STENPROP LIMITED
(Incorporated in Bermuda)
(Registration number 47031)
BSX share code: STP.BH JSE share code: STP
ISIN: BMG8465Y1093
(?Stenprop? or ?the Company?)
ACQUISITION OF TRAFALGAR COURT, DISPOSAL OF CHISWELL STREET AND DETAILS OF OTHER POTENTIAL TRANSACTIONS
1. INTRODUCTION
1.1 Stenprop provides shareholders with an investment in a diversified portfolio of European Real Estate
Assets, primarily focused in the United Kingdom, Germany and Switzerland. At 1 October 2014 the
portfolio was valued at ?720 million.
1.2 The Company?s strategy is to deliver a sustainable growing dividend to shareholders while growing the
underlying net asset value of the portfolio.
1.3 In order to maintain the balance between income growth and growth in net asset value, the Company
seeks to invest partly in core assets in locations and markets that are positioned for growth in
underlying rents and values as a result of inherent tenant demand; and partly in higher yielding assets
with long lease terms that provide contracted sustainable income and that can be acquired on a yield
enhancing basis. Value added asset management strategies are implemented across the portfolio
where appropriate but development projects that would limit the Company?s ability to pay growing
dividends are generally avoided.
1.4 Consistent with the Company?s strategy, Stenprop has exchanged contracts to dispose of Chiswell
Street, a multi-let office block located in London; has exchanged contracts to acquire Trafalgar Court, a
modern A grade multi-let office building in Guernsey; has secured the opportunity to participate in a
Berlin residential investment and is in the advanced stages of agreeing the acquisition of another
London office property.
2. DISPOSAL OF CHISWELL STREET, LONDON
2.1 Disposal
2.1.1 Stenprop has exchanged contracts to dispose of Chiswell Street, a multi-let office block
located in London, for a gross price of approximately GBP 48 million with a completion date
set for 20 March 2015.
2.1.2 The net sales proceeds (after settling debt and all costs of the disposal) are expected to be
approximately GBP 34 million, resulting in a net gain of approximately GBP 3.5 million over
Chiswell Street?s 30 September 2014 valuation.
2.2 Background and rationale for the disposal
2.2.1 Over the period 2009 to 2012, Stenprop management were of the view that London office
properties represented a prime growth opportunity. As a result, over that period the
management team acquired nine London office buildings at an aggregate cost in excess of
GBP275m. Three of these properties, Euston House, Pilgrim Street and Chiswell Street, were
acquired by the Company (as part of the Stenprop transaction) at their 31 March 2014
valuations which, in the case of Chiswell Street, was GBP 41.6m.
2.2.2 As a result of ongoing negotiations with existing tenants, an opportunity has arisen to create
substantial value uplift through a full scale redevelopment of the building. However, if
undertaken by Stenprop, the redevelopment would negatively impact the Company?s
distributable earnings for several years ? due to costs of the redevelopment, the ongoing
rates and other costs and the loss of income during the development period and the subsequent
letting and rent free periods.
2.2.3 The management team concluded that a sale of Chiswell Street to a property development
Company would enable Stenprop to achieve a premium price, thereby unlocking a
substantial portion of the potential value uplift without any of the attendant risks and
without negatively impacting distributable income. As a result (and in the context of the
Company?s overall strategy and having regard to other available investment opportunities)
the decision was made to market the property and, as anticipated, a premium price was
achieved resulting in significant value uplift.
3. ACQUISITION OF TRAFALGAR COURT, GUERNSEY
3.1 Acquisition
3.1.1 Stenprop has exchanged contracts to acquire Trafalgar Court, a modern A-grade multi let
office building in Guernsey for a price of approximately GBP61.4 million with a completion
date set for 24 March 2015.
3.1.2 GBP 30 million of the purchase price will be funded though bank debt with the balance being
funded from available cash.
3.2 Rationale for the acquisition
3.2.1 Based on the current cost of five year fixed rate debt, Stenprop?s return on equity from the
acquisition is expected to be in excess of 8% per annum. The building is fully let to good
quality tenants with an average unexpired lease period in excess of 12 years and three yearly
upward only rent reviews.
3.2.2 The acquisition is consistent with Stenprop?s strategy of buying yield enhancing assets with
long lease terms that will deliver sustainable income and its strategy of acquiring properties
in locations and markets likely to deliver growth in income and property values over time.
4. OTHER ACQUISITIONS UNDER CONSIDERATION
4.1 Consistent with its strategy to invest partly in prime growth assets, Stenprop is at an advanced stage of
agreeing the acquisition of a further West End London office property and has secured the opportunity
to participate in a Berlin residential investment.
4.2 If the London acquisition is concluded, it will result in the Company replacing Chiswell Street with an
asset that is superior in terms of quality, lease profile and location, whilst being a better fit for
Stenprop?s strategy.
4.3 Over the last few years, the Stenprop management team has been involved in Berlin residential
investments, a sector that the team believe, like London offices in 2009 to 2012, is positioned to deliver
sustainable growth in underlying rental and property values over the next few years. In this context,
Stenprop has acquired an initial strategic stake of ?2.85m in a Berlin residential investment, thereby
securing an opportunity to gain a foothold in another prime growth sector.
4.4 Stenprop is also in early discussions to potentially acquire two other medium sized suburban retail
centres in one of the five major cities in Germany.
4.5 Further details of these opportunities will be announced when appropriate.
5. IMPACT OF MOVEMENT IN EXCHANGE RATES BETWEEN COMPLETION DATE OF THE STENPROP TRANSACTION (2 OCTOBER 2014) AND 06 FEBRUARY 2015
5.1 Approximately 21% of the Company?s portfolio by value is located in Switzerland and 37% in the United
Kingdom. Since the last published results of the Company, Swiss Francs have appreciated by
approximately 15.0% against the Euro, and Sterling has appreciated by approximately 4.4%. The impact
of the strengthening of these currencies against the Euro on the net asset values of the portfolios based
in Switzerland and the United Kingdom is an increase of approximately ?16 million.
Stenprop has a primary listing on the Bermuda Stock Exchange and a secondary listing on the Alternative Exchange
of the JSE Limited.
9 February 2015
Corporate advisor and JSE sponsor
Java Capital
Bermuda Stock Exchange sponsor:
Appleby Securities (Bermuda) Ltd
