Hansteen Half Year Results to 30 June 2016 Castrop-Rauxel, Germany
Introduction Hansteen - Pan European Real Estate Investment Trust (REIT) Pan European REIT Five countries Regional teams in 15 offices High yielding industrial property Yield on passing rent 7.6% Topped up EPRA NIY 6.7% Avondale, UK Reversionary yield 9.3% Property portfolio of 1.67 billion Rent roll of 126.5 million pa from 41.4 million sq ft 5,270 tenants High and realised returns All dividends well covered by Normalised Profits Holhauser Strasse, Germany Saltley, West Midlands 2
Record Half Year Results Normalised Income Profit ( NIP ) increased by 28.1% to 29.2 million (H1 2015: 22.8 million) Normalised Total Profit ( NTP ) of 30.8 million (H1 2015: 30.1 million) Adjusted EPRA NAV per share increased to 120p (31 December 2015: 111p) November interim dividend increased by 4.8% to 2.2p per share (November 2015: 2.1p per share) Refinancing of Netherlands portfolio with new 145 million five-year facility Valuation increases in all regions 1.0% or 15.5 million on the attributable portfolio Post 30 June: AIF ownership increased to 100% through acquisition of remaining 14.4% of units for 39.5 million and refinanced UK portfolio with new five-year loan facility of 330 million Bordesley Green, Midlands, UK 3
Overview Croft Road, Newcastle Under Lyme, UK 4
Why Light Industrial? Consistently outperformed office and retail over the longer term Most flexible and economical commercial property type with widest occupational audience Recognised winner from growth in internet retailing Fundamental value dynamics strong Opportunities for adding value in low growth environment In scale, industrial property produces high and robust income Amersfoort, Netherlands Bellway, Newcastle Waalwijk, Netherlands 5
Hansteen returns underpinned by high income yield Yield on property - 7.6% Misconceptions about the Hansteen high yield Leakage? Works on property? Growth? Lease profile? 6
Question: Does leakage negate Hansteen s high yield? Hansteen: 5,270 tenants, short leases, high vacancy, multi jurisdiction Requires active asset management (15 offices, detailed hands-on approach) IMPORTANT YIELD IS THE NET INCOME AFTER ALL COSTS H1 results H1 results annualised Return on Market Cap Return on NAV Total Rent 59.8 119.6 Leakage: Property costs (7.9) (15.8) Admin costs (11.7) (23.4) less 3 rd party fees 1.7 3.4 Total leakage (17.9) (35.8) Ungeared Net operating income 41.9 83.8 5.5% 5.7% Interest (12.7) (25.4) Geared Net Income Profit (NIP) 29.2 58.4 6.8% 7.2% 7
Hansteen 1.5% 2.8% 3.2% 3.8% 3.6% 5.0% 4.7% 4.6% 4.6% 4.6% 4.3% 4.3% 6.8% Question: Does leakage negate Hansteen s high yields? 7.0% Net income return on a share purchased 1 Jan 2016 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 8
Hansteen 1.3% 1.7% 2.1% 2.1% 2.1% 2.0% 2.4% 2.9% 2.9% 2.8% 3.4% 3.2% 4.9% 5.1% Question: Does leakage negate Hansteen s high yields? 6.0% Earnings per share all REITS 2007-2010 5.0% 4.0% 3.0% 2.0% 1.0% - 9
Question: Do works on property negate Hansteen s high yields? Works on property consist of two elements: Repairs and maintenance: paid for by tenants paid for by Hansteen included in total leakage 3.0 million (annualised based on H1 16) Capital works: added to book cost then revalued at end of period think of spend equivalent to acquiring additional property run rate c. 11 million (annualised based on H1 16) breakdown of capex: 20% new building development 80% adding rent, ERV and value Cash required but adding to rent, ERV and value Veghel, Netherlands Ridderkerk, Netherlands 10
