www.nrr.co.uk

Investing in the Abnormal

Allan Lockhart, Co-Founder & Property Director

13 October 2016

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• About NewRiver

• The Macro Picture

• Today’s Real Estate Market

• The Consumer

• Impact on Real Estate Owners

OVERVIEW

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• Founded September 2009

• Clear investment strategy delivering growing income returns

• Market Cap of c. £800 million

• Total AUM of £1.2 billion

• 33 shopping centres

• 21 retail warehouses/parks

• 16 high street assets

• 350 pubs

• 8 million sq ft

• Focused business model committed to creating value

• Active asset management

• Risk controlled development

ABOUT NEWRIVER

Specialist listed REIT focused on UK retail & leisure

4

66%12%

4%

3%15%

No. Retailer % Total Rent Stores

1 2.9% 5

2 2.6% 19

3 2.3% 20

4 2.2% 15

5 2.1% 7

6 2.0% 5

7 2.0% 14

8 1.9% 8

9 1.8% 8

10 1.7% 5

11 1.6% 4

12 1.5% 12

Total 24.6%

ABOUT NEWRIVER

£1.2 Billion AUM

• Average purchase yield 8.7%

• 96% retail occupancy

• 79% occupier retention

• 82% retailers are national multiples

• 140m annual footfall

• Affordable average rent: £12.14 psf

• WALE of 7.2 years (1)

• Low capital value of £127 psf

Excludes pub portfolio

Development

Shopping centres,

convenience stores

& in-town retail

Retail warehouses

Pubs

High street

As at 31 March 2016 (excluding Bexleyheath assets)

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• Leading indicators of economic growth

• Quantitative Easing & The Global Economy

• Yields

• Low Interest Rates

• Impact of Brexit

• Real Estate Market

• NewRiver in the current climate

MACRO

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MACRO

Explanatory note: Indicators include forward and backward-looking surveys of consumers and businesses, official output and employment data, house price

growth, measures of uncertainty, and the FTSE all-share index. Indicators at or above their long run average are coloured green; indicators up to one standard

deviation below their average are coloured amber; indicators more than one standard deviation below their average are coloured red. Indicators with a higher

correlation with quarterly GDP growth sit closer to the middle of the circle.

Leading indicators of economic growth

Jan 2014, Aug 2016 & Sept 2016

Source: Bank of England

Indicators of GDP growth

Well below average

Below average

Above average

Indicators of GDP growth

Well below average

Below average

Above average

Indicators of GDP growth

Well below average

Below average

Above average

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Quantitative Easing & The Global Economy

• QE Stimulus has led to a saturation of the Bond Market

• Risk assets artificially manipulated by Central Banks – Negates business cycle

• 30% of Global sovereign bond market ($13 trillion) carries a negative yield

• Huge rises in Balance Sheets of the Bank of England, the ECB and the Federal Reserve

• Italy’s banking system est. £400 billion of troubled loans – equivalent to 25% of GDP

• Japan, Italy and France all have lower yields than the US 10-year treasury

• Japanese Central Bank already owns 1/3rd of all Government Bonds (JGBs) and 1/2 of all the ETFs in

Japan

MACRO

8

MACRO

Central bank balance sheets are greater than ever before

and continue to increase

Sources: Bank of England, Federal Reserve, Bank of Japan, European Central Bank, Bloomberg, ONS and Bank Calculations

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Yields & Bonds

• Volatility of investing in bonds

• Value of bonds at an historic high

• Risk asset prices pushed up

US GDP weakening

whilst S&P 500 achieved new high

MACRO

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MACRO

Real and nominal yields on long-term

government bonds have been declining

over the course of decades

Source: IMF, DataStream, Consensus Economics & Bank Calculations

‘Safe’ bonds giving negative returns

More than a third of

developed Market Bonds

now have negative yields

Source: Bloomberg

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Low Interest Rates

• Long-term damage of low interest rates to

Savings, Pensions & Banks

• ‘Swimming against the tide’ – Central Banks

encourage inflationary pressure in the economy

by reducing incentive to save

• In the last ten years the Real Estate sector has

recorded a 22% increase, compared to a 24% fall

in the larger Financials sector

MACRO

UK base rate of interest 1976-Q2 2016

Source: Bank of England

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Impact of Brexit

• Certain of the uncertainty

• Re-focus on domestic produce

• Projections of hit to GDP ranges from 1.7% to 6% by 2020

• Fears over impending recession eased following Q3 results

• A relaxation of Austerity measures

MACRO

Financial Impact of Brexit in both the UK and in the EUSource: OECD/FT

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Real Estate Market

• Real estate has out-performed Financials by over 40% in the last 20 years

• HSBC projects that price declines will be no more than down 10-15% over 18m

• Target price reductions by 15% across the UK REITs

• Retail capital growth has lagged behind Offices and Industrial since December 11, having experienced the

highest level of capital growth out of the three sectors in the two years prior to this

..

