Hansteen acquired the portfolio through its successful offer for IMPT which was declared wholly unconditional on 25 April 2017. The portfolio consists of 51 UK multi-let properties offering c.500 leasable units with a total floor area of approximately 1.65 million sq ft and a passing rent roll of GBP8.0 million per annum at 30 June 2017. The contracted rent roll is currently circa GBP8.5 million per annum. Approximately 93% by floor area is invested in light industrial property and 7% in workspace and offices.
The portfolio is being sold on a debt free basis for cash, and the value attributed to the portfolio is GBP116 million payable upon completion of the transaction, which is expected to occur at the end of March 2018. There are no conditions to completion. IMPT valued the portfolio at £85.3m at the end of December 2016 and Hansteen valued it at £90.5m at the end of June 2017 and we think they paid £88.8m for it (including debt).
Commenting on the transaction, Ian Watson and Morgan Jones, joint chief executives of Hansteen, said: “In line with our intentions set out in the original IMPT offer document dated 22 February 2017, we absorbed the portfolio into our UK property asset management platform and were in the process of successfully increasing the occupancy and income across the portfolio. However, during the successful implementation of this strategy, we received an unsolicited approach from Warehouse REIT to acquire the portfolio at a level which provides a return in excess of our initial expectations and which we were willing to accept. In the short term we plan to use part of the proceeds to reduce the balance on our revolving debt facility. Going forward the board will consider new acquisition opportunities or distributions to shareholders.”
For Warehouse REIT, the transaction means that all its IPO proceeds have been fully deployed, significantly ahead of plan, and brings its total property acquisitions to date to GBP279 million. The acquisition will be funded from existing cash resources and enlarged debt facilities of GBP135 million (previously GBP65 million), secured with HSBC. HSBC has increased the Company’s current revolving credit facility from GBP35 million to GBP105 million, for the same duration of five-years but at a reduced coupon of 2.25% above LIBOR (previously 2.40% above LIBOR). This enlarged facility is on the same terms as the existing GBP30 million fixed term loan with HSBC.
Commenting on the transaction, Neil Kirton, non-executive chairman of Warehouse REIT, said: “This acquisition provides us with a meaningful portfolio of good-quality and well-located assets that are perfectly aligned with Warehouse REIT’s investment strategy. The portfolio is well known to management who have tracked it for some time and we are pleased to now be in a position to take ownership of it. The acquisition also allows the Company to deliver on its business plan ahead of target, ensuring that for the year ending March 2019 the company continues to expect to pay a dividend of 5.5p covered by earnings. The new assets weight the geographical spread of the overall portfolio towards the UK Midlands and South – areas that are expected to experience strong rental growth driven by high demand, while the near-term opportunity to grow the portfolio’s income presents a compelling proposition.
In a competitive market environment, our ability, working with Savills, to secure this unique off-market investment opportunity is a clear illustration of the deal sourcing abilities of our experienced and well-connected management team and we are confident in realising the benefits of the acquired portfolio both in the short and longer term. With the IPO proceeds now fully deployed we will turn our focus to actively enhancing the value of assets under management, whilst continuing to review options to capitalise on our pipeline of further investment opportunities.”
HSTN / WHR : Hansteen sell IMPT portfolio to Warehouse REIT