Hansteen: Brexit bet
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.