Question: Does Hansteen s high yield sacrifice future growth? Earnings on share purchased 1 Jan 2012 Grown 60%: 2012 6.3% 2013 8.0% 2014 9.8% 2015 8.9% 2016 10.1% Hansteen s levers for earnings growth: rental growth and occupancy improvement on existing portfolio growth generated from CapEx property acquisitions at higher yields than sales 11
Question: Does Hansteen s lease profile mean high yield is fragile? High tenant retention level Robust like-for-like rent performance (annual growth ranging from 0.5% to 4% of the rent roll) IPD outperformance of industrial Bergkamen, Germany 12
2016 Half Year Results Earnings Robust, high and growing Dividend Unbroken, progressive and well covered Bremen, Germany Saltley Business Park, Midlands, UK 13
Half Year Results Profit and loss account million 30 June 2016 30 June 2015 Rent 44.7 40.2 Cost of sales (5.8) (6.3) Gross Profit 38.9 33.9 Management fees 1.7 2.2 Share of Associates Income 8.2 4.9 Administration (9.7) (9.2) Interest (9.9) (9.0) Normalised Income Profit 29.2 22.8 Profit on sales 1.6 6.2 Other - 1.1 Normalised Total Profit 30.8 30.1 NIP per share 3.9 p 3.3 p NTP per share 4.2 p 4.4 p Diluted EPRA EPS 3.4 p 0.4 p Dividends 2.2 p 2.1 p 14
Half Year Results Balance Sheet million 30 June 2016 31 December 2015 Investment Property 1,224 1,061 Trading Property 10 11 1,234 1,072 Associates share of NAV 257 261 1,491 1,333 Other Assets/Debtors 35 36 Cash 44 63 1,570 1,432 Debt (615) (538) Other liabilities / creditors (91) (88) (706) (626) IFRS NAV 864 (115p) 806 (105p) MTM on convertible bond 100 107 Deferred tax and other adjustments 49 42 Adjusted EPRA NAV 1,013 (120p) 955 (111p) 15
Half Year Results EPRA NAV bridge 7p (3p) 120p EPRA IFRS 3p 2p Dec 2015 NAV 111p 105p 111p NTP net of tax 3p 4p Property revaluation 2p 2p FX net of hedging 7p 7p Dividend (3p) (3p) Other - 1p Dec 2015 EPRA NAV NTP net of tax Property revaluation FX net of hedging Dividend Like-for-like June 2016 EPRA NAV June 2016 NAV 120p 116p 16
Post Balance Sheet Events AIF ownership increased to 100% through acquisition of remaining 14.4% of units for 39.5 million Immediate NAV enhancement of circa 3.5 million reflecting performance fee on those units Equivalent property purchase of 62.9 million at an 8.0% yield on the passing rent Some savings on admin and interest costs Refinanced UK portfolio with new five-year loan facility of 330 million 280 million drawn Replaces 95 million RBS facility and 138.1 million RBS facility in AIF Cost of debt reduced to 2.7% (including fees) Saltley Business Park, Midlands, UK 17
Proforma adjustment for AIF transaction Balance sheet - million 30 June 2016 AIF adjustment Proforma Investment Property 1,233 437 Investment in Associates 257 (257) Cash 44 17 1,671-60 1,534 197 1,731 Debt (615) (185) (800) Other liabilities (56) (8) (64) (671) (193) (863) IFRS NAV 864 4 868 18
Half Year Results Balance sheet analysis Position post UK refinancing in July 2016: Borrowings NDV 44.9% NDV excluding convertible 38.2% All-in cost 3.2% Total swapped 46% average rate 0.68% Total capped 16% average rate 1.17% Total fixed (convertible) 11% rate 4.0% Total floating 27% Alfred Nobel Straase, Germany Dormagen, Germany Convertible 100 million convertible bond. Conditions for convert not met during H1 2016 Current convert rate of 91.35p (92.8 million shares) Adjusted EPRA NAV includes dilution of 4p per share Dreiech, Germany See appendix for details 19
