extract further management, our risk-controlled value from assets development pipeline and our ability to recycle capital profitably through our market- enable us to extract further value leading platform from our assets. Our wholly unsecured We have a strong balance sheet, with no bank and unencumbered refinancing events due until August 2023, provides significant balance sheet operational flexibility. We aim to enhance the lives We are committed of consumers and minimise to our communities our impact on the environment. This ensures thriving communities, reduces operating costs and unlocks growth opportunities. 2 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021 CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT STRATEGIC REPORT BARONESS FORD OBE Non-Executive Chairman GOVERNANCE When I wrote to shareholders in June last year, we all hoped However, we have not just used the last year to cope: we have that we were coming through the worst of the COVID crisis; used the time wisely to completely review our strategy and and of course at that point we were anticipating the reopening have drilled into the likely future performance of every single of our retail and pubs. one of our assets. As a consequence, we are committed That optimism was somewhat short-lived as we all now know. to creating the most resilient retail portfolio in the UK. Very few people expected the second wave of the pandemic To accomplish this, we have a clear plan. We will divest to be more serious than the first but that is indeed what we ourselves of our pub portfolio. As a REIT, our exposure to this experienced and, of course, many of our retail occupiers and all sector was always going to have a natural scale and we believe of our pubs were obliged to close again. that now is the best time to realise the value that has been So it is all the more remarkable to report that NewRiver’s full created for shareholders. We will then use the proceeds to year performance has been highly resilient. Our strategy lower our LTV to an appropriate level. This will establish a very of providing essential retail in convenient locations has once strong financial foundation as we continue to reshape our again distinguished our portfolio. And this against the most assets to form the most sustainable retail portfolio in the UK. incredible headwinds. We clearly understand where and what resilient retail needs to look like in the future and we will only hold and acquire Our whole team has worked tirelessly over the last year. assets which fit those criteria. I cannot thank our staff enough for the incredible effort that they have made. But the results speak for themselves. With excellent This has been a remarkable year for everyone and in so many different ways. I believe that the leadership and stewardship relationships in place across our very diverse customer base, FINANCIAL STATEMENTS our diligent asset management team has been able to collect of NewRiver has been as good as it possibly could have been. or rebase 93% of rents due. The Board has worked hard and has, at every turn, had the interests of shareholders front and centre in every decision Our Hawthorn colleagues have shown phenomenal commitment we have taken. to the pubs they own or manage. To have maintained energy and morale during such a significant period of closure is really Finally, it is with great sadness that I pay tribute to David admirable. The highly successful reopening of the pub estate Lockhart, the founder of NewRiver, who stepped down from (on both occasions) has demonstrated just how incredibly well the Board last year and passed away in September. David was the whole team has coped. a towering figure in UK real estate for over four decades but, more importantly, he was an exceptional human being. He was Consequently we finish the year with significant liquidity and a highly valued colleague and enjoyed widespread respect Underlying Funds From Operations in excess of £11.5 million. from our shareholders. Above all else, he was a wonderfully Our unsecured debt has continued to underpin the strength of our loyal friend and mentor to everyone in the Company. balance sheet and our healthy financial position has led the Board to conclude that now is the right time to restore the dividend, as we promised one year ago. BARONESS FORD OBE Non-Executive Chairman 9 June 2021 NEWRIVER REIT PLC ANNUAL REPORT AND ACCOUNTS 2021 3 OUR BUSINESS AT A GLANCE SPECIALISTS IN CONVENIENCE & COMMUNITY Core Shopping Centres Located in areas with good supply and demand dynamics for retail space, resulting in sustainable income and valuations. 22% £13.15 They are characterised by high OF PORTFOLIO AVERAGE RENT occupancy and retention rates, BY VALUE PER SQ FT and affordable rents. Through asset management and small-