European property investment group Stenprop on Thursday reported saw a strong interim period, with its headline earnings of €16.5-million increasing from the previous year’s €13.5 million, diluted headline earnings a share of €5.78c apiece.
Further, the company declared a dividend of 4.5c apiece, and based on a projected full year dividend of 9c apiece, a dividend yield of 7.4% is expected.
Meanwhile, Stenprop noted that its adjusted European Public Real Estate Association (EPRA) earnings attributable are €15.2-million, up from €14.3-million in the previous year, which removes valuation changes, equating to a diluted adjusted EPRA earnings a share of €5.32c, a 3% increase on the diluted adjusted EPRA earnings in 2015.
At the end of September, the company's real estate portfolio comprised an interest in 55 properties valued at €839.8-million, with 40% in the UK, 42% in Germany and 18% in Switzerland.
The portfolio, which has a gross lettable area of about 254 1001 m2 and gross annual rent of €50.9-million, is predominantly in the office and retail sectors which account for 50% and 38% of rental income respectively.
Meanwhile, CEO Paul Arenson said that the company decided to sell its more mature assets in its 117-million francs Swiss portfolio, mostly made up of offices and industrial properties.
Speaking to Engineering News Online, Arenson said that it was a very expensive market, owing to service providers and company structures, as well as returning quite low yields, which was bringing the company’s average earnings down.
He further highlighted that because of the low negative inflation, there needed to be a slight reduction in rent when tenants renewed their leases. However, he noted that this would count in the company’s favour when selling their assets, as it could “get quite high prices” from private buyers owing to a negative interest rate.
Another reason for the exit, is the maturity of the building, Arenson said. “There is quite a lot of capital expenditure on these buildings, so although we are earning rent, we still have to spend a lot on them.”
“[The disposal] should release, after debt, around €30-million to invest with an 8% return,” he noted, stating that the company would mainly look at office and industrials properties.
Arenson believed that with online shopping becoming more accepted and consumers having to tighten their belts, the retail property sector would not return as much yield.
“We will recycle our [earnings from the disposals] into assets where we can get a higher return. . . we will continue to focus on the UK and Germany, where we are strongest and have economies of scale,” he noted.