Hansteen asset value up as it anounces £1.1bn portfolio sale

Investor in UK and continental European industrial property Hansteen announced its full year results for the year to 31 December on Monday, with a total annual return to shareholders of 23.1p or 20.8%, representing EPRA net asset value growth of 17.7p plus dividends paid of 5.35p.

The FTSE 250 company reported IFRS profit before tax of £119.9m, down from £171.4m, with normalised income profit increasing 29.4% to £61.1m.

Normalised total profit improved 4.4% to £66.0m year-on-year, and the firm’s IFRS net asset value per share increased 17.9% to 124.0p.

Its EPRA net asset value per share was up 15.9% to 128.9p.

Hansteen’s board confirmed the full year dividend increased 12.4% to 5.9p per share, and its net debt-to-property value ratio fell to 40.9% from 41.2% at the end of the prior year.

“I am pleased to report an exceptional year for Hansteen with our portfolio and our team once again delivering record results,” commented chairman Melvyn Egglenton.

“While acquisition opportunities have been limited the team has focused on growing the portfolio occupancy and rent roll resulting in the highest ever number of new lettings and lease renewals, record like-for-like rent growth and the highest ever portfolio occupancy rate.”

Egglenton said the significant spread between the company’s portfolio yield and borrowing costs offered potential for further capital growth, particularly when the current yield was compared to the yield lows of previous cycles.

“This compares favourably to the other property sectors where yields have reached historic lows during 2015 or earlier.

“The UK portfolio also offers earnings upside through the letting of the remaining vacant area and emerging rental growth which will allow the business to continue to generate strong income returns in the future.”

Across the UK, we are experiencing pockets of rental growth and shorter incentives being offered to tenants as demand intensifies, particularly at estates where voids are zero or close to zero,” Egglenton said.

He added that the company also held 447 acres of undeveloped land in the UK which did not yet produce income, but would in time produce further value.

“We will continue to focus on realised returns allowing us to pay a well-covered and growing dividend to our shareholders.”

Hansteen to dispose of German and Dutch portfolios

Hansteen also announced on Monday that it had agreed to dispose of its German and Dutch portfolios for €1.28bn (£1.1bn) to entities owned by funds advised by affiliates of The Blackstone Group and M7 Real Estate.

The firm said the portfolios were being sold on a debt-free basis for cash, and the value given to the German and Dutch portfolio was €1.28bn payable upon completion - less a deposit of €50m which had already been paid - subject to a net asset value adjustment post-completion.

All latent capital gains tax liabilities incurred in relation to the transaction would be shared on an equal basis between the company and the buyer.

The board claimed the price represented a premium of approximately €76m, or 6%, to the year-end valuation, which itself included a valuation uplift of €34m over the 31 December valuation.

It said the disposal realised the value in the portfolios at a time when they remain at historically high levels of occupancy and rent for the period of Hansteen's ownership, and the euro-sterling exchange rate was favourable.

Completion was expected to occur before the end of June 2017, with conditions to completion including Hansteen's shareholder approval and the buyer obtaining antitrust clearance in Germany.

Following completion and repayment of the debt secured against the German and Dutch portfolios - and satisfaction of other incurred costs - Hansteen said it intended to distribute a substantial portion of the net cash proceeds of the transaction to its shareholders.

“This is a compelling opportunity to crystallise both the revaluation gains from these German and Dutch assets achieved by our active asset management and the gains from foreign exchange movements,” commented Hansteen joint chief executives Morgan Jones and Ian Watson in a statement.

“The value being realised is around 30% higher than the book value at 31 December 2015 when measured in sterling.

“The sale is in line with our long-term business and portfolio strategy of buying at a low point in the cycle, with low occupancy and rents, adding value through improved asset management and subsequently realising the investment at a higher point in the cycle.”