NewRiver REIT plc (NRR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to NewRiver's Capital Markets event. I'm particularly excited to be here this morning with my colleagues as we believe we have a very exciting story to tell. And we are increasingly confident about both the short- and medium-term outlook. And it's been a while since I've been able to say that. Following the sale of Hawthorn earlier this year, we have modified our purpose statement. Our goal is to acquire, manage and develop retail assets across the U.K. that provide essential goods and services and support the development of thriving communities. It's a purpose that is worth celebrating and one that we believe can deliver attractive returns. Our objectives have never been clearer. We want to own and manage the most resilient retail portfolio in the U.K. It will be focused on 3 key areas: retail parks, which are performing very well; core shopping centers, where we believe there is a strong outlook; and regeneration, where there is significant opportunity to enhance capital values over the coming years. Putting that together, we're going to be able to deliver stable income and capital growth, and all of this is supported by, firstly, a best-in-class operating platform, which has stood us in good stead in recent years. Secondly, a robust and significantly enhanced balance sheet and, finally, a confident and experienced management team ready for the challenges and opportunities ahead. And we will be targeting a 10% total accounting return. At NewRiver, we have a brilliant real estate and financial team, and I'm delighted that I'm joined today by our new CFO, William Hobman, who many of you will know; Emma MacKenzie, who is Head of Asset Management and is also responsible for our ESG strategy; and finally, Justin Thomas, our Development Director. You will also see a few of our colleagues in action in 3 videos that we will be presenting later in this presentation. The presentation today should last approximately 1 hour, following which we will be able to take questions which you can submit online. So what progress have we made since the full year? Well, I have to say we have made excellent progress. And consequently, our confidence has grown with each passing month. Clearly, the retail backdrop has improved significantly with the gradual reopening of the economy and confidence has returned across the country. At the same time, we have also made major strides in achieving some of our short-term objectives. Here, you can see the change from our March year-end to the September pro forma, how we have brought our balance sheet back into kilter with our loan-to-value down from 51% to our guidance level of 40%. But perhaps more importantly, we have disposed of our pub business, which has reduced operational risk, but also allows us to pursue superior risk-adjusted returns from being a retail-focused real estate business. You can see that core shopping centers, regeneration assets and retail parks now account for just over 80% of total assets. And those shopping centers, which are in our workout portfolio, are less than 20%. And we're making good progress in exiting those assets which we will complete by FY '23. And we're doing this with the benefit of a very strong operational performance, which has been excellent throughout the pandemic and has gathered momentum in recent months. As the chart shows, the latest quarter rent collection now exceeds 90%, which represents a material improvement from the pandemic period, but rent collection only tells half the story. Improving leasing momentum, which is reflected across the whole portfolio, is most encouraging. Within some parts of our portfolio, we are seeing excess demand for space, and that's reflected in the fact that occupancy remains high at 97%. Our leasing transactions have for some time now consistently exceeded value as ERVs. And we continue to make good progress with our disposal strategy, and that will provide us the capital to reinvest into the business where we see the opportunity to create value for shareholders. Even during the pandemic when many retailers were forced to shut their stores, our retail rental income remained remarkably resilient. As reflected in this chart, where on an annualized basis, our FY '21 contracted rental income is forecast to be down only 7% compared to pre-COVID. I mean that is just an amazing performance given the extreme operating circumstances that we faced and very much reflects the quality and resilience of our portfolio. What is so pleasing to see is that occupiers have continued to stick with our COVID rent deferral agreements, further improving our cash rental collections. But it's not just the trading backdrop that is improving, we're also seeing valuations start to stabilize. And I think this is what the market has been waiting for confirmation of. It's been most evident in retail parks where we have seen a good number of transactions and where capital growth is accelerating, but it's now being reflected in our wider portfolio. Indicative valuations for our half year suggests that our core shopping centers, we are close to stable valuation as with our regeneration portfolio. And whilst our workout centers remain in decline, they are becoming a smaller part of the portfolio as each month passes given our disposal of these assets is well underway. This is an encouraging place to be and gives us genuine confidence in the outlook for the whole group going forward. We're delighted with the progress that we've made with our joint venture relationship. Over a short period of time, assets have grown to around GBP 200 million with the recent acquisition of The Moor in Sheffield, and we expect that to continue to grow over the medium term to around GBP 500 million. We have an excellent relationship with our joint venture partner. The structure offers us a lot of financial flexibility in relation to our equity investment, which means we can generate higher returns in a capital-light way while enhancing risk diversification. And of course, we do benefit from their insight into the global capital markets. So let me now explain what resilient retail means to us. What we want to be is a company that is invested in resilient retail. And what I want to do is explain to you what we mean by resilient retail and how we're going to position the portfolio going forward. As I said a moment ago, there is a definite change of mood in the economy and particularly amongst consumers. And that's been reflected in increased consumer spending. And what's very clear is that physical retail remains the dominant channel. That's most evident in grocery, but it's also the case in most categories. Through the pandemic, we've seen a sustained shift in category spend, which has benefited our portfolio. House and home, durable goods and grocery are the clear winners. Of course, online retail growth has accelerated during the pandemic, but forecasts suggest that growth is slowing and it will settle around 30% of total spend by 2030. That cannot be said for click & collect, which is really gathering pace and is forecast to grow by close to 50% by 2024 and 1 that plays into the hearts of our local shopping portfolio. And finally, a lot of people think that physical store networks are dead and that Amazon is the only retail model of the future. While the reality is somewhat different, Amazon are increasingly using physical stores as effective fulfillment centers, and many retailers are recognizing that they are also well positioned for online returns significantly reducing their costs. Ultimately, the success of our business is dependent upon our shoppers, and their views really matter to us. So we recently undertook a national consumer behavioral trend survey to understand what they're looking for, what they value and what they're seeing for the future. The good news is that it's validating our portfolio positioning. The key trends include the fact that people have enjoyed working from home and there is likely to be an increase in flexible working going forward, resulting in a spend shift to local retail assets. Health quite clearly has become important. And people are looking to shop in areas where there is plenty of space, larger stores and fresh air. We've also seen a dramatic rise in the awareness of the environment, particularly amongst Gen Z, who are environmentally aware and are changing the way that they shop. And finally, as I mentioned a moment ago, omnichannel retailers are emerging as the clear winners from the pandemic. So the survey very much supports our future retail strategy. 51% of employees expect to be working from home at least 2 days a week, which is perfect for our local community-focused assets. 45% consider their carbon footprint when making shopping decisions, which plays into our portfolio, which is well served by public transport with low average travel times. 46% people want to see more independent retailers. We know that our underlying rental affordability and varying unit sizes has attracted a broad spectrum of independence, and we expect that trend to continue. And finally, food and beverage, leisure and medical were the most cited popular additions to retail centers. All of these long-term sustainable uses have been increasing within our portfolio over the last few years and will continue to do so. So armed with the latest consumer insights, we then undertook a strategic review of our portfolio as well as all aspects of retail property. Whilst our portfolio has proved to be very resilient throughout the pandemic, it is clear that economic and behavioral trends are changing, and that, in turn, is influencing retail supply and demand. And we need to make sure that we respond to those changes. We appraised our portfolio against both the existing and emerging trends, which in turn provided a risk analysis for each of our assets as well as most assets across the U.K., enabling us to make informed decisions on whether to hold or sell or what to acquire. The starting point was identifying the criteria that make up a resilient retail asset, location, convenience, supply, online compatibility, the mixture of occupiers, affordability of rents, ESG, asset management, the optionality in terms of alternative use, and ultimately, liquidity are all important. But not every asset will score well on each of these criteria nor will all criteria be relevant. But what is absolutely clear is that we know exactly where our portfolio sits in respect of those characteristics. We then created a proprietary retail scorecard for all retail assets based on those 10 characteristics, leading to an asset-by-asset assessment from which we can then overlay our real estate experience and expertise to enhance our capital allocation decisions. These criteria and their associated metrics sit behind our scorecard, which delivers an unbiased view of the risk profile at each of our assets. This data-driven analysis helps to inform our portfolio reshaping decisions. Our ultimate aim is to enhance the resilience within our portfolio, which generates stable income, capital growth and a 10% total accounting return. The results of the scorecard are based around 4 key outputs: resilience, stability, repositioning or at risk. Resilient is those assets which are already fit for purpose with affordable retail alongside a strong local and economic backdrop. Stable assets, which fit many of the characteristics of resilient retail, but which may require some asset management intervention over the longer term. Repositioning is where the asset displays some resilient characteristics, but requires partial repositioning through exploiting viable alternative use. And the final group is the at-risk assets where their future as a retail asset is uncertain and where values look to be declining. The scorecard is not only used to assess our current portfolio but also where we should be investing in the future. So where does our portfolio stand today? Well, as you can see here, 70% of our portfolio is categorized as resilient or stable, and only a modest amount is at risk, largely the workout portfolio, which we expect to be exited by FY '23. A modest part of the portfolio requires some repositioning through reducing excess retail space with sustainable and viable alternative uses. Over the medium term, that proportion will reduce partly through the completion of our repositioning plans or through disposals. Through the implementation of our strategy, we will move the portfolio, so that over 90% will be in the resilient or stable categories. When you look at that by segmentation, what it shows is that we expect to see over double the proportion of retail parks in the portfolio, which is reflective of the results of our scorecard analysis of the wider retail market. We also expect to increase our proportion of core shopping centers, albeit to a much lesser extent than retail parks. And finally, we expect that the regeneration portfolio will reduce to around approximately 10%, reflecting the fact that many of our current projects will have been completed over the medium term. Now we turn to the practicalities of how we will move from today's position to where we want to be in the longer term. There are 3 main pillars to our strategy. First of all, disposals. These are assets where we believe we can achieve a lower risk profile or higher return through disposal and redeployment of that capital. This redeployment, our second pillar, drives our increasing resilience. Thirdly, we have regeneration, the part of our strategy, which delivers sustainable alternative use to retail, tackling over supply and making the remaining retail more viable over the long term. The successful execution of our strategy is supported by the excellence of our operating platform. We have a team of highly experienced asset and development managers with deep knowledge of the sector and strong relationships with occupiers. In terms of disposals, we identify these by looking forward 5 years at the expected returns and the projected risk profile of those assets. This has enabled us to work out which assets we should be selling and when. Over the next 5 years, we have identified close to GBP 300 million of assets, which we will look to divest. Our workout portfolio or the at-risk elements will be fully exited by FY '23. And here, you can see how we're planning to redeploy capital into assets that enhance returns and maintain our resilience. Of the 2,600 assets we analyze across the U.K. retail market, we have identified approximately 300 resilient assets, which offers stable and predictable cash flows. We aim to target a minimum IRR of 8%. Based on our U.K.-wide analysis, we've also identified a smaller number, approximately 70 assets, which have the potential to be viably regenerated. The target IRR for those assets is approximately 15% to 20%, reflecting the greater element of execution risk. That said, our main priority is to deploy surplus capital into resilient retail, and we have the flexibility, in that we can acquire assets, either on our balance sheet or through our joint venture partnership. With that, let me hand you now over to Emma, who will take you through what resilient retail means in action. Thank you.

