The company was previously wary of holding onto cash as it transitions to a UK-focused, multi-let industrial property play
22 November 2019 - 09:29 Alistair Anderson and Karl Gernetzky
London. Picture: 123RF/LITTLE NY
UK-focused industrial landlord Stenprop said on Friday that strong valuations in Germany had resulted in a decision to accelerate the sale of assets in that country as it focuses on UK-based, multi-let industrial (MLI) assets.
The company, which is seeking to become a specialist UK-focused group that provides work spaces for small and medium businesses, was previously avoiding holding on to cash, but would now accelerate the sale of its non-MLI assets.
CEO Paul Arenson said 60% of the group’s assets need to be industrial parks at the end of March 2020, and 100% of them at the end of March in 2021.
The company had wanted to time sales in Germany with MLI acquisitions, but noted high valuations in that market, even as the pipeline of MLI purchases opportunities has decreased.
Stenprop now intends to bring three Berlin retail centres and its portfolio of five retail warehouses to market in January. The value of these properties at the end of September was £229.6m (R4.3bn).
If there were no more MLI acquisitions, and the disposals proceeded, the company’s portfolio would comprise about 55.2% of MLI, 19.6% cash and 25.2% of non-MLI property that is yet to be sold.
During its six months to end-September, the company reported net rental income of £15.8m, down 1.25% from the prior comparative period. The company acquired eight MLI estates for a total of £23.9m.
Peter Clark an analyst at Investec Asset Management said Stenprop’s strategic decisions are paying off.
“Stenprop is on a transformational path towards a higher growth structure sector. It is also moving towards having a higher operational element to the business. The MLI investment together with the operational platform, industrials.co.uk, are starting to deliver,” he said.
Stenprop is not yet a takeover target. “Corporate activity is less likely given the reliance on the higher operational component and, if anything, would need to be friendly to secure the platform and intellectual property,” said Clark.
“Although the business has come a long way, it has only transitioned just over half way into the MLI business, hence there remains some execution risk, and while the balance sheet is not strained, gearing remains higher than peers. Something the company plans to address in the short to medium term.”
The company declared an interim dividend of 3.375p, unchanged from the prior comparable period.
Stenprop’s largest SA shareholders include the Government Employees Pension Fund (GEPF), the Public Investment Corporation (PIC), Investec Wealth, and 36ONE Asset Management.
The company is trying to attract more SA investors and improve its liquidity.
Stenprop’s share price was unchanged at R21.60 on Friday, having risen 18.68% in the year to date.
