London. Picture: 123RF/LITTLE NY
London. Picture: 123RF/LITTLE NY

UK-focused industrial landlord Stenprop says the battering the property sector is taking from Covid-19 may help it pursue its ambition of becoming entirely focused on multi-let industrial assets.

The company, which is seeking to become a specialist UK-focused group that provides work spaces for small and medium businesses, said on Thursday that Covid-19 may boost demand for these types of rental, and provide acquisition opportunities.

Stenprop said most of its customer base are able to work with some degree of social-distancing during the pandemic, and have e-commerce as part of their distribution chain, or as a sales channel.

The group’s multi-let industrial portfolio represented 58% of the total property portfolio valued at £532.6m at the end of March, up from 42.7% a year earlier.

“The coronavirus has become a trend accelerator. Every business is starting to go online. Small service providers need websites and to deliver goods. Some want to operate out of the kind of multi-let industrial assets we own”, CEO Paul Arenson said.

“We are very happy with what we have achieved in this period and are sitting with a healthy cash position. We are currently 58% exposed to multi-let industrial assets and should be invested 100% within two years. For a start, once we have sold our retail centre in Berlin, we willl become 70% multi-let.”

The group kept its total dividend for the year to end-March unchanged at 6.75p, saying profit after tax fell 34% to £15.6m.

“The new financial year is likely to be challenging with Covid-19 and Brexit headwinds, but we are well positioned to meet these challenges with exposure to resilient assets, a strong balance sheet and free cash of approximately £70m,” said Arenson.

He said the effects of the pandemic are expected to be muted on the asset type Stenprop invests in.

British corporate finance advisors Numis said Stenprop delivered “a robust performance, achieving its transition target for 2020 with the comfort of a strong balance sheet to navigate the challenging backdrop, and importantly providing scope to swiftly take advantage of further investment opportunities, at attractive prices. 

“In our view, the shares continue to offer significant value on an absolute and relative basis for access to one of the strongest real estate sub-sectors in the UK.”

Stenprop’s rival Warehouse Reit, with a portfolio comprising 78% multi-let industrial  (by estimated rental value) was trading at a premium to net asset value and recently announced its plans to raise further capital to fund growth, said Numis. 

Stenprop has a low loan-to-value ratio of about 27.7%, which enables it to be fairly aggressive with new deals and leasing.

Update: June 12 2020 
This article has been updated with comment throughout.

gernetzkyk@businesslive.co.za

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