Thanks, Allan. Good morning. I'm Emma MacKenzie, and I head up our asset management team, and I'm also responsible for our ESG program. My background is in retail property, but with our official ESG strategy being launched 6 years ago and have been so integral to how we manage our assets, I now combined the 2 rules. So before I talk about asset management, let me just touch on ESG. Our ESG program is firmly embedded in our business model. And after careful consideration of the implications, we announced our commitment to net zero earlier this year. We're currently just working on the detail of how we achieve that, and we'll update our shareholders later in the year. Allan has taken you through our portfolio positioning, the work that we've done to identify the key characteristics of resilient retail and how this will inform our redeployment decisions. What I want to demonstrate is that we have the quality assets that display these criteria. So starting with retail parks. Recognizing the popularity of retail parks to consumers and our ability to add value, we started selectively acquiring retail parks about 7 years ago. It's not surprising that retail parks are increasingly popular with investors. Quality retail parks display the resilient retail characteristics that we've identified, including convenience, online compatibility, liquidity and value-add opportunities. Having sold Gateshead earlier this year, we now have 18 assets located throughout the U.K. with an average lot size of 16 million. They are anchored and occupied in the main by food and grocery, value, DIY and homewares, who have all traded really well over the pandemic. Occupancy in our retail parks is 97%, and our retention rate is 92%. The growth in new homes and the amount of time spent working from home will continue to support many of the retail park retailers and with free car parking to help to facilitate the growing click & collect market. From a management perspective, retail parks are cost effective with minimal M&A and limited common parks, leading to simpler service charge budgets. Our average service charge is 84p per square foot. Asset Management is extremely efficient with a relatively small number of retailer relationships to nurture and simpler solutions to add value. Retail parks have less impact on our environment, and our ongoing program of EV installations is satisfying rising demand and feeding into our ESG program. So there are inevitably similarities in our value-add initiatives on retail parks, but we're just going to give an example of one. Waterfront Retail Park in Barry near Cardiff is very typical of the sort of resilient retail park we own. The asset presented immediate asset management opportunities. And since purchase in 2015, we've built Acosta and a Burger King drive-through. We've regeared the Halfords and the Argos leases above ERV, and we served the landlord break compound stretcher to affect a new letting to B&M at passing rent. A combination of the F&B choices and the new B&M garden center really improved the customer offer and dwell time. Delivering this income and capital growth is a factor of the ability of the asset managers, and we have an excellent team. But it's also supported by the underlying criteria of resilient retail. Waterfront is in an excellent location and walking distance from the town center and adjacent to a large Morrisons. The occupiers offer a range of complementary goods and services that are compatible to online and support click & collect. With service charging rates less than when we bought the asset, the rent-to-sales ratio is 4.5%. From our research, the affordable rent-to-sales ratio is just over 9%, which means there's real headroom in the rents that the retailers can afford to pay. Not surprisingly, with such resilient characteristics for long-term secure income and capital growth, investors are hungry for assets like Waterfront. Now to move on to our core shopping center portfolio. If you were to believe the press over the last few years, you could be forgiven for thinking that all retailers were doomed. What I want to demonstrate is that there are retailers and assets, that because of their strong fundamentals, were resilient before the pandemic, have thrived through it and have long-term secure futures in their communities and in our portfolio. The assets within our core portfolio are in communities throughout the U.K. On average, they are 97% let, and the retention rate of almost 90%. The average rent-to-sales ratio is less than 7% and to put that into context, it would be almost double that in a large destination center. From the research we've done, the affordable rent-to-sales ratio is almost 9%, which indicates that if the supply dynamic tension remains balanced, there's scope for rental growth. We've already added value by exploiting development opportunities for residential and medical uses from excess land within the core portfolio and there's still more to come. By the very nature of the location of our core shopping center portfolio, the alternative use value such as residential really underpins the value and the optionality of our assets. With an average lot size of GBP 16 million, we believe that as the dust settles, these well-let, food-anchored community assets reinforced by alternative use value will be increasingly attractive to investors seeking sustainable income returns. Our research tells us that in recent years, 60% of consumers are now more connected to their local areas have enjoyed doing so and are going to continue to do so. With flexible working patterns, more time will be spent at home and in local shopping centers like ours, which are embedded in their communities. Also from our research, we know that almost half of consumers are making shopping destination choices with consideration to their carbon footprint. And again, staying local is the best option. What is apparent from our core portfolio is that the rightsized assets in the right location with the right mix of goods and services is what defines resilient retail and is sustainable in the long term. To exemplify resilient retail, we have selected 3 core assets, which although different, all produce sustainable long-term returns and opportunities for adding value. These 3 assets combined represent 40% by valuation of the core shopping center portfolio with a blended net initial yield of just under 10%. Firstly, we're going to look at Locks Heath Shopping Village in Fareham, Hampshire. This is a smaller open-air community center of almost 100,000 square feet, which is anchored by Waitrose. And it has residential development opportunities on surplus land. Secondly, the avenue in Newton Mearns, Glasgow, which is a covered community shopping center of 200,000 square feet on the south side of Glasgow anchored by M&S Food and ASDA. We've already sold a site there for residential and have a further site under offer. And lastly, Abbey Centre in Newtownabbey. It's 6 miles northwest of Belfast city center and it's a larger covered shopping center of just over 300,000 square feet, and it's anchored by Next, Primark and Dunns and very much part of a wider retail destination. So to give you a flavor of these assets and an opportunity to meet some of the team, we have created 3 short videos, the first of which is Locks Heath. [Presentation]

