Bolton a safer bet than May­fair for UK Reit as Brexit looms

Irish Independent - Business Week - - PROPERTY 17 - Alek­san­dra Gjorgievska

“a highly ed­u­cated labour force is crit­i­cal and a strong univer­sity sys­tem is re­quired”. Would that take cities like Dal­las and Char­lotte out of con­sid­er­a­tion, or would be­ing a cou­ple hours from highly re­spected uni­ver­si­ties be good enough?

Costs are stated as an im­por­tant fac­tor as well. It’s “easy” to iden­tify large metro ar­eas with ro­bust air­ports and deep, ed­u­cated tal­ent pools, but those tend to be tremen­dously ex­pen­sive. Be­ing in Seat­tle, Ama­zon surely sees how much be­ing based in Seat­tle, which is cheaper than the San Fran­cisco Bay Area, helps with re­cruit­ing. It might make sense for an ex­pan­sion of five thou­sand em­ploy­ees, but will Ama­zon re­ally try to hire 50,000 em­ploy­ees in a metro like Vancouver, San Fran­cisco, Toronto, Bos­ton, New York or Wash­ing­ton — an area that’s al­ready ex­pen­sive?

Tax in­cen­tives play a role too. To some ex­tent this is a ques­tion of “who wants it the most”. For all other con­sid­er­a­tions, Chicago would be an at­trac­tive des­ti­na­tion. But the city and state are broke. Are Chicago and Illi­nois will­ing to of­fer bil­lions of dol­lars in tax in­cen­tives, try­ing to com­pete with younger, “hun­grier” Sun Belt met­ros? And Chicago’s an­other metro area with no clear prospects for labour force growth, even if its ex­ist­ing tal­ent base is large and deep.

There are some softer cul­tural fac­tors that are dif­fi­cult to quan­tify as well. Will flir­ta­tions with anti-gay laws un­der a guise of “re­li­gious lib­erty” (and anti-trans “bath­room bills”) hurt the causes of the large metro ar­eas in North Carolina, Ge­or­gia and Texas? Will Toronto’s case be helped or hurt by the po­lit­i­cal en­vi­ron­ment un­der Pres­i­dent Don­ald Trump? (Af­ter all, he has waged a per­sonal war against Ama­zon.) Will Wash­ing­ton’s case be strength­ened by Ama­zon CEO Jeff Be­zos’s pur­chase of the Wash­ing­ton Post? Will ge­o­graphic di­ver­sity — per­haps a place in a time zone other than Pa­cific — be seen as at­trac­tive?

This is the Olympics of cor­po­rate re­lo­ca­tions. The win­ning city will be able to of­fer a large metro area, a deep and ed­u­cated tal­ent pool with a strong lo­cal univer­sity sys­tem, a ro­bust in­ter­na­tional air­port, suf­fi­cient high­way and tran­sit in­fra­struc­ture, a rea­son­able cost of liv­ing, a wel­com­ing cul­ture, a busi­ness-friendly en­vi­ron­ment, likely eye-pop­ping tax in­cen­tives, and a lo­cal busi­ness and po­lit­i­cal com­mu­nity able to work to­gether to make a con­vinc­ing pitch.

This col­umn does not nec­es­sar­ily re­flect the opin­ion of the ed­i­to­rial board or Bloomberg LP and its own­ers.

(Bloomberg View) ONE of the best-per­form­ing UK real es­tate in­vest­ment trusts this year is bit­ing the Brexit bul­let and dou­bling down on its home mar­ket.

Hansteen Hold­ings Plc, which in June sold its Ger­man and Dutch port­fo­lios, says a boom­ing e- com­merce busi­ness and growth from small en­ter­prises in the UK out­weigh any anx­i­eties sur­round­ing Bri­tain’s exit from the EU. Shares of the Lon­don-based mem­ber of the FTSE 250 In­dex have out­per­formed its peers al­most ten­fold in 2017, and are trad­ing at the high­est level in a decade.

“We are very happy to be fo­cused on the UK now,” co- chief ex­ec­u­tive of­fi­cer Ian Wat­son said in an Au­gust 25 in­ter­view. “At the mo­ment, the Brexit wor­ries don’t seem to be af­fect­ing ei­ther our oc­cu­piers or in­vestors. Our units are in re­gions which we think are a good place to be, mainly out­side Lon­don and the south­east, and we’re get­ting a new tur­bocharg­ing by the whole e- com­merce phe­nom­e­non. All the trends we are see­ing play to our port­fo­lio. Our mar­ket­place is Bolton, not May­fair.”

Hansteen, which mainly in­vests in in­dus­trial prop­er­ties in re­gions out­side Lon­don, is ben­e­fit­ing from in­de­pen­dent re­tail­ers seek­ing af­ford­able space to grow their busi­nesses. Some of its ten­ants use Ama­ Inc.’s plat­form to sell their prod­ucts, Wat­son said.

“Of­ten when you press ‘ buy’ on Ama­zon, the goods may not be in an Ama­zon shed, they may be with the re­tailer in an­other lit­tle unit, so they can come straight from there to your house. We have a lot of small units, ba­si­cally just a square box, that are f lex­i­ble and the least ex­pen­sive of any com­mer­cial prop­erty type,” he said.

Last year, Hansteen started record­ing whether new ten­ants re­tailed through Ama­zon, eBay Inc. or their own on­line re­tail plat­form. In 2016, 26pc of new ten­ants said they used one of those plat­forms; this year, that num­ber has risen to 31pc.

The stock has proven a more lu­cra­tive bet this year than own­ers of UK shop­ping malls and of­fice build­ings bear­ing the brunt of Brexit. The shares have also out­per­formed peers like Tri­tax Big Box Reit Plc and Lon­donMet­ric Prop­erty Plc, which have also beaten the FTSE 350 Real Es­tate In­vest­ment Trust Sec­tor In­dex this year.

Hansteen re­ported 2.8pc growth in net as­set value per share for the six months ended June 30, cit­ing strong de­mand and higher rents.

The com­pany in­creased its in­terim div­i­dend, say­ing it plans to return up to Stg£ 580m to share­hold­ers by the end of 2017 from the pro­ceeds of the Ger­man and Dutch sale.


Bos­ton is one of the few Amer­i­can cities with the abil­ity to meet Ama­zon’s cri­te­ria for its new ‘HQ2’

Lon­don isn’t the only Brexit safe haven for real es­tate in­vestors

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