Stenprop gains more ground in UK's property market

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Stenprop CEO Paul Arenson says the company is transitioning from a diversified real estate investment trust into a multi-let industrial property owning company. Stenprop CEO Paul Arenson says the company is transitioning from a diversified real estate investment trust into a multi-let industrial property owning company.

Dual-listed property company Stenprop (JSE: STP) has expanded into the UK industrial property sector with its R116.8m acquisition of Gainsborough Trading Estate.

The acquisition follows the group’s announcement two years ago that it is repositioning to become a specialist UK-focused business that provides work spaces for small- to medium-sized firms.

The JSE-listed Stenprop said in its 2018 annual report that even though its property portfolio was of excellent quality and well-let”, it opted to move into the multi-let industrial area (MLI) because the growth prospects of its portfolio were stagnating.

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By comparison, it said the prospects for growth in MLI industrial estates were stronger, but for it to take full advantage of the opportunities in this sector, it needs to increase the number of MLI assets it owns, and also needs a management platform that can deal with the “granular nature of the tenant base”, as well as the short bases of its leases.

To fund this change in strategy, Stenprop said it plans to sell off its non-MLI properties over the next few years. This has already seen it dispose of Euston House in London and put its Swiss properties up for sale.

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This change in strategy led it to buy the property portfolio of C2 Capital for £130.5m in June 2007. It said at the time that no MLI units had been built in the region since 2007 and that by taking over C2 Capital’s 25 industrial estates it could get it for 60% lower than their replacement costs.

Since taking over these assets, it has been steadily taking over other industrial estates. Earlier in 2019 it bought Hansteen Holdings, which owned 22 industrial estates, for £67.9m.

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Its goal for 2019 is to grow its MLI assets to about 65% of its total portfolio. The acquisition of Gainsborough Trading Estate increases this percentage to 41%.

Stenprop, which also has assets in Germany, also plans to reduce its ratio of debt to capital from the 49.2% it was at the end of March 2018, to about 40% by the end of March 2020.

Stenprop executive property director Julian Carey said the acquisition of the Gainsborough Trading Estate increases its MLI portfolio to more than £250m, and that the growth prospects in this part of the UK are strong. “We have long been fans of investing in and around Birmingham, and the excellent demand-supply dynamics in the area are clear to see from the excellent letting history at Gainsborough Trading Estate.”

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Listed Property / REITs  |  United Kingdom Property Market  |  Stenprop Ltd  |  Paul Arenson  |  Julian Carey