From our video, you'll have seen that Locks Heath is situated in the heart of a densely populated area of Hampshire. Almost 2/3 of the catchment fall within the 3 most affluent [ e-comm ] groups, which is clearly why we managed to secure Waitrose as the anchor food store almost 7 years ago. Population growth is forecast to be over 11.5% over the next 15 years. And under the Local Plan currently being developed, Fareham is to deliver 540 homes a year to accommodate this. We are consistently carrying out consumer research at our assets. And hence, we know that customers are making multipurpose trips more than once a week and dwelling longer than average. Locks Heath is 100% let. There can't be many shopping centers that can say that. In fact, over the last 5 years, Locks Heath has benefited from rental growth and service charge reductions, resulting in a remarkable 40% growth in NOI. Locks Heath has been unaffected by CVAs and administrations over the last 18 months, which is also highly unusual. The stability of income is created by balanced supply and demand underpinned by the affordability of the rents and the profitable rent-to-sales ratio of sub-6%. We have a strong and trusted relationship with the council in Fareham and are currently progressing the opportunity to add value through the sales of surplus land in the next 2 years for residential development. With 100% occupancy, a [ wallet ] of greater than 5 years and residential land sales to progress, Locks Heath is an exemplary core shopping center asset. Our second case study takes us to Glasgow, where we have The Avenue shopping center in Newton Mearns. [Presentation]

There's a great mix of people. It's a great location. He's absolutely right. Fundamental to a core asset and a resilient retail profile are location and demographics. The Avenue is the town center of Newton Mearns, which we know from research, benefits one of the most affluent catchments in the U.K. The local population is predicted to grow by 7.6% by 2026, which is more than double the Scottish average and a further 10% by 2041. This will be accommodated by almost 3,500 new homes being built by the end of the decade, which will fuel the demand for local goods and services. The Avenue is uniquely placed to take advantage of the changing consumer trends and the growth in local spend. The blend of nationals and quality independents is increasingly important to customers. 25% income is secured against well-established independents with an ASDA and an M&S Food that is 1 of the top 3 performers in the U.K., the blend of food, goods and services ensures multipurpose trips. M&S have seen their click & collect orders grew to an average of over 600 orders per day, which is only set to grow and now 50% of our retailers at The Avenue also offer click & collect. The Avenue has consistently been over 95% let throughout our 7-year ownership. And consequently, the NOI has remained stable. Our gross-to-net ratio is 95%. And we know that the current rent to sales ratio of less than 7% is 15% below what is actually affordable. This will help to ensure the future stability of the income and offers real potential for rental growth. Along with the consistent rental income, we have boosted returns by the sale of land for residential development. During the video, you will have seen the flats built by Westpoint, which delivered a capital receipt of GBP 1.6 million. And we're now progressing the sale of a larger site also to them. The demand from house builders and consumers for quality residential in Newton Mearns underpins the value of our asset and offers optionality and liquidity in the long run. We're about to start creating a new unit for the gym and there remain opportunities for both hotel and medical uses which we're continuing to explore with the support of the council. Displaying all the key criteria of resilient retail, The Avenue sits firmly in our core portfolio. So finally, we're going to head to Belfast over the Abbey Centre in Newtownabbey. [Presentation]

