Co-Op to build stores on 63 ex-Marston’s sites

The supermarket agreed the deal with NewRiver Retail, the real estate investment trust that bought 202 pubs from Marston’s last November.

This morning’s announcement represents a 7.6% increase on the original agreement in April that space on 54 pub sites would be leased to the Co-Op.

NewRiver said its pub portfolio, which was leased back to Marston’s for four years, “continues to perform well” and announced that it hopes to redevelop surplus land of five of pubs to provide 42 houses.

The company said the Co-Op deal would see 215,232 sq ft of new retail space created over a two-year phased development programme. It stressed “the majority of the C-Store developments will be constructed on surplus land and car park areas thereby protecting the value and income generated by the pubs”.

The lease terms remain at 15 years with no break clause and an annual RPI-linked rental increase formula capped at 4% and collared at 1%. The rental income agreed varies between £15 per sq ft and £17.50 per sq ft. The c-stores will range in size from 3,000 sq ft to 4,200 sq ft and will benefit from dedicated and shared car parking spaces ranging from 10 to 25 spaces.

Increase​

The agreement is “performance-incentivised” whereby NewRiver will receive additional payments upon delivery of various tranches of the portfolio. With the increase in the portfolio, the total fee payable is now £3.85m, up from £2.7m as announced in April 2014.

NewRiver said: “Since the acquisition in November 2013, the pub portfolio continues to perform well benefitting from an increase in turnover and beer sales leading to an increase in the earnings before interest, taxes, depreciation and amortization (EBITDA) that on an annualised basis is now higher than the guaranteed rent that Marston’s pays NewRiver.

“The principle focus of NewRiver over the last nine months has been to complete the leasing portfolio with the Co-operative Group whilst progressing development plans to unlock further value for the remaining pub portfolio. Importantly during this time the company has continued to receive a strong rental income from the portfolio.

“With the Co-operative Group agreement now complete the company will continue to drive forward these value enhancing opportunities, which will include preparing detailed planning applications to be submitted within coming months for the redevelopment of the surplus land of five of the pubs to residential.

“In total these five developments, subject to planning consent, will provide 42 detached and semi-detached houses.”

Hard work​

Allan Lockhart, property director at NewRiver Retail, said: “This portfolio leasing transaction is the culmination of a tremendous amount of hard work by NewRiver and our design team. Following on from our pre-planning application meetings with local authorities, we now look forward to the submission of formal planning applications over the next few months.

“On the back of this transaction, NewRiver is set to become the UK’s largest c-store developer in what is the fastest growing area of the food market.

“We have established an excellent working relationship with the Co-operative Group and we are delighted to be in a position to provide them, with such a large number of new stores as they continue to expand in this competitive market. We believe that these modern c-stores, operated by one of the UK’s leading c-store retailers, will provide excellent amenities to the local communities as well as the creation of 1,300 valuable jobs.”

Steve Murrells, chief executive of the Co-operative Retail Division, said: “The Co-operative Group has a clear vision to establish itself as the best local food retailer in the UK and over the coming years our focus will be to develop and grow our existing convenience estate of over 2,000 shops. The key to our focus is our new store opening programme where we intend to open 150 new stores each year.

“We are delighted to be working with NewRiver Retail and this significant portfolio is a great example of the innovative and industry leading transactions we are undertaking as a part of our ambitious convenience expansion plans.”