The Co-operative to develop 54 pubs sites following innovative deal with NewRiver Retail
The Co-operative Food has signed an agreement to lease 54 pub sites from the Marston’s Plc public house portfolio owned by NewRiver Retail.
Last month Steve Murrells, Chief Executive of The Co-operative’s retail division, announced that the Food business plans to open more than 100 new convenience stores this year. This is the first major lease agreement that the business has secured since that announcement. In order to maintain its position as the UK’s leading convenience retailer, The Co-operative Group is building its pipeline to enable the opening of 150 food stores per year across the UK.
The properties are located throughout the country but with a concentration in Central, Eastern and Northern England. The majority will be new-build projects to be constructed on surplus land adjacent to the existing public houses. A smaller number of public houses will be either converted to convenience store use or redeveloped as standalone convenience retail stores, whilst some of the assets will be significantly expanded in size through the addition of an extension or new-build.
Finished unit sizes will range from 3,000 sq ft to 4,500 sq ft, and the first of the new stores is expected to open early in 2015.
The lease terms are 15 years with no break clause and an annual RPI-linked rental increase formula capped at four per cent and collared at one per cent. The rental income agreed varies between £15.00 per sq ft and £17.50 per sq ft.
Importantly, as the majority of the portfolio will utilise surplus land such as car parks and under-utilised garden space, a number of the public houses will continue to operate in their original format under lease to NewRiver Retail.
Steve Murrells 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 stores.
“Our focus is on convenience stores and a move away from larger stores, as we look to highlight our strengths and consolidate our position as number one in the competitive convenience market. To do this we are investing in our stores to ensure that the product offering, the service and the prices appeal to shoppers.”
Stuart Hookins, Head of Portfolio Strategy, Acquisitions and Disposals at The Co-operative Food, added:
“Part of our acquisitions strategy is to explore creative ways to acquire stores, and this is a great example of that approach at work, adding over 50 stores in one transaction. The speed at which this acquisition was completed – four months from start to finish – is a testament to our decision making and ability to progress deals quickly.”
Allan Lockhart, Property Director at NewRiver Retail, said:
“We are delighted to complete this unique and innovative leasing agreement less than five months since we acquired the Portfolio. NewRiver has efficiently delivered on its stated intention to identify viable demand from major food store operators to expand their convenience store portfolios.
“The agreement is a prime example of how NewRiver’s successful strategy of strong retailer relationships, active asset management and risk-controlled development generates significant value through the creation of institutional investment class assets. The agreement significantly develops the Co-operative Group’s UK footprint and we look forward to expanding our strong relationship with them in the future.”
In November 2013 NewRiver announced its £90 million acquisition of a portfolio of 202 public houses from Marston’s, with the primary intention of conversion of land and buildings to alternative use, notably convenience stores.