Good morning! My favourite secondary retail property REIT, Newriver Retail (LON:NRR) has announced a £67m Placing at 205p. Whilst that seems a discount of 19p to the current market mid price of 224p, bear in mind that the shares go ex-divi on 26 June, so it looks like the new shares will not qualify for the 10p dividend. So it's really just a 9p discount, so should not concern existing holders.

They are issuing 32.7m new shares, which is almost doubling the number in issue (there are 34m in issue currently), so as one commentator suggests, that will dilute EPS and the massive dividend yield of around 7-8% whilst the cash is being deployed.

However, we recently met NRR management at a Mello Central investor evening, and were highly impressed with them. In a nutshell their business model is to buy secondary retail property (which is let to value-orientated retailers like Primark, Poundland, etc) on a 9% rental yield, and borrow money at 4% interest. The gap between prime rental yields and secondary is at record levels, so providing you invest with a management team who know what they are doing, then there should be good gains to be had long term in this space.

They also stand out because of the very active management and development of their centres. I was amazed at the range of initiatives they have underway to develop and improve their centres, including building a large new Morrisons store at one, and numerous other things such as installing free WiFi, Amazon collection lockers, etc. Shopping centres are morphing into meeting, social, and eating places, being just as important as the actual shopping aspect. So the threat from the internet is arguably overstated, especially at the value end of the market, where there is no threat from the internet at all - e.g. Primary don't have a transactional website, there's no point as you can go into the store & buy armfulls of cheap, disposable clothes, so nobody is interested in ordering them via the 'net.

It sounds like NRR has deals in the pipeline, so the cash should be deployed fairly quickly. It should also dilute management costs over a larger portfolio, so overall as a New River shareholder I am pleased to see this company expanding in this way.



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