Half Year Results Currency hedging 1. Net assets in Sterling - 45%, Net assets in Euros - 55% 2. Balance sheet hedge expired 30 June 2016 and not renewed. Euro debt reduces currency exposure but no additional hedging. 3. Continue to hedge short term euro net income (see appendix for details of current instruments) Radway Green, UK 20
Property Performance Kenfig Industrial Estate, Port Talbot, Wales 21
Property Performance Portfolio summary post AIF consolidation No. Acres Built Area Vacant Area Passing Rent Value Yield Reversionary sqm Euros Sterling Euros Sterling Yield m m m m UK 299 1,494,035 10.07% 60.9 50.4 747.1 618.5 8.2% 9.4% UK land - 440 - - - - 59.5 49.2 - - Germany 104 1,577,532 13.16% 63.6 52.6 869.7 719.9 7.3% 8.9% Netherlands, Belgium & France 81 776,713 17.01% 28.4 23.5 342.0 283.1 8.3% 11.8% Total Wholly owned 484 440 3,848,280 12.91% 152.8 126.5 2,018.3 1,670.7 7.6% 9.3% Exchange rates: June 2016 =1.2081 22
Property Performance Statistics at 30 June 2016 Rent p.a. Yield Passing rent 126.5 m 7.6% Contracted rent 132.7 m 7.9% ERV 156.0 m 9.7% EPRA topped up net initial yield 115.1 m 6.7% Number of tenants: 5,270 Average rent: 24,000 per annum No tenant > 1.7% rent roll H1 like-for-like valuation increase across total portfolio: 1.0% Like-for-Like occupancy: decreased by 34,759 sq m (0.9%) Like-for-Like rent: decreased by 0.65 million (0.5%) Average rent: UK 38 per sq m ( 3.50 per sq ft) Europe 46 per sq m ( 4.24 per sq ft) 38 per sq m ( 3.50 per sq ft) 23
Property Performance German portfolio Year Properties Tenants Built area Vacant area Passing rent ( m) Value ( m) June 2016 104 2,011 1,577,532 13.16% 63.6 869.7 7.3% Dec 2015 105 2,007 1,594,782 10.7% 66.8 863.3 7.7% Yield 43% of Hansteen s property investments Berlin, Germany Like-for-like valuation increased by 9.2 million or 1.1% Like-for-like occupancy decreased by 37,053 sq m Like-for-like rent down 1.5 million Dormagen, Germany Both rent and occupancy up in July 2016 One property sale for 8 million - profit of 1 million over 31 December valuation and 3.1 million over cost Neuss, Germany 24
Property Performance UK portfolio Excluding 49.2 million of development land: North Tyne, UK Year Properties Tenants Built area Vacant area Passing rent ( m) Value ( m) June 2016 299 2,754 1,494,035 10.1% 50.4 617.1 8.2% Dec 2015 308 2,776 1,508,122 11.2% 49.8 616.5 8.1% 40% of Hansteen s property investments Yield Like-for-like valuation increased by 5.2 million or 0.8% Like-for-like occupancy increased by 9,765 sq m Like-for-like rent up 1.0 million Nine sales for 7.3 million profit of 1.3 million over 31 December valuation Kings Court, Tyneside, UK 25
Property Performance Benelux and France portfolio Year Properties Tenants Built area Vacant area Passing rent ( m) Value ( m) June 2016 81 505 776,713 17.0% 28.4 342.0 8.3% Dec 2015 81 494 782,983 15.9% 29.0 336.1 8.6% Yield 17% of Hansteen s attributable property investments Like-for-like valuation increased by 4.7 million or 1.4% Like-for-like rent decrease of 0.5 million Utrecht, Netherlands Like-for-like occupancy down by 7,472 sq m Ridderkerk, Netherlands 26
Outlook Bremen, Germany 27
