Theres no doubt that the founders are in it to make money by leveraging funds raised from shareholders. Wrong to suggest they just happened on a lucky break with their strategy. I think they spotted the opportunity, raised funds and went for it. You could argue that the fruits if their labours has been distributed unfairly but they are working to a well published scheme, so you pays your money.........! I still think we should have had a cash payout last time instead of a buyback.
good company, but from latest results today the founders having a laugh at shareholder expense.
Under their performance terms they have set aside £19.1m for the founders with one more year to run on it (part of a 3 year deal). Now given they have hit their performance in the first two years - of achieving 10% compound return over 3 years - the founders are going to reward themselves this year 25% of all additional returns for 2018. What this means is if the company deliver 10% to 15% total return this year (which is feasible given the strength of the UK industrial market) Hansteen will be paying the founders somewhere between £35m to £40m.
Please note the long term incentive plan was formulated in 2005 (back in the casino banking era of pre Global Financial Crisis). Also, whilst I think Hansteen have done a good job, you have to questions if they really delivered superior growth; what I mean here is the company has just ridden the industrial market up... possibly through no skill of their own. As an example the broad level IPD index for Industrial property did 20% last year on an ungeared basis (no debt) which demonstrates the whole industrial market is booming. So you must question if the founders deserve the potential of £35 to £40m when most of the return is just driven by the broad market and not necessarily by management skill.
So I think shareholders a getting a super bad deal in the Hansteen Founder Incentive. This is something shareholders should be on top of.
So, they give you a profit of 4p a share after selling a huge chunk of the company and promising to return the proceeds to shareholders.
They should actually have been giving you something like 70p a share (you do the maths, I cant be bothered now)
If youre happy with that so be it.
Thats why Im out.
Sorry TP, I don't see it as a rip off at all. Quite the opposite in fact. I added to my holding when they were at 136 and promising to buy half back from me at 140. Such a no-brainer, I was waiting for the catch as they always say, if it seems too good to be true, it probably is.
No. They did just what they said; bought half my stock at a really good price. It has appreciated that much since I bought my first tranche last year sometime that I was quite happy. Even topped up again since the price has fallen back a bit, as this is a good company I think. Probably be a couple of leanish years as they start acquiring new properties but a good medium term bet IMHO.
Sold mine into the market for 139. No point waiting for it to go through the process.
My view is that we were sold down the river. The return to shareholders if you stay is a bigger share of a much smaller pot...no benefit. If you take the offer you end up with market price for half your holding and. A reduced value share of whats left.
If you do nothing youre end up with a reduced value of your complete holding.
Wheres the return in any of that .? I just cant see it.
Rip off Britain at its worst.
Thanks for your reply and details of your REIT holdings.
As mentioned in my previous post I probably should have some pure RE holdings but still need to build up my portfolio with some more speculative growth shares although I do hold some IT's and UT's.
Not too familiar with RE so good to have a few to check out.
Thanks MJS, I will have a look at SRE and GRN as I do not have any pure RE holdings and probably should. Likely to give Palace Capital a miss though as it looks like it will provide a decent income but limited growth.
Does anyone have an interest / opinion on PSDL (Phoenix Spree) Berlin residential Market (yield 2%) or PCA (Palace Capital) Commercial property outside London (yield 5.3%) two other companies I have been monitoring in addition to Hansteen?
I favour PCA despite 100% UK based for yield and management although both Directors in their 70's so some risk on succession, if, as an analyst tactfully said one or both should fall under a bus.
I have been moitoring HSTN with a view to buying into my ISA. However my interest was based on the yield but also importantly the business having a UK / Europe mix which will, sadly, not now be the case. It seems a short sighted move but seems LTIP swung the decision.
I'm with Interactive Investor (have been since 1998). I can't say how it would work with IG, but with Interactive Investor, they will set up a 'Corporate Action' form, on the site, which allows you to select what options you want to take. So far all my experiences with Interactive Investor have been very positive, with respect to how they handle this kind of thing.
Fromthis morning's Times.
I'm holding. Done me well so far as up circa 20% in just over a year and some dividends too.
Companies are funded by investors with their hard-earned cash and are expected to invest it wisely to provide a better return than those investors would get elsewhere. Any cash handed back, then, by whatever means should be looked at very carefully.
Hansteens return of £580 million to investors, pretty much half its market capitalisation, looks unavoidable. This year the industrial property company was in receipt of an offer from Blackstone and another investor for its German and Dutch properties that was far too good to ignore.
The price settled on, 1.28 billion, was 6 per cent more than those properties had been in the books for at the end of last year. It was completed, conveniently, just before the end of Hansteens first half.
The company, historically, was only in the European market because, on its listing in 2005, the founders were contractually precluded from investing in the UK industrial market after the sale of their previous venture, Ashtenne. Since then a UK portfolio has been built up, while now is not a bad time, given the recovery in the eurozone economy, to be disinvesting there.