For our last case study, we thought it would be particularly interesting to showcase resilient retail anchored by best-in-class fashion retailers alongside a selection of complementary goods and services, including a doctor surgery. Location remains key. And from the video, you'll have seen that Abbey Centre sits in the heart of an established wider retail destination with Tesco, M&S Food and B&Q, all in the immediate vicinity. So roundabout [ chimney ports ] and serving the northwest of Belfast, and the wider Northern Ireland catchment beyond, the area uniquely meets the criteria for both destination and community retail. Abbey Centre is one of our larger core assets and is anchored by Next, Primark and Dunnes. All 3 retailers upsized as part of our early asset management and they've proven to be invaluable lettings, cementing not only the fashion and homewares offer for our customers, but the desirability of the location for other retailers. Next, we now have popular concessions, including Victoria's Secrets, continue to stress the importance of their physical store network to support their online business. And now 83% of our retailers in Abbey Centre also offer click & collect. Primark continues to successfully rely entirely on in-store sales, which is a huge footfall driver for Abbey Centre. Endorsing the strength of the retailer demand and strong sales performance is the appetite for retailers to upsize. Poundland upsized into the former Primark and currently Superdrug and River Island have taken the opportunities created by recent administrations to increase their floor space on new longer leases. But we have not been immune to CVAs, but our scale and our turnover insight has been critical to our tactics. With confidence, we serve landlords' breaks on Clarks and Caffe Nero and renegotiated higher turnover percentages, which should result in rents not dissimilar to the original rents. With a stable NOI throughout our 7-year ownership, over 1,000 free car parking spaces open till 9:00 5 nights a week, Abbey Centre plays an important part in the local community and in our core shopping center portfolio. Well, I hope you have enjoyed the overview of our retail park portfolio and core shopping center case studies, and it's given you some insight into what resilient retail looks like and also confidence that NewRiver are uniquely placed to benefit from the current market and consumer trends. So I'm now going to hand over to Justin to take you through some of our exciting regeneration projects. Thank you.

Thanks, Emma. Regeneration is one of the 3 sectors that we focus on and is an important strategic objective for NewRiver. Let me tell you why we're getting involved in regeneration. It's because as the owners of large areas in town centers, our regeneration projects give us a real and very exciting opportunity to improve the communities we're involved with and to deliver meaningful asset value growth. Regeneration of historically underinvested town centers and leveling up has leaped to the top of the government's agenda and that represents a real opportunity for us. We've seen an increase in the number of grant funds being made available. And currently, we're working on over GBP 50 million worth of public sector grants with a number of local authorities. Regeneration projects are often residential-led, replacing surplus retail space with much needed new homes. Our role is to ensure we design the right housing products in the right volumes that attract new residents into town center destinations. There is a U.K. housing shortage and demand is high. However, the quality of design and creation of place are essential to ensure successful regeneration. So why are we so well placed to carry out these regeneration projects? Well, we're unusual because we're able to combine our skills as a leading investor asset manager with a highly experienced and capable in-house development team. We've got the resources to evaluate and quantify the potential for value growth in our assets, which can be released through master planning and collaboration with the local authorities, while our own high-quality asset management teams continue to manage the asset, maintaining income and engaging with the community through these early design and planning stages. We'll always work with the local authority from the start to define an initial scheme with minimal CapEx. And then once it's proven, we'll advance the project through a program of capital investment to a point where the regeneration proposals have value and credibility. We can then choose a range of options for project delivery. One option is to forward sell and forward funder scheme, such as the 85-bed premier in which we're now completing in Romford, or for smaller projects, we can choose to build out ourselves once we have the majority pre-let. However, for the major residential projects that have large funding requirements, our options are either to sell the asset with outline planning and realize the value growth at that point or alternatively to transfer the asset into a joint venture with a suitable delivery partner. The joint venture approach is particularly attractive that it allows us to fix our value and capital requirements but still maximize revenue by combining our own expertise with the resources and background of our chosen joint venture partner. To demonstrate our regeneration strategy, I'd like to showcase some of our current schemes. The following 2 projects in Penge and Oxford are nearing completion, having been through the design and planning stages. The first one is Blenheim Shopping Centre in Penge, which was bought in 2015. It's a strong commercial asset with 5 retail units facing into a central covered mall, but has become an outdated arrangement for a site extending to 1.7 acres in a strategic town center location. A series of pre-application discussions highlighted Bromley council's huge shortfall in their 5-year housing supply and established the principles for a dense residential-led regeneration of Bromley High Street, which reconnects the extensive residential areas to the east with the town center. It will have new public squares, improving safety and well-being. The latest scheme revisions, which are supported by Bromley Council, will provide 290 homes right in the town center. So now that the design and master planning has been worked up, we are planning to sell the site and so deliver GBP 5 million of profit since the asset was bought. This one is Templars Square shopping center in Cowley, Oxford, which was acquired in 2012 for GBP 24.6 million. It's been a very well-supported neighborhood shopping center, although occupancy has started to decline as there's too much retail space for today's market. The whole site extends to nearly 8 acres in the heart of Cowley. And owing to its good layout and healthy trading, it wasn't originally a target for a whole scale redevelopment, but it did suffer from a poor frontage, which had an impact on public perception. So in 2015, we started a master planning exercise to improve the whole frontage of the site, including all the public spaces. The scheme was approved by the city council in 2018 and will effectively enhance 1/3 of a kilometer along the main street in Cowley through delivery of 226 apartments and a new 71-bed hotel. And more recently, in the light of challenges over the last 18 months, we've carried out a further master planning exercise to look at rationalizing and reconfiguring the retail space. And in so doing, have identified the opportunity to release more land for residential development of around 500 apartments. We're now planning to sell this asset and so deliver over GBP 30 million of profit since it was bought. And now on to our next 2 projects, which are in Bexleyheath and Thurrock. And these are examples of our regeneration projects in early stages of design and planning. This one is Broadway Square Retail Park in Bexleyheath, outlined in blue, which sits alongside the Broadway Shopping Center. Both shopping center and retail park were bought together in 2016 for GBP 120 million, and they cover 11 acres or roughly 1/3 of Bexleyheath Town Center. Bexleyheath is the principal center of the borough for retail, leisure and civic uses. So this regeneration scheme has, therefore, got a rare opportunity to influence and enhance the future direction, not only at the town, but also the wider borough. Bexley Council have identified a need for 1,500 new homes in the town center, of which the new neighboring development of 500 flats by Bellway Homes will provide about 1/3. So there's still a considerable capacity for more housing. In reviewing the potential for regeneration, here, we've had to factor in the existing value of the retail park because to redevelop the airspace above the existing retail, we'll need to relocate our key tenants. So we're currently negotiating around their lease break dates and relocation aspirations. The discussions are well underway, and they're giving us the confidence to continue with the master planning. Our intention here is to progress and outline planning application over the next 12 months and then possibly to enter into a joint venture with a residential delivery partner. Alternatively, the asset could be sold with the benefit of an outline planning consent. However, our early-stage modeling indicates a forecasted profit share from a joint venture of GBP 18 million in FY '26 with an IRR of greater than 20%. Our last project to showcase is Grays Shopping Centre in Thurrock, which was bought in 2018 and was a regeneration project from the start, largely because Thurrock Council had identified the site the year before as a strategic building in their own town center regeneration framework. Our market analysis showed that Grays in the surrounding area has suffered from long-term underinvestment that has left it lagging behind the rest of the London residential market. The image on the bottom left shows with blue shading the lowest residential values from 2015. And the image on the bottom right shows the same values in 2020. Clearly, the TEMs corridor around Grays is one of the last remaining zones in Greater London to experience growth, but that doesn't reflect the fact that you can get from the center of Grays to Fenchurch Street by train in only 35 minutes. Our external researchers have suggested that residential values here could grow by up to 25% over the next 5 years as a result of the regeneration impact. Since acquiring the site, we've held community engagement events and council workshops. We've lobbied council offices and local politicians, and we've got strong support for a dense residential-led scheme, which is needed to drive positive impact on the whole town. The proposals are going to open up the town center again, massively improve pedestrian flow, and with it, the sense of safety and security at all times of day. The density of the residential provision, as shown in this image, is very important to drive the regeneration. We're proposing up to 900 new homes in the town center surrounded by big new public squares linked with green corridors. There'll be a lot less retail space, but it will be much more resilient, supporting and being supported by the new homes, ensuring a long-term sustainable future for both the existing community and new arrivals to the town. The costs to achieve outline planning approval are roughly GBP 950,000 and we're already in discussions with the potential joint venture partner. Once completed which we forecast will be at FY '26, the project is expected to provide a profit share from the joint venture of around GBP 15 million with a target IRR of greater than 20%. Finally, I'd like to share one last slide of our proposed new town square in Grays. Across all our regeneration and development projects, we're extremely excited by the very real opportunity we see to deliver real capital growth over the next 5 to 6 years, which we believe will contribute around GBP 45 million of added value over and above the March 2021 valuations. The costs to achieve this growth are forecasted at close to GBP 3 million comprising planning costs, enabling works and professional fees, but not major construction works, which under our proposed joint venture arrangements would be funded by our well-resourced delivery partner, matching the value of our own asset transferred into the joint venture. If we set that forecasted GBP 45 million as a net value per share, then we would show a cumulative impact of around 15p per share over the next 5 years for investors as well as delivering social and economic benefits for our communities. Thank you. I'm now going to hand over to Will Hobman, our CFO.

