HSTN.L Regulatory News (HSTN)

For release: 18 May 2012

Hansteen Holdings PLC

("Hansteen" or the "Company")

Interim Management Statement

Hansteen Holdings (LSE: HSTN), the UK and Continental property investment company, announces its Interim Management Statement for the period from 1 January to 18 May 2012.

For further information:

Overview

In the first four months of 2012, despite the difficult economic environment, Hansteen has continued to generate solid returns, with key measures, such as strong cash flow and Normalised Total Profit, being at least in line with the Board's expectations.

The Company has continued to selectively sell properties, often to occupiers, and mainly vacant or low yielding. It has completed 10 disposals generating £1.0 million above book value and a further six sales are under negotiation. Notable amongst the sales was a vacant 10,800 sq m property at Ede in The Netherlands, sold at a book value of €4.1 million, and a quarry site in Shipton, Oxfordshire sold for £6.0 million generating a £0.5 million profit.

The pipeline of potential new acquisitions is growing as banks show an increasing willingness to deal with distressed loans. The Company is actively pursuing opportunities in each of its three core markets but the processes remain slow and at times opaque, meaning the timing and certainty on individual transactions is difficult to predict. However, the Board is confident that its strategy and market position will result in value enhancing acquisitions.

The total rent roll including HPUT at 31 March 2012 was £76.4 million (31 December 2011: £79.3 million); key factors were a small net reduction in like-for-like occupancy and rent roll, a £1.5 million adverse exchange rate movement and £1.0 million loss of rent resulting from disposals.

The acquisition of the Spencer portfolio in December last year has proven to be particularly successful with a reduction in vacancy from 32% to 27% in the first four months of our ownership.

Overall, occupational demand in Germany is robust, in the UK stable but competitive and in Benelux the market continues to be difficult.

However, with a new local asset management team now in place in Benelux, there has been an increase in the number of enquiries, particularly for larger spaces, over the period.

Disposals/Acquisitions

During the first quarter, Hansteen completed 10 disposals of mainly vacant or low yielding properties for a total of £25.0 million, representing an average yield of 4.7%, and an average of 4.5% above the 31 December 2011 valuations.

Two property acquisitions in Germany totalling €35.6 million are currently in solicitors' hands. They have a combined income of €5.3 million, representing a yield on the total acquisition cost of 13.8%.

UK

Across the UK wholly owned portfolio, vacancy was reduced by 8,000 sq m to 95,000 sq m or 36% (31 December 2012: 103,000 sq m (38%)), adding £205,000 per annum to the rent roll.

Within the HPUT portfolio, vacancy was reduced by 14,000 sq m to 69,000 sq m (20%) (31 December 2011: 83,000 sq m (23%)) adding £352,000 per annum to its rent roll.

We continue to see good levels of letting activity in the UK where 45 lettings, generating £1.2 million of income, were concluded in the first quarter of 2012.

A 450 acre site at Shipton Quarry, which was acquired as part of the Kilmartin purchase in May 2011, was sold for £6.0 million in March 2012 generating a net profit of £0.5 million.

During the period, significant progress has been made with the Spencer portfolio acquired in December 2011. Since acquisition, the passing rent has increased by £0.2 million to £12.6 million and vacancy has decreased by 17,500 sq m, from 120,400 sq m (32%) to 102,900 (27 %). Two properties at Broomfield Commercial Park, Mold, were sold to an occupier for £1.0 million in March 2012 generating a net profit of £ 0.1 million. A 5.6 acre land holding is currently in solicitors' hands for sale. 

Furthermore, the Spencer acquisition has provided critical mass in the North West, South West and Midlands regions which has enabled Hansteen to add a further three centres to its UK regional office network. The six regional offices, staffed by a dedicated and experienced asset management team, allow direct marketing and contact with local occupiers thus enabling Hansteen to unlock the opportunities in this portfolio.

Overall, the occupational market remains fragile with a general nervousness amongst prospective tenants, albeit there are some regional differences with, for example, the South West and Midlands gaining strength while the North East remains relatively weak.

Germany

In Germany, vacancy has increased by 44,000 sq m to 213,000 sq m (17%) (31 December 2011: 169,000 sq m (13%)) as a number of short term lettings entered into towards the end of 2011 reversed in the period.

The German occupational market remained steady with 119,000 sq m of new lettings and lease renewals to 111 tenants concluded across the portfolio, representing rental income of €5.5 million per annum.

In Rodenbach, Danceries Textilhandel GmbH signed a three year lease for offices and a warehouse at a rent of €58,902, whilst in Paderborn Massong, an existing tenant, has taken an additional 2,273 sq m of warehouse space at €84,556 per annum and at Gustavsburg, NTE GmbH has agreed a lease for 1,054 sq m of warehouse space at €60,078 per annum. Major lease renewals included a new three year lease to Toom Baumarkt (REWE) at Cologne Porz for €285,000 per annum.

A total of four German properties were sold, in the period, for €16.6 million, generating profit of €0.5 million. The most significant sale was the 21,975 sq m Heilbronn property which sold in January 2012 for €13.4 million.

Benelux

In the Benelux region, despite a decrease in occupancy of 36,000 sqm, the rent roll has not materially changed. This is due largely to the expiry of rental incentives and indexation. The new year has seen more enquiries than hitherto and we have achieved one material letting of 5,000 sq m at Tiel and concluded the sale of two vacant properties.

A 10,800 sq m property at Ede was sold for €4.1 million and part of the site at Milsbeek was sold for €260,000; both of these Netherlands sales were at or above the December 2011 book value.

Currency

The Euro has weakened further against Sterling, as a result there will be an adverse currency effect on reported earnings and NAV as the Company reports in Sterling. This will only have a cash impact, if, or when, the Company changes Euros into Sterling. Hansteen has substantial cash reserves in both Sterling and Euros allowing any currency exchange to be at a time of the Company's choosing. Furthermore, Hansteen's currency exposure is substantially ameliorated by a €200 million currency hedge at €1.20 to the £1.

Outlook

The Board is assuming the current difficult economic background will continue for some time and indeed could get worse before it gets better. However, it believes that the approach of buying high-yielding, industrial properties with low capital values and opportunities to add value and managing them intensively for income and, in time, value growth, is a model suited to such testing times. The team is growing earnings, selectively achieving profitable sales and pursuing a number of potentially exciting acquisition opportunities from a position of financial strength.