Companies: HSTN   

European industrial property investor Hansteen has built up a diverse and high-yielding portfolio worth £412m and plans to move into projects where more value can be added from now on.

‘The portfolio can now cover our overhead costs and all dividends’, says joint chief executive Morgan Jones, and now that banking costs are rising and more ‘distressed sales’ are becoming available, he and partner Ian Watson are looking for properties where they can add value. Typically these will be half-empty lots that can be bought low, filled with renters and sold high or kept in the portfolio.

Jones points to four bargain purchases already made in 2008, ‘all from banks in possession’, one of which for a fifth of its construction costs. Potential opportunities have been identified in the UK as well, where valuations are falling.

But Jones stresses that the economic situation has ‘not affected our valuations and we think the market is flat going forward. Our banking arrangements are fixed for another three and a half years, but if we want to make any more loans then it will have to be at lower margins.’

In 2007’s more conducive conditions the Hansteen team made hay, lifting net asset value 21% to 138p per share. The portfolio of warehouses in Holland, Germany, France and now Belgium swelled 183% to £411.9m, where it yields a lucrative 7.25% against borrowing cost of 5.6%.

Recommended here at 117p in 2006, the shares hit 152.5p last year but have been below 100p since. With management having made this strategy pay before and the shares trading at a discount to assets, Hansteen is worth holding.

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Hansteen Holdings	AIM	£166.84m	93.50p	0.50p
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Other company articles:
Hansteen			11/04/2008
Directors’ dealings by Andrew Hore			07/02/2008
How to play the AIM property boom			02/07/2007
Hansteen in £70m placing			28/02/2007
Hansteen			27/07/2006