Thanks, Justin, and good morning, everyone. My name is Will Hobman, I recently stepped up to the role of CFO, and it's my pleasure to be presenting to you today. During this session, I'm going to bring you up to speed with the impact of completed H1 activity on our financial position, remind you of our debt structure, financial policies and new dividend policy, give you a sense of the shape and scale of our P&L post pub disposal and explain the levers we have available to rebuild UFFO from here. Then I'm going to explain how we believe we can achieve our target to deliver a total accounting return of 10% per annum before finishing with a look at our return-focused approach to capital allocation. And I'm going to begin by looking at the March '21 balance sheet and specifically, reviewing the pro forma impact of the pub disposal and subsequent debt reduction, starting with the pub disposal. The key balance sheet benefit of the Board's strategic decision to sell the pub business is that it reduced LTV by 10.8%, bringing pro forma LTV within guidance of less than 40% and significantly increasing our already conservative covenant headroom position. This slide also shows the impact of the sale of the pub business on NAV per share, a reduction of 11p. This is due to the fact that we sold a pub business, including the cost of operating a platform, which are not included in the property valuations. And ultimately, we were very pleased with the earnings multiple achieved, which was at the upper end of our expectations. Next, on to the debt reduction. We focus post the pub disposal on maintaining sufficient liquidity and maximizing UFFO efficiency. We've done this by reducing drawn borrowings by GBP 335 million, including the cancellation of our GBP 165 million term loan and the repayment of the GBP 170 million of drawn RCF. So we currently have a fully undrawn RCF of GBP 215 million, which means that our GBP 300 million bond is the only drawn debt on the NewRiver balance sheet at the moment, and it does not mature until 2028. And we're currently in discussions with our bank lenders around potentially reducing the size and extending the maturity of the RCF as we look to strike the right balance between liquidity, cost and expiry. Most importantly of all, the NewRiver balance sheet remains fully unsecured, which gives us maximum flexibility. Next, I'd like to cover our conservative financial policies, which have been embedded within the business for a number of years, forming a key part of our financial risk management strategy. We have 5 financial policies in total. We assign equal importance to each of them, and we monitor compliance on an ongoing basis. Two of the measures, LTV and interest cover, also appear as debt covenants on our RCF and our bond, although the policies are set at a level to ensure considerable headroom over debt covenants. I'll pick up dividends separately in a moment, but starting with the first 4 policies. Clearly, in the year to March '21, we experienced significant retail valuation and pub income decline, which led to us being outside of policy on the first 3 measures: LTV, balance sheet gearing and net debt to EBITDA. For that reason, I've included a pro forma column, which takes into account the actions we've completed over the last 6 months, specifically the pub disposal and the debt reduction, which shows that on a pro forma basis, we are comfortably in compliance with all policies, which is a position we've worked hard to achieve, and we are committed to maintaining going forward. Lastly, dividend cover. Our financial policy is to be fully covered, which is supported by the new dividend policy we announced at the full year results in June and which I will quickly recap now. Under our new sustainable dividend policy, we will pay out 80% of UFFO as dividends to our shareholders, thereby linking dividends directly to earnings. This policy will ensure that our dividend reflects underlying trading conditions and will enable NewRiver to make appropriate capital and operational decisions in the best interest of the long-term future of the business. We paid the first dividend under this new policy related to full year '21 earlier this month. And going forward, we will pay dividends twice per annum, announced within our half and full year results and based on the UFFO for the most recently reported 6 months. And where required, we will top-up the dividend at the full year to ensure compliance with the REIT rules, meaning the blended payout may be a little higher than the 80% headline. Having covered the pro forma balance sheet and our financial policies, now I'd like to focus on earnings. Specifically, I'd like to take you through the shape of the NewRiver P&L following the pub disposal, using a pro forma FY '21 FFO statement with the pub stripped out as the start point. And you can see that shown in the far right-hand column on the slide. And I'd also like to give guidance on the areas we expect to be the key drivers of UFFO growth from here, starting with net property income. If we take the GBP 47 million of retail net property income as our start point, assuming no further lockdowns, we expect to recover a proportion of the GBP 15 million we identified at the full year as being COVID impact. That's items such as increased rent and service charge provisions and the significant reduction in car park and commercialization income we experienced in FY '21. And we expect the strategies discussed throughout the course of today's session will also feed into net property income growth in the future, all of which is underpinned by the resilience of our retail rent collection as demonstrated by Allan earlier. Next, moving to admin expenses. Adjusting for pub admin expenses leaves a start point of GBP 12 million. During the first half, we've undertaken an extensive review of our admin costs, and we've set ourselves a target to reduce admin costs by 15% from the GBP 12 million in FY '21. And we've targeted unlocking these savings by the end of FY '23. So the FY '24 admin costs will reflect the full 15% reduction. Now other income. By its nature, other income is difficult to provide guidance on. But so far in FY '22, we've already received GBP 2 million from our insurers relating to the income disruption experienced during the first national lockdown last year, and the claim is ongoing. So in FY '22, we expect other income to be at least in line with the pro forma column on the slide. And lastly, net finance costs. As I've mentioned already, we've taken steps during the first half to reduce our levels of debt, which means that we already have unlocked an expected annualized reduction in interest costs of GBP 7 million. And we'll start to see the benefit of this from now. So bringing together everything we've talked about today, we see that FY '22 will be a year of repositioning the company for future growth, starting with rebuilding UFFO through the recovery of COVID disrupted income streams that's getting back as much of the income as we can. The admin cost savings we've identified, we've targeted a 15% reduction by the end of 2023. And the finance cost savings we've already unlocked through our actions in the first half. Allan has commented on capital values, where we're seeing signs of stability, which helps to create the platform we need in order to grow, and that takes me on to our future drivers of growth, which are the measures we've talked about today, where we're targeting both income and capital growth to support our target total return. So that's our disposal and redeployment strategies, selling noncore and workout assets and reinvesting into retail parks and core shopping centers and into the regeneration of assets, be it small scale retail park extensions or the larger scale regeneration of shopping centers, supported through the continued growth of our capital partnerships. So in summary, our FY '22 total accounting return will be influenced by the NAV impact of the completed pub disposal and our portfolio valuation stabilizing. But looking beyond FY '22, we have a total accounting return target of 10% per annum, underpinned by our dividend. And having discussed how NewRiver looks immediately post the pub disposal, I wanted to spend a moment giving you a sense of how we expect some of our key metrics to develop in the medium term. You can see that our target total accounting return will be underpinned by UFFO growth, supported by the modest valuation growth shown on the slide, which does not factor in the majority of the per share contribution from the regeneration projects mentioned by Justin earlier. Just one final area I'd like to touch on before I finish, and that's our approach to capital allocation. Hopefully, I've been clear today that looking forward, we remain committed to keeping our LTV below 40%. With valuations stabilizing and following the completion of the disposals we currently have exchanged and under offer, we expect to have surplus capital to invest in the near future. When allocating this surplus capital, we have a number of options. We can invest into our existing portfolio into regeneration or accretive asset management opportunities, for example. We can invest into the direct real estate market. So for us, that's buying resilient retail assets, either on balance sheet or in capital partnerships or we can invest that surplus capital into buying back our own shares, and we currently have the authority to purchase up to 10% of our issued share capital. When deciding how to invest our surplus capital, we're very focused on maximizing the returns we can generate for our shareholders, weighing up the relative impact of each option on LTV and our key per share metrics. So in summary, we end the half in a much stronger financial position with LTV reduced materially. Our balance sheet remains unsecured. We've improved its efficiency and our closest maturity on drawn debt is in 2028. And we're positive about our future growth prospects and our ability to deliver our target total accounting return of 10% per annum. Thank you all for listening this morning, and I'll now hand back to Allan for his concluding remarks.

