Stenprop has bought three multi-let industrial estates for £13.5 million in line with its stated strategy to focus on UK multi-let industrial property.
It has also secured a new £50 million revolving debt facility from Investec Bank PLC to enable further acquisitions in the sector while it executes its sales programme of the non-multi-let industrial assets in its portfolio.
In three separate transactions in December 2017, Stenprop bought Souterhead Industrial Estate in Aberdeen from M&G Real Estate, Venture Park in Peterborough from Catalyst Capital and Coningsby Park in Peterborough from Thomas Cook, which together total more than 360,000 sq ft.
The three estates comprise 63 purpose-built multi-let industrial units. In addition to the combined £13.5 million purchase price, Stenprop will invest a further £4.5 million into Coningsby Park in Peterborough as part of a comprehensive refurbishment programme. The acquisitions increase the size of Stenprop’s multi-let industrial portfolio to 2.36 million sq ft, which represents almost 20% of its total portfolio.
Julian Carey, Group Property Director of Stenprop, said: "All three estates fit perfectly with our business model and give us an opportunity to add value through our industrials.co.uk asset management platform.
"Coningsby Park, Peterborough, which had previously been fitted out as a call centre by Thomas Cook, is a particularly exciting acquisition for us We were able to acquire the asset for a price reflecting largely vacant value, giving us the opportunity to use our asset management capabilities to reposition it to its former multi-let use enabling us to bring it back to market for letting. The Peterborough multi-let market has a sub 3% vacancy at present, and we are encouraged by the early demand we received from potential occupiers in advance of acquisition. Once fully let, this asset will be substantially yield enhancing for the overall portfolio.
"The other two estates are income producing and meet our earnings return targets, with the prospect of strong rental growth through asset management over time."
Paul Arenson, CEO of Stenprop added: ”We remain committed to our strategy of transitioning into a focused specialist in the UK multi-let industrial sector. Rental growth from the £127 million portfolio we acquired from Morgan Stanley in June 2017 has exceeded our expectations. The integration of the operating team that we acquired at the same time, headed by Julian Carey, has been seamless, positioning us well to take on substantially more assets of this nature at little marginal cost.
"We have identified £460 million of assets to sell over the next two years and have a target to acquire at least £220 million of multi-let industrial assets from those proceeds, with the balance of equity realised being used to reduce overall debt levels to a loan-to-value ratio of less than 40%. To facilitate our acquisitions, we have arranged a revolving credit facility of £50 million. Through this we can fund purchases immediately, eliminating cash drag during the transition process. We expect UK multi-let industrial assets to comprise the majority of our total portfolio by the end of 2019 based on the current programme.
"As part of this strategy, we will also be converting to UK REIT status and listing on the London Stock Exchange within the next six to nine months. We will continue to retain our current listing on the Johannesburg Stock Exchange. At this stage, there is no intention to issue shares when we list in London as we will first utilise the proceeds from sales to fund the acquisition pipeline.
"The first of our sales at 11 Pilgrim Street, London EC4, completed on 12 January 2018 and was sold at above book value for £79.9 million. We have further sales in the pipeline throughout 2018."
Stenprop was represented on the three acquisitions by Buchanan Bond, Ereira Mendoza and AGL, with Gowling WLG and Pinsent Masons undertaking the legal due diligence. It was represented on the sale of 11 Pilgrim Street by Cushman & Wakefield, with Berwin Leighton Paisner LLP undertaking the legal work.