AIM-listed NewRiver Retail announced on Monday that it has formed a co-investment joint venture with Morgan Stanley Real Estate Investing (MSREI) to acquire UK retail property assets.

The joint venture, NewRiver Retail Investments, has exchanged contracts to acquire its first acquisition - a large UK retail portfolio from the UBS Triton Property Fund for £49 mln (EUR 54 mln). NewRiver said the investment reflects an attractive net initial yield of about 9%.

The nationwide portfolio comprises nine large retail assets totalling more than 37,000 m2 and is let to more than 100 tenants. Nearly 90% of the portfolio's rental income is secured by strong national and regional retailers predominantly operating in food and value retailing, the two strongest performing retail sectors. The average unexpired lease length is approximately seven years.

J Sainsbury and Tesco are the two largest tenants in the portfolio, accounting for more than 16% of the total rent roll. Both parties have committed equity capital with the senior debt facility being provided by Santander Corporate Banking.

NewRiver Retail Investments is a closed-end Guernsey-registered limited partnership, and will have an acquisition capacity in excess of £250 mln (about EUR 278 mln) including leverage. The joint venture will initially be owned equally by NewRiver and MSREI with future respective equity commitments being decided on a transaction by transaction basis.