I hope this event has given you a good understanding of where the business is positioned today and how we're going to transition it for the future. We believe that resilient retail is going to deliver attractive returns. And as I said in my opening, it is the first time for a while that we can genuinely look forward with confidence. Our Board is acutely aware that our shares are trading at a material discount to net asset value, but we expect that with valuation stabilizing, an improving market backdrop, a strengthened balance sheet, a reinstated dividend and a clear strategy to deliver attractive returns should lead to a significant narrowing of that discount.

Welcome back, everyone. We're now going to move to the Q&A. Will is going to read out the questions. We've had a number of questions through the presentation. Thank you for that. And I think Will is going to concentrate on pulling out some of the common questions and key questions. So Will, do you want to read out the first question?

Yes, for sure. The first question has come in from Tom Musson at Liberum. And he asks, can you give a bit more color on the market evidence you're seeing that suggests your valuations should stabilize and then grow again?

Well, thanks, Tom, for that question. I think it's worth just sort of going back into last financial year and what we saw just to put into today's market in context. Last year, when the pandemic hit, liquidity completely dried up. And actually, our external valuers reacted very quickly to that and marked down our assets, particularly our core shopping centers and our workout assets, very significantly. When we got to the full year presentation, I think I probably mentioned on the presentation, Tom, that from what we were seeing in the market and from our knowledge of our assets, that we felt that we were close to that stabilization point. Today, as we stated on the presentation, the indicative valuations from our external valuers is actually endorsing that view that we had at the full year results, in that we're close to that stabilization point, particularly in core shopping centers. Retail parks have continued to accelerate in terms of capital growth, and our regeneration portfolio has also reached close to a stabilization point. And on regeneration, it's more about residential values and less about retail values. And I think the reason why that is liquidity. Last financial year, the liquidity dried up. And what we've been seeing this year is the liquidity increasingly and quite rapidly. So far in the first half of this year, there's been GBP 2 billion of retail park transactions, and that is comparable to 2016 activity levels. And even in shopping centers, we've seen the liquidity move quite rapidly. Already in terms of the volume of transactions by value, it's up by 73% compared to 2020 and, indeed, in terms of the number of transactions that is comparable to 2015 activity levels. So we're very confident now that our portfolio has reached that stabilization point. Yes, we still have some more valuation decline, I think, in our workout portfolio, but it's becoming less every month as we execute our disposal strategy.

Okay. Okay. The next question is from Guillaume at Columbia Threadneedle. And he asks, could you give us an idea of how the underlying credit risk of your tenant pool has evolved since the pandemic.

Well, I think the underlying credit within our tenant pool has actually held up remarkably well, during the pandemic. And that's because the majority of our portfolio focuses on essential goods and services, which was one of the clear winners during the pandemic. And as we come out of the pandemic and the economy is reopened, what we're seeing is that we're seeing increased consumer spending, which is obviously benefiting many of our tenants. And you can see it in our rent collection numbers. We were pretty back, much back to a normalized position on our rent collection, which is great to pre-COVID at over 90% and improving. And we've also seen no CVAs and known solvencies in the first half of this year, and that is really encouraging.

