Stenprop decides to go the MLI route

LISTED property fund Stenprop, whose €848.1 million property portfolio comprises only office and retail assets, could over time become a highly focused multi-let industrial (MLI) property company.

Paul Arenson, the chief executive of Stenprop, said yesterday that they wanted to become a leader in the MLI estates property segment in the UK and planned to build up this part of its portfolio over the next three to five years through the active pursuit of acquisition opportunities over time.

His comments follow Stenprop, which has a primary listing on the Bermuda Stock Exchange and a secondary listing on the JSE, earlier this week reporting that it had agreed to acquire a portfolio of MLI properties in the UK and C2 Capital, the management business that built up and managed the portfolio, for a total of £130.5m (R2.16 billion).

The portfolio comprises 25 MLI estates across the UK with a gross lettable area of 200 000m² and a diversified base of more than 400 tenants. “We are very excited about this transaction. It provides us with a strong strategic foothold, economies of scale and management expertise in the MLI sector.

“Our intention is to build a much larger MLI portfolio off this base, which we are confident will deliver sustainable higher average annual rental growth going forward,” he said.

He said there were many drivers of demand for MLI units, including the host of suppliers spawned by the Internet and the favourable supply and demand dynamics because they were expensive to build.

This had resulted in the demand for these unit increasing while there was no new supply, because it was uneconomic to build them until the rentals improved. In addition, Arenson said the acquisition of C2 Capital meant Stenprop had the management expertise to manage these properties.

“We think there is a big opportunity to mop up the small owners of MLI units. There are thousands upon thousands of them. If it’s wildly successful, which we believe it will be, its not beyond the realms of possibility that we become a highly specialised focused MLI company,” he said.

He stressed that the expansion into this sector would be restricted to the UK.

Stenprop’s current portfolio is geographically split between three countries, with 40 percent by value in the UK, 42 percent in Germany and 18 percent in Switzerland.

However, it expects to have sold its entire €153m Switzerland portfolio by end-March next year.

Stenprop yesterday reported a 1.1 percent growth in total dividend a share for the year to March to 9 cents from 8.9c in the previous year.

Stenprop shares gained 0.61 percent on the JSE yesterday to close at R18.10.