Blackstone, M7 buy Hansteen light-industrial portfolio for €1.28bn

Private equity real estate firm Blackstone and pan-European investor and asset manager M7 Real Estate are buying a portfolio of Dutch and German mainly logistics assets from listed UK property REIT Hansteen Holdings for €1.28bn. The portfolio represents Hansteen's complete light-industrial office holdings in the region.

Hansteen said M7 will manage the portfolio on behalf of the Onyx joint-venture with Blackstone, and will acquire its German and Dutch asset management business, transferring 36 employees from Germany and the Netherlands.

Commenting on the transaction, Morgan Jones and Ian Watson, joint CEOs of Hansteen, said: 'This is a compelling opportunity to crystallise both the revaluation gains from these German and Dutch assets achieved by our active asset management and the gains from foreign exchange movements. The value being realised is around 30%, higher than the book value at 31 December 2015 when measured in sterling.

"The sale is in line with our long-term business and portfolio strategy of buying at a low point in the cycle, with low occupancy and rents, adding value through improved asset management and subsequently realising the investment at a higher point in the cycle."

The portfolio will be added to light industrial assets already owned and managed by Blackstone and M7. Earlier this year, it was reported that Blackstone bought 26 French assets from a joint venture between M7 and Starwood Capital, as part of plans to build a specialist pan-European investment platform.

The Hansteen portfolio is being bought in an all-equity deal at a 6% premium – or €76m – to its 2016 year-end valuation, due to a currency uplift. The German portfolio of 104 properties was worth €869.7m with €63.6m of passing rent in June last year, while the Netherlands portfolio was worth €217m. The assets encompass 1.56m sqm, are 90% leased and generate a rental yield of 7.4%.

The deal, subject to shareholder approval and German regulatory clearance, is expected to close in June, and will leave Hansteen with just its £676.9m portfolio of 286 UK assets and 447 acres of undeveloped land, as well seven assets in Belgium and two in France respectively worth £17m and £17.7m.

On the timing of the deal, Hansteen said in a statement that the sale crystallised the value in the portfolios "at a time when not only are they at historically high levels of occupancy and rent for the period of Hansteen's ownership but also the euro/sterling exchange rate is favourable". Hansteen said it plans to return a large portion of the proceeds to its investors.

The UK-headquartered M7, which is active in 13 countries across Europe, manages 600 retail, office and industrial properties worth €2.4bn. It has 130 staff in the UK, and (to date) a team of 12 in continental Europe – now about to get a lot bigger.

M7 Real Estate last year raised an initial €175m for its European Real Estate Investment Partners IV fund, targeting value-add, multi-let assets in Germany, the Netherlands, France and Scandinavia. The first close was backed by investors from Hong Kong and the Middle East.

Last year, the industrial market outperformed all other European real estate sectors, including offices and retail, data from property consultant CBRE showed, as the sector benefited from higher demand for warehouses from retailers expanding their online operations.

   Over the fourth quarter, European commercial real estate deals reached a record high of €86.8 billion euros, boosted largely by a buoyant Germany market and growth in the Netherlands, according to the data.