REAL ESTATE MARKET

0

1000

2000

3000

4000

5000

6000

7000

8000

FTSE EPRA/NAREIT Price Return

Europe Ex UK - local North America - local UK - local

(3.0)

(2.5)

(2.0)

(1.5)

(1.0)

(0.5)

0.0

0.5

Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016

IPD Capital Growth

Retail Shopping Centres All Property

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NewRiver in the current climate

• Build safety of margin when allocating capital

• Reducing leverage and increasing our cash position

• Patience in waiting for the right opportunity to emerge

REAL ESTATE MARKET

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Technology

THE CONSUMER

Key Influencers?

• Equally redefining and disruptive

• Serious challenges for internet retailing

• Distribution squeezing profitability

• Absence of physical presence

Brexit

• Depreciating pound

• Higher inflation

• Higher living costs

• Increased unemployment

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The Fundamentals: Demographics

THE CONSUMER

Baby Boomers

1946 - 1964

Donald Trump, Bill Clinton, Cher,

Meryl Streep, Steven Spielberg,

Warren Buffet

Influences: Civil Rights, Vietnam

War, Cold War, Space Travel

Attributes: Anti War, Anti

Government, Anti-establishment.

Competitive, competent, live to work

Financially: Savers, able to retire

with sufficient accumulated wealth

Generation X

1965 – 1980

Barack Obama, David Beckham,

JK Rowling, Angelina Jolie and

Allan Lockhart!

Influences: Dot.com bubble, 2008

Financial Crisis, Energy Crisis,

Attributes: Resilient, self-starting

& bottom-line focused. Pessimistic,

sceptical and disillusioned

Financially: First generation with

significant decline in real median

household net worth

(52yrs – 70yrs) (36yrs – 51yrs)

Millennials

1981 - 2000

Cristiano Ronaldo, Frank

Lampard, Serena Williams,

Mark Zuckerberg

Influences: Google, Facebook,

9/11 terrorist attacks

Attributes: Ambitious, educated,

& gadget-dependent. Unfocused,

independent, political, community

Financially: Earn to spend, debt-

averse - 63% US millennials don’t

have a credit card

(16yrs – 35yrs)

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Key Lifestyle Shifts: Millennials

• Diminished Car Ownership: Less mobile, expects retailers

to come to them

• Fewer Advantages: Baby Boomers experienced growth in

real wages after 10 yrs working; millennials will earn <40%

less in real terms during their first 10 yrs working

• Home Ownership Obliteration: Renting with the rental

market set to increase +5% pa till 2021

1975: 18-34yr old average cost of home < twice their salary

2015: 18-34yr old, 11 years salary to afford the average home

THE CONSUMER

Real spending power lies with the Baby Boomers

• Ageing Population: Population growth is slowing and we are living longer which bring higher associated healthcare costs

• 65+ account for 56% of UK spend and set to grow further 5% in next 10 years

• Fastest salary growth

• Highest net worth

Ageing PopulationForecast to grow 5% over next 10yrs

with two key growth groups

Source: CACI

0

2

4

6

8

10

12

14

16

18

0-19 20-29 30-44 45-64 65+

Mill

ion

s

UK Population – Forecast Growth

2016 2026

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More focus on the Baby Boomer, less on the Millennial

THE CONSUMER

Baby Boomers

Frequency: On par 60 visits pa

Dwell: Similar at 62 mins

Preferred Retail Locations:

Out of town & Retail Parks

Spend: Conversion & Spend

on par at £47

Priorities: Accessibility, range,

parking, quality & price

Key Retailers: 3 of top 5 are

department stores

Millennials

Frequency: On par 61 visits pa

Dwell: Similar at 60 mins

Preferred Retail Locations:

High streets, in-town, malls

Spend: Conversion & Spend

on par at £48

Priorities: Local, spontaneous,

fast way to get what I want

Key Retailers: Fashion,

lifestyle and catering

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IMPACT ON REAL ESTATE OWNERS

• Strategic acquisition - value is in the buy

• Highly active asset management

• Customer-first focus

• Accessibility and parking

• Range and affordability

• Retailer relations

• Innovation

What does this mean for the real estate owner?

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20

Allan Lockhart

Property Director

alockhart@nrr.co.uk

THANK YOU