NewRiver is gushing income

It was a year of feverish activity at NewRiver Retail , an opportunistic property fund launched in September 2009 to take advantage of market falls. It made six acquisitions totalling £93m, funded by £42.5m of new equity as well as debt. The income generated from these new assets led to a near tripling of the dividend – as a real-estate investment trust, NewRiver is obliged to pay out 90 per cent of its cash earnings.

But these acquisitions came at a short-term cost. Purchase costs – typically about 5.5 per cent of property values, mainly for stamp duty – and underwriting fees for the well-timed capital-raising last summer cost 33p per share, entirely wiping out revaluation gains. Chief executive David Lockhart stresses that without these adjusted net asset value (NAV) would have risen 7.5 per cent. As it was, adjusted NAV actually fell 5.5 per cent to 258p.

NewRiver's strategy is to turn around failing high street shops and shopping arcades. The basic idea is to buy cheap, re-let to the more resilient retail sectors – convenience stores, pound shops, drug stores and cheap clothing outlets – and eventually sell on to institutions or private investors, while distributing the rental income directly to shareholders.

Broker Investec expects adjusted NAV to rise to 266p by next March.

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