Outlook Earnings out performance will continue Strong occupational demand and rental growth Efficiencies from consolidation in the UK Since 30 June 2016, favourable currency movement continued Longer term the sector still has room for yield compression Viersen, Germany Hellerhof Parc, Germany 28
Appendix Dietzenbach, Germany 29
Half Year Results Associates Profit & Loss - million Saltley AIF Total Hansteen 100% 100% 100% Share Rent 0.52 17.8 18.3 15.1 Cost of sales (0.02) (2.5) (2.5) (2.1) Administration (0.04) (2.4) (2.4) (2.0) Interest (0.12) (3.3) (3.4) (2.8) Normalised Income Profit 0.34 9.6 9.9 8.2 Profit on sales / other income - 0.9 0.9 0.7 Normalised Total Profit 0.34 10.5 10.8 8.9 Hansteen Balance sheet - million Saltley AIF share 100% 85.6% Investment Property - 436.7 373.8 Cash - 9.6 8.2-446.3 382.0 Debt - (138.1) (118.2) Other liabilities - (7.9) (6.8) - (146.0) (125.0) IFRS NAV - 300.3 257.0 Hansteen share - 257.0 30
Appendix Debt and cash at 31 st July 2016 million 30 June 2016 31 December 2015 Germany debt 336 338 Benelux debt 154 147 Convertible 124 100 Total Euro debt 614 585 Total Euro debt in Sterling 508 430 UK debt 300 77 Total debt 808 507 Cash 71 63 Property 1,671 1,072 Net LTV 44% 41% Net LTV assuming convertible converts 38% 34% Gross average cost of borrowing 3.2% 3.6% Weighted average length to expiry 3.7 years 2.8 years 31
Appendix Borrowings summary at 31 st July 2016 Country Bank Debt Amount EUR Debt Amount GBP Jun-16 Dec-16 Jun-17 Dec-17 Dec-18 Dec-19 Dec-20 Dec-22 Dec-24 Dec-26 Germany Helaba 187,603 158,088 Feb- 19 Germany HSBC 106,075 89,387 Dec- 18 Germany HSBC 40,000 33,707 Sep- 19 Germany DG Hyp 2,482 2,091 Jun- 17 Netherlands ING 145,000 122,188 Jun -21 Belgium Various 5,561 4,686 Mar - 25 UK RBS 332,276 280,000 Jul - 21 UK RBS 23,734 20,000 Oct - 17 UK RBS- Conv. 100,000 84,267 Jul- 18 Total 942,730 794,413 / : 1.1867 32
Appendix Hedging summary Currency hedges: Party Amount hedged Rate Sterling equivalent Maturity Date RBS 30 m 1.45 21 m Dec 2016 RBS 33 m 1.60 20 m Jun 2017 HSBC 35 m 1.60 22 m Dec 2017 Total currency hedges 98 m 1.55 63 m Interest rate hedges: Summary Rate % total Swaps 436 367 0.682% 46% Caps 150 126 1.166% 16% Fixed 106 89 11% Floating 254 214 27% Total interest rate hedges 946 797 33
Appendix Portfolio summary at 30 June 2016 No. Built Area Vacant Area Passing Rent Value Yield Reversionary sqm Euros Sterling Euros Sterling Yield m m m m UK 79 460,804 10.07% 18.4 15.2 279.0 231.0 6.6% 7.5% Germany 104 1,577,532 13.16% 63.6 52.6 869.7 719.9 7.3% 8.9% Netherlands, Belgium & France 81 776,713 17.01% 28.4 23.5 342.0 283.1 8.3% 11.8% Total Wholly owned 264 2,815,048 13.72% 110.3 91.3 1,490.7 1,233.9 7.4% 9.3% AIF 220 1,033,232 10.72% 42.5 35.2 527.6 436.7 8.1% 9.4% Total attributable to Hansteen Total under management Total under management Dec 2015 Hansteen s attributable property investments 2015 452 3,699,494 13.00% 146.7 121.4 1,942.3 1,607.7 7.6% 9.3% 484 3,848,280 12.91% 152.8 126.5 2,018.3 1,670.6 7.6% 9.3% 494 3,885,887 11.9% 163.5 120.2 2,104.9 1,547.1 7.8% 9.5% 452 3,647,532 12.1% 153.0 112.5 1,970.1 1,448.1 7.8% 9.5% * Hansteen s attributable property investments is defined as the wholly owned properties plus 82.8% Exchange rates: June 2016 =1.2081 Dec 2015 = 1.3605 of the AIF properties and 100% of Saltley. 34
Appendix Comparators Workspace London Metric Shaftesbury Segro Unite Intu British Land Hammerson Land Securities GPE Derwent Big Yellow 35