Hansteen has agreed a £460m deal with listed competitor Warehouse REIT that will see it sell almost 70% of its assets.
The industrial firm is disposing of 180 UK industrial estates that total 9.5m sq ft. The price reflects a yield of just above 7%. The majority of the assets previously made up the Ashtenne Industrial Fund, which Hansteen took full control of in 2016.
Warehouse REIT still needs to raise capital from investors to fund the purchase, but it is understood to have positive momentum.
The deal would be transformational for both companies and is the latest major transaction that forms part of a tidal wave of capital flooding into the UK and European logistics property market. This wave looks to take advantage of rising rents and values underpinned by the expansion of online retailers.
It would more than double the size of Warehouse REIT, which currently owns around £300m of assets and only listed last September when it raised an initial £150m.
Run by external manager Tilstone Partners and headed by managing director Andrew Bird, chairman Neil Kirton and non-executive chairman Simon Hope – who is also head of global capital markets at Savills – Warehouse REIT is aiming to become a major force in the booming UK logistics market.
Based on valuations from the end of last year, the sale will leave Hansteen, which was floated in 2005, with £120m of standing properties in the UK and £51.7m of land across 452 acres. It also owns £31.7m of properties in France and Belgium.
Its circa £203.4m portfolio may be added to in the coming weeks, however, as it is in talks to buy St Modwen’s 1.4m sq ft, 24-asset Cygnet portfolio for £59m.
Hansteen founders and joint chief executives Ian Watson and Morgan Jones [main pic], who are 58 and 60 respectively, are moving closer towards standard retirement age and options over the long-term future of the rest of the company are also being considered.
Both Watson and Jones, who are significant minority shareholders in the company, have long-term investment plans due at the end of the year that, according to an estimate in the company’s most recent annual report, will pay them a combined £19.1m in shares.
As a result, the company has long been seen as a prospective takeover target and last year Green Street Advisors tipped it as the fifth most likely company in the European listed real estate sector to be taken out with a 20% likelihood.
Hansteen and Warehouse REIT have a strong relationship and this deal will be the third portfolio transacted between the pair with the largest previous deal having seen Warehouse REIT buy the £116m Industrial Multi Property Trust from Hansteen in February.
The surge in the logistics investment market for both big box warehouses and last-mile distribution units has seen private equity firms pile into the market, such as Blackstone, which has built up a €4bn (£3.6bn) portfolio of last-mile assets alongside M7, and new listed firms being launched such as Tritax EuroBox that raised £300m earlier this month in a listing that was “significantly oversubscribed”.
Similarly, investors buying units in specialist funds such as Legal & General Investment Management’s Industrial Property Investment Fund or Aberdeen Asset Management’s Airport Industrial Property Unit Trust are having to do so at large premiums.
Savills is advising Warehouse REIT and it is understood the firm will also lead the management of the portfolio once it is acquired.
All parties declined to comment.
Hansteen’s steady wind-down
Hansteen has steadily been decreasing its assets under management over the past four years having undertaken a series of major disposals. In 2014 it sold the £146.1m Hansteen UK Industrial Property Unit Trust (HPUT) to Brockton Capital and Dunedin Property and then followed this by selling HPUT II to the same buyers for £192.1m.
Its most dramatic disposal came in when it sold almost its entire European business last June, made up of €1.3bn (£1.2bn) of German and Dutch assets, to Blackstone and M7 Real Estate.