UK industrial REIT Hansteen has gone from opportunistically acquiring assets in the UK and Europe to selling off the bulk of its European portfolio into a strong market in the past 12 months. With only a fraction left, does this signal the firm's exit from the opportunistic space? Robin Marriott investigates.
When Hansteen Holdings went public in 2005 it had a very particular strategy: to opportunistically acquire industrial and logistics assets with vacancies in the UK and Europe wholesale and sell retail once fixed up. It went about assembling a portfolio of around £1 bn (€1.1 bn). However, in the past 12 months it has been winding down by selling into a strong market, with a fraction left.
In 2017 it took advantage of high demand, strong occupancy and favourable currency conditions by selling the bulk of its European portfolio located in Germany, the Netherlands, Belgium and France. Now most of its remaining assets in the UK are close to being sold for around £460 mln (€514 mln).
The company looking to acquire Hansteen’s UK portfolio is Warehouse REIT, which floated on the London Stock Exchange only last September. In February, the same company paid Hansteen £116 mln for assets of the former Industrial Multi Property Trust that Hansteen acquired for £90.5 mln on 30 June 2017. At the time, Warehouse REIT’s investment manager, Tilstone Partners, said it was worth paying a premium for the 51 mostly light industrial assets in the midlands and south of England as they fitted the group’s strategy, which is mainly to tap into demand for last-mile distribution centres fuelled by e-commerce. Scroll forward to 26 July 2018, when Warehouse REIT’s shares were temporarily suspended ahead of an announcement that it was in talks – along with an unnamed third party – to buy the vast remainder of Hansteen’s UK assets, though the transaction will not constitute a takeover. Its statement confirmed discussions and although no final binding agreement could be certain, the REIT said any acquisition could require raising fresh equity. The deal could be valued at around £460-480 mln and involves 70% of Hansteen’s total assets that were originally acquired in 2016 from the former Ashtenne Industrial fund.
Should the deal complete, Hansteen will have almost completely round-ticketed its journey since its £125 mln float on London’s Alternative Investment Market. Two capital repayments have made shareholders happy and the two founders of the company are in line for incentive payouts later this year.
Pent-up demand
Due to high pent-up demand for industrial property in the UK and Europe, it has seemed that higher prices have precluded Hansteen from being able to recycle capital into new investment that fits its strategy. On 20 March this year, the company said it proposed to return £140 mln of capital upon concluding the transfer of the £116 mln Multi Property Trust portfolio to Warehouse REIT.
Its founders are Morgan Jones and Ian Watson (who previously founded Ashtenne Holdings in 1989 until its sale to Warner Estates in 2005). They took the opportunity in March to explain they were not expecting many more acquisition opportunities to materialise. Then again, they did not rule them out either. ‘While opportunities to acquire properties or portfolios from which we can generate value are likely to be limited, we continue to see good potential to drive further value growth both through increasing income from our remaining portfolio by improving occupancy and growing rental levels and capitalising on the demand for industrial assets from the investment market,’ they said. In other words, what was left was an asset management job.
But then a twist to the story came last month. On 6 August, the firm announced the purchase of a mixed-use portfolio of 34 assets for £53.7 mln from St Modwen Properties at a 9.15% net initial yield. Vacancy runs at 6.1% or 85,000 sq ft. It seems there are still a few opportunistic industrial deals left in the UK after all.