Okay. Thanks, Allan. Question from Yusuf Samad. He's asked, at what discount to book value as at 31st of March, do you expect to sell the GBP 400 million of assets that you intend to dispose?

Thank you, Yusuf. I don't think we said that we would be selling GBP 400 million of assets. We're looking to sell around GBP 290 million of assets, and we're doing that over a phased period. So it will be difficult to sort of predict what we'll be selling relative to the March '21 book value. We hope that our book values will be increasing over the coming years. But I'm confident that when we get to that point, we will be able to transact at book values.

Thanks, Allan. And actually, Greg Johnson has asked a very similar version of that question. But at the end, he said, do the pro forma targets assume a full recycling of these disposal proceeds?

Yes, we do because we're confident now that having significantly strengthened the balance sheet, got our LTV down to within guidance, we're confident that we've reached that stabilization point in our valuation. So future disposals will be recycled in line with our capital allocation policy.

Okay. There's a question coming here from Clive Black at Shore. He says, can you please give some indication to the balance of partnership and in-house funded activity in the future?

Thanks, Clive. I mean, I think our approach around investing in our partnership versus balance sheet is really down to the capital resources that we have at the time. It's important also from our perspective and our shareholders' perspective that we have the right balance between what's invested on our balance sheet and what's invested in our joint venture. We don't want to be over-relied or overexposed in our joint venture. When you invest on your balance sheet, you have 100% control. So it's all about getting that right balance, and that's something that we consider on a case-by-case basis.

Okay. Another question here from Tom Musson at Liberum. What effect do you think the end of furlough and full unwind of business rates relief next year has an affordability for your retail tenants' total occupancy costs?

Well, let me just sort of hand that question over to Emma. I mean Emma does speak to our retailers pretty much every day. So Emma what's your thoughts around that great question?

Furlough, I don't really think is affecting the retailers at the moment. They are looking for staff in the main, particularly the hospitality industry are crying out for staff. So I think anyone they've got still on furlough and think that it's petered out from the retailers' perspective, people on furlough. So I don't think that will impact today's news on furlough. And in terms of affordability on rates, and we've done -- we do a lot of homework and research on affordability and the real headroom in the rents that our retailers can afford and that's -- and we look at also the total occupational costs, not just rent. So we're comfortable that's affordability, and that already includes the cost of the rate. So again, as it unwinds, and it's different across the nation, and we've got diversity across Scotland, [indiscernible], the Wales, Scotland, Ireland still have that support right through to next March. So again, I don't see it being an issue for the retailers that were -- on the rates point, I don't see it being an issue.

Okay. Thanks, Emma. A question is coming from [ Tom Sharp ]. Can you please explain what the differences are between the retail parks, which you disposed of last year and the retail parks which you might look to acquire in the future?

Thanks, Tom. Not a huge difference. We will be looking to acquire retail parks in the future that fit with our criteria around resilient retail. The reason we have disposed of retail parks last year, and we will dispose of retail parks in the future, is really all about the forward-looking returns. Once we've completed our asset management plans and added value, we then look at that forward-looking return, and we make -- we ask ourselves, can we get a better return by recycling that capital? And that's the way we tend to approach things.

Okay. Next question from Mike Prew at Jefferies. What sort of buyers might be underwriting the workout assets you intend to sell? How do you assess the affordable tenant rent to sales ratios? There's 2 questions.

Yes. I mean there's definitely increased liquidity, Mike, for workout assets. We're seeing still councils being active in the market. But also really this year, we've seen more private investors coming into the market, which is a good sign that increased liquidity. And in terms of the sort of rent to sales ratios, well, we collect data. We collect data from a variety of sources from our asset management team that are constantly talking to retailers, our on-site team. And you saw a number of our center managers on the videos. They're talking to store managers all the time, and we collect all that data, and we use external consultants to support and analyze that data to provide us with that rent to sales ratios and, indeed, the rental affordability ratios. Because as I mentioned in the presentation, on many of our assets, the retailers can actually afford to pay more rent from what they're currently paying.

And also, we're looking at the wider market, and we're comparing that to the wider retail market and other -- how our portfolio compares to other retail assets.

Yes. Okay. Thank you. A question from Mark McGugan. He says, in the last annual report and subsequent statements, you headlined the strategy of increasing floor space by 2.5 million square foot from the current 8 million square foot with new floor space majority residential. Can you advise what period you intend to undertake this program, how it will be funded and whether it will be -- whether you will be undertaking this directly? That's probably one for Justin.

Yes, sure. Thanks, Mark. The -- I think it's -- in terms of the increase in floor space, it's probably worth bearing in mind that the 2 assets that we showcased there that are coming through in Bexleyheath and Grays, those alone will deliver circa 1 million square foot of additional floor space. In terms of how we're going to deliver them, no, we're not going to do it on our own. That is the point I was referencing in the presentation about the joint ventures where we can actually transfer an asset into a joint venture at a fixed value, but also we can fix our capital requirement that way, so that actually our joint venture partner's role is to provide the capital alongside our own equity provision in order to make sure those deliveries come through.

Okay. Another question -- or a question from Andrew Gill has just come in at Jefferies. Could you provide further color on the buyers in the retail parks and shopping center sectors? Are domestic buyers back in a greater force than in the last few years?

Well, certainly, in retail parks, Andrew, we're seeing that increased liquidity, that GBP 2 billion of transactions in the first half, which is a very significant increase over 2020. And also, we're seeing the pool of bars widening now as well. So we're starting to see that institutional capital move into the market. And of course, the institutional capital has a lower cost of capital, which is highly supportive around pricing and valuations going forward. In shopping centers, it's really predominantly private equity and high net worth private investor money that's coming in. The liquidity is increasing, which is encouraging. But also for like food-anchored shopping centers, we're also seeing lower cost of capital, investors looking for those type of assets. And of course, that's great in relation to our core shopping centers. And Emma did actually reference 3 of them, and you saw 3 videos this morning. Those 3 shopping centers represent about 40% of our core shopping centers. They are nearly fully let, close to 100%. They have a very high retention rate. And their rent-to-sales ratios are very low digits, which demonstrates the underlying affordability. And they're valued off a 10% yield. That looks pretty attractive to me and arguably undervalued relative to what people can invest in other commercial real estate sectors.

Thanks, Allan. Two questions from Andrew Saunders at Shore. Can you comment on the current position with lease incentives and direction of travel? And to what extent is yield compression behind the improving picture in valuations?

Emma, why don't you take the question on the leasing centers, current position and direction of travel, and I'll talk about the yield compression?