The problem is that UK industrial property is also much in demand, and not just those big box distribution units so favoured by internet retailers. It would be almost impossible to reinvest the net cash due from the disposal all at once and at decent prices while leaving it in the bank produces a cash drag on the companys finances, given low interest rates. Investors should not be complaining. The shares, recommended here at 123p in March because of the potential for cash returns, lost 1½p to 137½p yesterday. Hansteen is proposing to buy back from investors one in every two of their shares, up to that £580 million proposed return, at 140p, a premium of almost 14 per cent over their price in March when the potential disposal was mooted and at a premium of 7p over the latest net asset value at the end of June.
That premium means that NAV figure will be diluted on completion, but that need bother no one who takes up the offer. The sale of those properties means Hansteen is almost entirely in the UK there are some Continental odds and ends that will go in due course. It means dividends will have to be advanced to meet UK REIT rules which require a certain level of payout.
Take the cash and hang on to your remaining holding for the 4.3 per cent forward yield.
My advice Hold
Why The tender offer should be accepted as it offers good value to investors and a good use of the cash, while the forward yield is attractive
Personally, I'll sell my 50% at £1.40 and then mull over what to do with the cash. Possibly even buy some of the new Hansteen with it. We'll see.
I agree this is not a disappointing announcement.
Do you hold the shares through a nominee platform, PJ? Mine are, and I wonder how I will be notified of the options? Do they write directly or is it done through the platform? [IG in my case]
But this is in effect doing what was promised. You will have the option to sell half your holding, at 140 per share, as a corporate action - and those shares will be cancelled.
That is, in effect, the same as paying a 70 dividend per share.
The difference being that with a buy back, you end up with 70p per share as CGT and half the number of shares you had previously vs. getting 70p per share as dividend and keeping the same number of shares, which will be worth half as much as the CGT plan.
My shares are all in an ISA - so doesn't really make any difference which way they go.
This announcement does give shareholders another option of course - don't take up the offer. In which case, after the dust settles you'll be effectively doubling the percentage of Hansteen that you own (although it will be Hansteen lite at that point.)
Personally, I'll sell my 50% at £1.40 and then mull over what to do with the cash. Possibly even buy some of the new Hansteen with it. We'll see.
An annoying announcement today. In my view this just completes the picture of a board that is putting itself before shareholders.
Private clients now have the choice of selling back shares @ £1.40 or accepting a dilution of NAV to £1.24 (which will in any event apply to their remaining 50% of shares). So they are being forced to incur CGT as a result of the board selling an excellent continental European business, which they should have retained.
So Hansteen now selling high yielding UK industrial assets. I'm starting to wonder what on earth is going on. In my view the company is going backwards - unless it has a really large UK purchase in it's sights, which seems unlikely.
I thought the idea of a share buy back was to enhance the value of the remaining shares in circulation (there being fewer of them for theoretically the same mc, thought it often doesn't seem to work that way). Thus the only way to realise that ' added value' is to sell. Then we're into the cgt area.
All pretty obvious but I don't see how the company, or long term holders would benefit from such a discredited scheme.
I too was surprised by the sale of the Euro assets. At a time when the £ is fast becoming worthless the assets sold would have continued to be a good earner for years to come.
However, the deed is done, and we've long praised the wisdom of our founders in the past. (And it would seem their wisdom continues in the accrual of their personal wealth). We have benefitted by getting the crumbs by doing nothing but buying shares. So proportionately we should perhaps appreciate their LTIP actions.
As for the capital return, I would assume profits will be set against CGT, but that's ok. I've got a few losses mounting up elsewhere on dead dogs just waiting for the chance to finally sell off and set against that.
All I will say is that the 'new' HSTN should be a pretty clean business, with a load of property that is valued at less than it would cost to build, and generating a decent income. As long as Brexit doesn't blow us all sky high, which it probably will, all will be OK.
Personally I'm pretty cheesed off that a) the management have downgraded the business in order to earn a load of LTIP money and b) they are selling the part of the business that sits in the fastest growing part of Europe. How much sense that does make to shareholders?
The payout should be like a reverse corporate action. So it probably is a corporate action.
With the LTIP if I remember rightly, it accrues over five years. This is the important statement:
Based on this assumption the LTIP award would have been £27.7 million or 22.2 million ordinary shares. This would have diluted the June EPRA NAV by 3.5p per share
Not good.......directors taking another £27m off shareholders........crazy........
"Good results IMHO, although I'm not too sure how to react to the 70p a share return to shareholders, presumably the share price will drop 70p and I'll just end up with £5120 cash and a shareholding worth £4380 rather than a shareholding of £9500. About a 54% drop in share price
If £580 million is returned to the shareholders, and the current market cap is £1040 million. Then it seems one would assume the new market cap to be about £460 million(1040 - 580). About a 56% drop in share price.
