Hansteen: Brexit bet

Financial Times Middle East - - Lex -

Strad­dling the English Chan­nel sounds an un­com­fort­able po­si­tion at the best of times. Dur­ing Brexit ne­go­ti­a­tions it could be­come an un­bear­able stretch. Hansteen Hold­ings is be­ing re­warded for tak­ing mat­ters into its own hands and cleav­ing its busi­ness in half.

Shares in the in­dus­trial prop­erty group are at a near decade-high af­ter it said yes­ter­day it would switch its fo­cus from con­ti­nen­tal Europe to the UK by sell­ing Dutch and Ger­man port­fo­lios to Black­stone and M7 Real Es­tate for close to €1.3bn. A chunk of the pro­ceeds will be re­turned to share­hold­ers.

Co-founders Ian Wat­son and Mor­gan Jones say they are crys­tallis­ing gains from the cur­rent prop­erty cy­cle — with an added forex fil­lip for good mea­sure. In­ter­net shop­ping has helped to halve va­cancy rates at its dis­tri­bu­tion ware­houses in the past six years, rais­ing their value. But ster­ling weak­ness has done its fair share of heavy lift­ing too. The sale prices the Euro­pean prop­er­ties at a juicy-look­ing 30 per cent pre­mium to their value at the end of 2015. With­out the cur­rency trans­la­tion to ster­ling — which the com­pany has sen­si­bly locked in — it is a mod­est 9 per cent.

The ex­pected net pro­ceeds from the sale are just over £1bn. Af­ter re­deem­ing bor­row­ings, pay­ing cap­i­tal gains tax and other sundry ex­penses, the com­pany ex­pects to have about £650m. Share­hold­ers can ex­pect over half of that back, though the mode of trans­fer is yet to be con­firmed.

They will also be left with shares in a rather dif­fer­ent com­pany. Hansteen be­gan life with an all-Europe port­fo­lio. It will now be a smaller com­pany mak­ing a fo­cused bet on the re­silience of post-Brexit UK prop­erty.

This makes sense. The com­pany re­ports in ster­ling and its man­age­ment team is based in the UK. But there may be more to the share price jump than a ge­o­graphic tidy up and a cap­i­tal re­turn. With less debt and more cash the slimmed down Hansteen has just turned it­self into a hand­ily di­gestible takeover tar­get.

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