22 Jul 2020 07:00
STENPROP LIMITED
(Registered in Guernsey)
(Registration number 64865)
LSE share code: STP JSE share code: STP
ISIN: GG00BFWMR296
("Stenprop" or the "Company")
STENPROP ANNOUNCES ACQUISITION OF BOWTHORPE PARK INDUSTRIAL ESTATE IN NORWICH FOR £19.6M
-Acquisition is in line with the Company's strategy to become a 100% UK Multi Let Industrial business-
22 July 2020
Stenprop, the UK multi-let industrial ("MLI") property company, announces that it has simultaneously exchanged and completed the purchase of Bowthorpe Park Industrial Estate in Norwich, UK from Blackrock Industrial Trust for £19.6 million. The purchase price reflects a net initial yield of 6.35%.
With excellent access to the A47 and in turn the national road network, the 16-acre park provides 22,829 sqm (245,730 sq ft) of gross lettable MLI space across 76 units. It is currently circa 94% let to a wide range of tenants including manufacturers, distributers, high-tech companies and trade counters at a weighted average rental of £58 per sqm (£5.40 per sq ft).
The acquisition is in line with Stenprop's strategy to become a 100% UK MLI business. As a result of this acquisition, the percentage of MLI assets within Stenprop's portfolio rose from 58% to 60%, based on the Company's total property asset value at 31 March 2020. Following completion of the sale of the Neucӧlln Carrée retail park in Berlin, expected to occur by no later than 15 January 2021, the percentage of MLI assets within the portfolio will rise to 62% based on the Company's total property asset value at 31 March 2020.
Will Lutton, Head of Investment at Stenprop, commented:
"We are pleased to have secured this estate, which fits well with our investment criteria. The small average unit size mirrors our existing portfolio and variety of occupiers provides diversification of income. We are confident we can drive performance through the roll-out of our Industrials.co.uk leasing platform and flexible leasing model across the asset.
"We have been encouraged by the data we have collected from our existing portfolio during the COVID-19 crisis, with evidence of pent up demand from occupiers across the country. That knowledge, combined with the underlying market dynamics in Norwich, which has a low void rate, is a strong indicator that this estate is well placed to deliver sustainable and growing income returns."
The information below is included in accordance with the requirements of the Johannesburg Stock Exchange.
Terms of the Acquisition
Stenprop acquired the property from BNPDSJ & BlackRock (CI) Limited as trustees of BlackRock Industrial Trust (the "Seller") for a total purchase price of £19,600,000 (the "Purchase Price"). Simultaneous exchange and completion of the transaction took place on 21 July 2020, being the effective date of the acquisition. The acquisition was funded from the Company's existing cash resources.
Normal warranties and indemnities have been provided by the Seller for a transaction of this nature.
The Purchase Price for the property is considered to be its fair market value, as determined by the directors of the purchaser. The directors of the purchaser are not independent and are not registered as professional valuers or as professional associate valuers in terms of the Property Valuers Profession Act, N0. 47 of 2000.
Financial information
Set out below are the forecast revenue, operational net income, net profit after tax and earnings available for distribution relating to the property (the "forecast") for the period ending 31 March 2021 and the year ending 31 March 2022 (the "forecast period"). The forecast, including the assumptions on which it is based and the financial information from which it has been prepared, is the responsibility of the directors of the Company. The forecast has not been reviewed or reported on by independent reporting accountants.
The forecast presented in the table below has been prepared in accordance with the Company's accounting policies, which are in compliance with International Financial Reporting Standards.
| Forecast from 21 July 2020 to 31 March 2021 £ | Forecast for the year ending 31 March 2022 £ |
Property rental (note 1) | 871,597 | 1,327,348 |
Other operating expenses (excluding transaction costs) | (178,534) | (184,328) |
Operational net income | 693,063 | 1,143,020 |
Financing costs | (76,364) | (229,092) |
Profit before taxation | 616,699 | 913,928 |
Taxation | - | - |
Profit for the period | 616,699 | 913,928 |
Distributable earnings | 616,699 | 913,928 |
Note 1 - Property rental
% | Forecast from 21 July 2020 to 31 March 2021
| Forecast for the year ending 31 March 2022
|
Contracted |
99 |
83 |
Uncontracted | 1 | 17 |
Total | 100 | 100 |
The forecast incorporates the following material assumptions in respect of revenue and expenses:
1. The forecast is based on information derived from the lease contracts provided by the Seller, which have been the subject of a legal due diligence, as well as Stenprop's own review, in consultation with its advisors, of the expected income and expenditure associated with the asset.
2. Property rental income includes the effects of straight lining rental income.
3. Leases expiring during the forecast period are assumed to be re-let at current market rates after a 7.8-month void period on average, unless management believes the lessee has the intention to renew their lease.
4. An average 4.2-month rent-free period has been assumed on all new leases included in the forecast.
5. Property operating expenses have been forecast based on the current service charge budget for the asset, operating expenditure budgets, and forecast vacancy rates and thus landlord void costs for the respective units. A bad debt provision of 1.00% of rental income is included in the forecast. This provision has been made to account for the estimated impact of irrecoverable rent arrears and tenant forfeiture. There is an additional 10% bad debt provision for the first 12 months to reflect potential impacts of the COVID-19 pandemic on rent collection.
6. Senior debt of £7.84 million with a five-year term secured over the asset has been assumed from 1 December 2020, based on a margin of 2.40% over 3-month LIBOR, hedged using a 5-year interest-rate swap at an assumed rate of 0.35%, giving an all-in cost of debt of 2.75%. Upfront finance costs (including associated professional fees) have been assumed at 2.00% of the senior debt and are amortised over the term of the senior debt.
7. No fair value adjustment is recognised.
The acquisition is classified as a category 2 transaction in terms of the JSE Listings Requirements. Accordingly, it is not subject to approval by shareholders. Stenprop has a primary listing on the Main Board of the Johannesburg Stock Exchange and a listing on the Specialist Fund Segment of the Main Market of the London Stock Exchange.
For further information:
Stenprop Limited +44(0)20 3918 6600
Paul Arenson (paul.arenson@stenprop.com)
Julian Carey (julian.carey@stenprop.com)
James Beaumont (james.beaumont@stenprop.com)
Numis Securities Limited (Financial Adviser) +44(0)20 7260 1000
Hugh Jonathan
Vicki Paine
FTI Consulting (PR Adviser) +44(0)20 3727 1000
Dido Laurimore
Richard Sunderland
Richard Gotla
Neel Bose
Stenprop@fticonsulting.com
Java Capital Trustees and Sponsors Proprietary Limited +27 (0)11 722 3050
(JSE Sponsor)
About Stenprop:
Stenprop is a UK REIT listed on the LSE and the JSE. The objective of the Company is to deliver sustainable growing income to its investors. Stenprop's investment policy is to invest in a diversified portfolio of UK multi-let industrial (MLI) properties with the strategic goal of becoming the leading MLI business in the UK. For further information, go to www.stenprop.com.