Hansteen buys Dutch industrial portfolio at 14.5% yield

UK REIT Hansteen Holdings has acquired 370,000 m2 of multi-let industrial space in the Netherlands in a complex transaction from a distressed entity for €106 mln, or a gross income yield of 14.5%.

The transaction follows Hansteen purchase six months ago of half the loan secured against the assets at a 51% discount.

European property fund manager Internos Global Investors sold the HBI Netherlands portfolio (HBI) on behalf of BGP Investment, to Hansteen. The UK REIT will fund the transaction from existing cash resources and a new €60 mln, five-year loan from Dutch banking group ING.

The HBI Netherlands portfolio comprises 41 light industrial assets located across the Netherlands, predominantly in the Randstad area.

The gross annual rental income of the portfolio is €15.4 mln, and contracted rental income is more than €16 mln. The portfolio has 360 tenants with a current vacancy rate in the region of 20%, which provides a significant opportunity to add value, Hansteen said.

Internos was appointed asset manager of HBI in December 2009. The €4.1 bn Internos platform now manages €390 mln of assets across the Netherlands on behalf of three clients.

Hugo van der Goes, managing director of Internos in the Netherlands, commented: “Internos successfully completed its asset management strategy on this portfolio, having maintained consistent revenue and occupancy levels over the past five years. This sale demonstrates the depth of knowledge and expertise that our local teams of asset managers have of the markets in which we operate.'

Brokerage firm Peel Hunt said in its morning briefing that the deal reflected a yield of 14.5%. The analysis continued: 'Another outstanding deal from Hansteen with all the usual hallmarks – a distressed vendor, high 14.5% gross income yield for 20%+ geared cash-on-cash returns, and 20% vacancy for asset management potential. Timing also looks good, with today’s deal coinciding with a return to liquidity in the Dutch market.'

LOAN DISCOUNT
In December 2013 Hansteen purchased half the loan on the portfolio, amounting to €85.4 mln, from Unicredit Bank for €41.7 mln, representing a 51% discount to face value.

Following the acquisition of the Unicredit loan, Hansteen agreed to acquire the remaining 50% of the loan from ING, subject to a new loan. Hansteen also agreed to break the swaps on the loan at a discount to their market value and subsequently agreed a consensual deal with the borrower, Lancelot Land, which had been in breach of its covenants, to acquire the property assets.

According to Peel Hunt, the all-in price of €106 mln includes the Unicredit loan purchase, the ING loan purchase, breaking swaps, plus other costs.

Ian Watson, joint CEO of Hansteen, commented: 'This has been a highly complex set of transactions; however, it delivers a sizeable portfolio already producing a significant rent roll but with enormous opportunity for us to add shareholder value through active management and where we are confident we will see a large uplift at the next valuation.'

Derek Heathwood, Hansteen’s Benelux director, added: 'We will asset manage the portfolio from our existing office in Amsterdam and from a newly opened office at Smart Business Park, in Utrecht, one of the properties in the portfolio. The Benelux asset management team of five has been enhanced with the addition of three new members and we are already implementing our unique asset management approach to drive income and capital value forward'.

Hansteen Holdings is a European industrial REIT that invests in properties with high yields, low capital costs and opportunity for value improvement across Germany, the UK, the Netherlands, Belgium and France. At end-December 2013, the portfolio under management comprised 4.1 million m2 and was valued at over £1.5 bn.