Following the acquisition of a portfolio of 25 multilet industrial (MLI) properties in the UK earlier this week, JSE-listed property investment company Stenprop is considering the merits of a conversion to real estate investment trust status, as well as a possible listing on the LSE.
The company will also investigate a possible change in its reporting currency from euro to pound to reflect the relatively larger weighting of its UK portfolio, following implementation of the acquisition and sales strategy, Stenprop CEO Paul Arenson told Engineering News Online on Thursday.
“There is [significant] demand for our shares . . . from UK investors, particularly following this transaction, as the parties involved are well-known,” he said, pointing out that Stenprop starting to access capital in the UK would be advantageous.
Stenprop on Wednesday announced the £130.5-million acquisition of the MLI portfolio, as well as C2 Capital, which has managed the portfolio since 2009.
The MLI portfolio, which is being acquired at well-below replacement value, is made up of 25 separate estates situated in or near densely populated nodes across the UK. The acquisition is scheduled for completion on June 30.
Arenson highlighted that the acquisition represents a strategic opportunity for Stenprop to invest significantly in an asset class that, based on a number of positive fundamentals, the company believes will deliver sustainable earnings.
He suggested the MLI sector to be “pregnant with growth”, owing to the increasing demand for MLI space from a growing range of occupiers. “The Internet and technology facilitate new MLI business with requirements such as properties as last-mile distribution hubs,” he reiterated.
A constrained MLI supply also exists owing to a lack of historic development and conversion of much existing MLI space to residential, owing to higher value.
“[Further,] this transaction provides us with a strong strategic foothold, economies of scale and management expertise in the MLI sector. Our intention is to build a much larger MLI portfolio off this base, which we are confident will deliver sustainable higher average annual rental growth going forward. Our intent is to position Stenprop as a leading player in the UK MLI space through the active pursuit of acquisition opportunities over time,” Arenson said.
Despite tough global economic conditions and the impact of Brexit on the pound, Stenprop on Thursday posted a total dividend of 9c a share, a 1.1% year-on-year increase for the year ended March 31.
The company further reported diluted adjusted European Public Real Estate Association (EPRA) earnings a share of 10.28c, a 1.2% decrease against the previous year, and a €1.59 diluted adjusted EPRA net asset value (NAV) a share, a 4.7% decrease on the previous year.
The results are mostly attributed to the decline in the value of the pound, according to the company. Calculations showed that, without the depreciation of the pound against the euro, the EPRA earnings figure above would have increased by 5.6% and the NAV would have decreased by 1.5% compared with the previous year. Based on the same currency rate as the previous year, dividends would have increased by 8.1%.
“Apart from the negative impact of the pound devaluation, our portfolio continued to perform in line with forecasts. We continue to pursue opportunities to recycle mature assets into new purchases likely to show enhanced growth in earnings, distributions and capital value over time,” Arenson said.
At the end of the reporting period, Stenprop owned an interest in 54 properties valued at €848.1-million, with 40.3% of the properties in the UK, 41.7% in Germany and 18% in Switzerland, by value.
Stenprop, meanwhile, expects to sell the remainder of its Switzerland portfolio in the financial year to March 31, 2018.
It had already, in November 2016, sold some properties in Interlaken, Switzerland, for CHF6.8-million.
Contracts have also been signed for the disposal of the regional shopping centre, Nova Eventis, near Leipzig, in which Stenprop owns a 28.42% share. The sale (of which all closing conditions have been met) is scheduled to [be completed] on June 22.
“This is in line with Stenprop’s strategy to actively monitor its existing portfolio and recycle capital into assets that support our objective of delivering sustainable and growing earnings, distributions and capital value to shareholders,” Arenson concluded.