However, post return of cash, the remaining Property/Land will be worth about £805 million, debt of approx £320 million, cash on hand of about £70 million. NAV will be about £555 million. Therefore, if the share price were to drop to 60p, it would value HSTN at about £495 million - just over a 10% discount to NAV. I guess with brexit and uncertainty etc, a 10% discount might be fair value - but looking over the past five years, it seems to me that HSTN has normally traded at a premium to NAV. At £1.30 - could be a worth buying a few more.
I'm not too sure I understand the LTIP implications. Also, I've not had a share where a return of cash was done as a capital return before, rather than dividend. How does that typically work?
Agreed GI. But good to see, at last the embryonic plan to return the proceeds of the sale to shareholders before the end of the year. (Approx 70p per share). No doubt the sp will take a big hit post this event.
Capital return rather tha income is good.
NAV +2.8% based on EPRA NAV @ 132.5p
You need to look into the NAV carefully, though. As a result of the sale of non UK businesses, there is a 'one off' gain, which in turn triggers an LTIP liability, which essentially means that all of the NAV gain accrues to the directors as a bonus accrual. Call me a cynic, but you can't help suspecting that the non UK sale may well have been made with this in mind.
In my view the NAV is therefore unchanged and shareholders are not gaining from the above sale. The IFRS view is that there has been an increase in shareholder value, of maybe 4%.
The dividend is +4.5% to 2.3p - good
Future dividend outlook is for further increases - good
The distribution of sale monies will come as a return of capital - good.
Future prospects are good on both the capital and income side.
So my only gripe with Hansteen is that due to the LTIP, the directors are getting the lions share of NAV increases. I'll take the capital distribution and reduce my exposure to the stock. Or have I got this wrong? It's just my opinion, having read the results.......
The LTIP was supposed to be being reviewed. It hasn't been.
"It's pertinent to review the investment case for mid-cap commercial property investor LSE:HSTN:Hansteen since I drew attention to its shares at 109p two months ago, yielding 5.2%.On 10 March I also suggested a switch into Hansteen from ..."
Hansteen sells out of Europe
Hansteen sells out of Europe
The release of full-year profits for Hansteen Holdings (HSTN) was overshadowed by news that the commercial property landlord is to sell its portfolio of Dutch and German properties at a 6 per cent premium to the December 2016 valuation, and a 30 per cent premium to their value 12 months previously. After expenses, this will leave Hansteen with around £650m, a substantial proportion of which is expected to be returned to shareholders. The sale will leave Hansteen with a UK portfolio valued at around £677m.
An upward revaluation in the property portfolio (although not as large as in 2015) and higher rental income pushed adjusted net asset value per share up by 16 per cent to 128.9p at the year-end. Demand for smaller urban distribution and light industrial warehouses, as internet retailers seek out appropriate 'last mile' distribution centres to facilitate deliveries, helped to drive normalised income profit or recurring earnings up by 29.4 per cent to a record £61.1m. On top of this, asset sales netted a further profit of £4.7m.
Acquisitions included the 18.2 per cent of the Ashtenne Industrial Fund Unit Trust that Hansteen did not own, for £49.7m, and after the year-end it made an offer for Industrial Multi Property Trust, valued at £25.2m.
Analysts at Jefferies expect adjusted NAV to reach 132p by the year-end.
ORD PRICE: 122.7p MARKET VALUE: £913m
TOUCH: 122.6-122.8p 12-MONTH HIGH: 130p LOW: 95p
DIVIDEND YIELD: 4.8% TRADING PROPERTIES: £10m
DISCOUNT TO NAV: 1%
INVESTMENT PROP: £1.72bn NET DEBT: 79%
Year to 31 Dec Net asset value (p) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)*
2012 81 46 6.2 4.5
2013 86 65 9.1 4.8
2014 99 131 17.6 5
2015 105 171 21.3 5.25
2016 124 120 14.8 5.9
% change +18 -30 -31 +12
Ex-div: 20 Apr
Payment: 18 May
*Excluding special dividend of 3p a share paid in 2016
Even without the asset sale, Hansteen was paying an attractive dividend. Yet the shares still trade at a discount to forecast per-share net assets. Buy.
Last IC View: Buy, 116p, 23 Aug 2016
Having had 24 hours to mull this over, I think that this is probably a very shrewd move by an exceptionally experienced management team. Let's see whether they are wondering about a complete exit. The history of the team lies in buying at the bottom and selling at the top.
I can't see what else there is to buy at a low price in the UK. I can't help but feel that there must be something more to come; a complete exit or a new market entry. Let's see.
A strong Hold for me. I'm not convinced that the global recovery is that solid; the UK is still spending and borrowing, the USA is slowing. Ironically it is the EU that looks OK at the moment. But we'll see.
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