For them, there's really increasing demand from retailers. We've done end of FY '21, we did over 1 million square feet of leasing through the -- right through the pandemic, which was really encouraging. And that was just opportunistic retailers who were aware of the opportunity that they could maximize in the year when there was their markets were booming in terms of the essential retailers. So since then, we're still seeing leasing has been positive. We're still seeing leasing coming through in our retail parks. And actually, in the last few months, there's been tension in retail parks space. And we're actually having -- we're having opportunities to actually negotiate with more than 1 and 2 parties, which is, of course, just pushing the rents up and also bringing the tenant incentives down. So we're really seeing that. And similarly, in the core portfolio, we've done -- we're continuing to do a lot of leasing. We're continuing to do leasing with other uses rather than just retail. So we've done leasing to office occupiers and that multipurpose trip to town centers is really what's driving that is that other sectors are seeing that to be represented in town centers being right in the heart of a town center is where they want to be. So that's, again, pushing the kind of potentially the rental growth that we're hopefully going to see from the supply dynamics even themselves out and that all feeds incentives and deals.

And Andrew, just on your question around what's driving valuation movements. Well, in retail parks, yes, we're experiencing yield compression in the wider market, and we're seeing that in our own portfolio, which is resulting in accelerated capital growth within our retail park portfolio. But ERVs are starting to move in a positive direction. And in terms of what determines valuations, the key components are yield movements and your ERV movements. In terms of shopping centers, what we're seeing is the equivalent yields starting to stabilize and ERVs starting to stabilize as well. And we're seeing that in our own portfolio where for quite some time now, we have been doing our leasing transactions above the value of ERVs, which again is a good sign for future valuations.

Okay. Question from [ Tom Sharp ]. Can you please comment upon the announcement that the U.K. CMA investigation into the disposal of the pub portfolio to Admiral Taverns?

I'm not going to comment. I mean all I can say, Tom, is that it has no bearing on us. We signed an unconditional contract with Admiral Taverns that wasn't dependent on CMA approval or not. So it has no impact on us, and the risk really lies with Admiral Taverns. Thank you.

Okay. Question from [ Ollie Creasy ]. The numbers presented today suggests that the pubs recently sold were loss-making. Is that a pandemic issue? And what would the figures look like for the FY '20?

Do you want to take that?

Yes. I mean I think the short answer, Ollie is, yes, it was a pandemic issue. If you think about FY '21, probably in the full 12 months, the pubs were really only able to trade unimpeded for a matter of weeks or at best a few months. We had around 6 months of lockdowns. We had tiered restrictions, et cetera. So you're absolutely right. If you look at the UFFO statement from FY '21, the pub has only had GBP 1 million of net property income. If you were to have looked in the previous year, you'd see the equivalent figure then was GBP 24.5 million. So I think that's absolutely right. The pubs did not make as much profit in FY '21 as they would have done historically. But if you look back to the previous year, they were profitable. And so yes, I think it's fair to say it was linked to the pandemic. Okay. Another question from Clive Black at Shore. An interesting point was made on electric vehicle charging. Will this be a significant future feature of work? And will this involve partners?

That's a great question from Clive, Emma.

Well, yes, it involves partners. And we've already got an EV program rolled out across the portfolio and continuing to do so. So it will -- it is driven by demand, of course, as well. So there are some assets which are there's more demand, and we're working with that and working with partners to deliver that. And it's only part of a wider ESG program, and we're looking at a whole range of opportunities, both of which can be income-producing and obviously servicing the community. So solar panels and urban farms and all the opportunities, and we're working with [indiscernible]. We've got an agreement with them in place to allow us to exploit all the opportunities that will come through in that sort of area.

Okay. A question from [ Bill Hall ]. Can you explain in layman's terms, what is meant by a 10% total accounting return? Does it mean an annual increase in NAV?

I think that's one for you.

Layman's terms, yes, I'll take that one. So total accounting return for any financial year is effectively the return we generate for our shareholders through the dividend we pay and the movement between the opening and the closing NAV expressed as a percentage of the opening NAV. So it's similar to total shareholder return, but it's based on book values and not share price movement. So when we think about a 10% total accounting return, which is our target, we see that as being underpinned by our dividend. So during my slides, I talked about our new dividend policy. Our new dividend policy is linked directly to UFFO. 80% of UFFO will be paid out as a dividend. We've talked throughout this morning session really about how resilient our income has been over the last 12 months. Allan had a slide on our rent collection. The fact we're still collecting rent from FY '21 now. And effectively, when we think about that target 10% return, we see that as being underpinned by growing UFFO. And we've talked about the levers in UFFO, which is the strategy that we've talked about today, looking a bit further out. But actually, in the near term, is the cost efficiencies we've talked about today, which is the finance cost savings and the admin cost savings we've talked about. And actually, it's those more operational aspects of our income streams, things like the car park income, commercialization, which were significantly impacted during the pandemic, the level of provisioning we're carrying. So ultimately, when we talk about that 10%, it's underpinned by UFFO because UFFO is linked directly to our dividend. And I think it's amazing how resilient the business was during FY '21. And I think Allan said we can look forward with confidence.

Any more questions, Will?

I think there's one more here from Oliver at Seven Pillars. Based on your accounting return target and dividend policy, would it be reasonable to say that NewRiver targets to pay an annual dividend per share of a minimum 10p per share going forward? Also, while the buyback authorization is good news, why not buy back shares here below 85p? In other words, when would you buy back shares, if not now?

Do you want to take that or...

Yes. I mean I think on the buyback, I mean what we've said today is that when we think about surplus capital and our capital allocation, we have effectively 3 places that we can invest our surplus capital. We can invest it into our existing portfolio. We can invest it into the direct real estate market, and we have the authority to buy back 10% of our shares. Now we've also talked today about our pro forma LTV position. So at the full year March, our LTV was 51%. Pro forma, it's just under 40%, which is in line with our guidance. So as we sit here now, we don't really have surplus capital to invest. When we look forward, we've talked today about GBP 90 million of retail assets that we've currently got exchanged and under offer at the moment. So as we look forward, perhaps towards the end of the year, we may well be in a position where we do have some surplus capital. And I think it's at that point that we would start to look at all of our options for that surplus capital, which includes a share buyback.

Yes. And we do expect that through the stabilization of valuations, which we've been talking about this morning, the fact that we've reinstated a dividend, which will be growing and recurring, a strengthened balance sheet, a clear strategy in terms of delivering the accounting returns that we're targeting, that should narrow the discount, Oliver. But as Will says, when we get towards the end of this year and we have available surplus capital, we will be judging the use of that capital on a side-by-side comparison and very much focused around the returns, what is going to deliver the best risk-adjusted return.

Okay. I think that's everything.

Okay. Well, listen, thank you very much for joining and listening into our presentation. We really appreciate it. And also many thanks for your questions. If you do think of any follow-up questions, you all know that we are always available to speak to our shareholders. And with that, that's the end of our session. Thank you very much.

Thank you very much.

Thank you.