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Edited Transcript of HSTN.L earnings conference call or presentation 21-Aug-19 8:30am GMT

Half Year 2019 Hansteen Holdings PLC Earnings Call

London Aug 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Hansteen Holdings PLC earnings conference call or presentation Wednesday, August 21, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ian Richard Watson

Hansteen Holdings PLC - Joint Chief Executive & Executive Director

* Morgan Lewis Jones

Hansteen Holdings PLC - Joint Chief Executive & Executive Director

* Richard Phillip Lowes

Hansteen Holdings PLC - Finance Director & Executive Director

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Presentation

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [1]

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I'm Morgan Jones. This is Ian Watson. And this is the first half results for 2019.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [2]

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Good morning. So Hansteen is an urban multi-let regional industrial specialists, and when we say urban, it's really to draw a distinguish between the big boxes who often tend to be on motorways, junctions and good infrastructure that involves in the -- between the foundations. Our properties tend to be in or on the edge of towns or cities. We specialize in the regions. It's probably unusual compared to most quoted property companies. So whereas a lot of people would say we want to be in the southeast. We do the inverse of that, all our properties are in the Midlands, the North Wales and Scotland, and we're very happy with that. And also, I think, uniquely, we have 6 U.K. regional offices where people from the region, in the region, in amongst our properties really stretching the values.

We want to particularly draw your attention to the fact that this time last year, our portfolio was substantially bigger than it is today. So this time last year, our portfolio was GBP 818 million worth of property, and today it's GBP 647 million. I'm pleased to say that's not because the values have fallen, it's because we've sold -- well net selling, we've been buying and selling, but our net selling was just over GBP 170 million. And we also -- the proceeds of those sales, we returned GBP 145 million to our shareholders. That's 35p per share. So it's worth noting that when you look at the comparative, anything that relates to income, profit, et cetera, we're producing those numbers from a substantially smaller capital base. And in fact, we are very proud, as you'll see as we unfold the numbers that nothing that relates to that portfolio has fallen 25%. So we're outperforming, if you like, on every measure we've taken

(technical difficulty)

for-like basis. And we talk of being a high-yielding portfolio. I think, again, we couldn't find any other public company that has the profile of yields that we have. So 7.6% on the passing rent, 8.3% on the contracted rent. So they're all neatly contracted, but in some cases, there's rent freeze or in some (inaudible) have fallen in [particular]. And 9.2% on the ERV. And actually, then we'll talk in a bit more detail, but the transactions that we've [filled] in the first 6 months have substantially outperformed that ERV. So you're actually talking about an equivalent yield of substantially more than 9.2%, which I think is extraordinary really, but our mantra is to produce high and realized returns for our shareholders and so far, for the 20 years (inaudible) Hansteen, we've managed to do that.

And if we turn to the highlights. Again, in the 6 months, we produced 5.4% total return for our shareholders, that's now growth in dividends. We're proud of that in all of the circumstances, I think. And underpinning that return was an extraordinary amount of activity by the teams. So 373 lettings or renewals done in the first 6 months. I mean, interesting to see that for the same period last year, where we had a considerably bigger portfolio, the team did 364 transactions. So -- actually, I mean, I think it's impressive given the sort of turmoil that the U.K. has been in in the last 6 months. They've actually produced more activity this 6 months than we did a year ago. And of course, activity is great, but activity without kind of results isn't so good. But when you look at that, if you take the average rents from the lettings and renewals, that's GBP 4.62 per square foot. And that compares to December 31, it was GBP 4.03. So that's 14.6% ahead of our average rents at December.

So I mean, we're -- we'll talk a bit more about the rental growth, but we're genuinely convinced that the rents are really on the march in our sector at the moment. And because of the returns because of the activity that's given us so much confidence. On the dividend, we're actually being [financially] substantially progressive from the resized dividend. So if you took the dividend this time last year and reduced it by 25% to reflect the 25% of capital returned, it would have been 1.8p. And in fact, we've announced it within the new 2p so that's 11% up. And of course, it's well covered. So Morgan will talk a lot more about the numbers.

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [3]

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So the results for the -- financial results for the first half year. We setted out normalized income profit, that's our version of realized and repeatable income. So that's excluding profits on sales and valuations and so forth. If we're just holding the portfolio, GBP 11.2 million for the year, again, remind you, in comparison with the previous year. There's been a big capital return in the period. The things to note that in -- the cost of sales appears to have gone higher, but it's probably -- it's much closer in 2019 to the normal range, probably about 12% is the normalized -- normal deduction for the gross to net rent, whereas we had some one-offs in 2018, which is lower. The overheads that we have reduced, the admin for the half a year is down from GBP 7 million to GBP 6 million. And that's been part and parcel of us resizing to adapt to the smaller portfolio, which -- and interest costs gone down a little. In fact, we have reduced the debt by about GBP 30 million between the 2 periods, but there's been a slight increase in interest rates. So potentially that's going to reverse a bit in the second half. Normalized total profit is the realized income plus the realized one-offs so it's profit on sales, and that was $12.7 million. And moving then to include unrealized (inaudible) valuation gains, we have IFRS profit after tax at GBP 19 million. So all these numbers are strong in relation to our new capital. We paid a 3.8p dividend in the period, and the beginning of the new dividend era starts with the 2p interim in October later this year.

The balance sheet, this is comparing December '18 with June '19, so there's just 6 months. It's not like the P&L. So we had GBP 650 million of properties at the beginning of January. We sold about 18. We bought 4. CapEx of [GBP 318.5 million] valuation uplift. So that's performing reasonably well. I'll talk about the debt in a moment. But basically, we have the low loan-to-value, but we still have -- we've got plenty of firepower should the opportunity arise.

The EPRA NAV per share has gone from 102.7p to 104.4p, and that's after taking out the high dividend we paid in May of 3.8p. So that's where the net growth over the 6 months is 5.5p or 5.4% for 6 months. That's the key measure that we (inaudible) .

And (inaudible) every year, we started going from the NAV at the beginning and end of the 6 months, so basically the realized profit 2.9p, 2p of it was in 2p income and 0.9p was profit on sales, revaluation was another 2p and bits and pieces for 0.6p, and the dividend is 3.8p, makes you -- gets you 104p.

Then looking at the bank borrowings because we've gotten relatively small currency exposure these days, and we haven't got any strange financing instruments, it's pretty straightforward. Our loan net debt-to-value 32%, loan-to-value 36%. It's relative -- it's pretty prudent gearing. But at the same time, it's low cost. It's -- I mean, it has gone up a bit to 3% gross, 3.1%. But otherwise, I mean, compared with the income, it's still low-cost borrowing, and it's a flexible facility. So if needs be, we've got firepower to go up to over GBP 100 million, if we -- if an opportunity arose. So we have a [fifth] bank facility which is prudently -- prudent at the moment. It's low cost, and we can pull out some acquisition money if we find one. We've got another 2 and a bit years on the -- 2 years of the bank facility, which was a 5-year facility to go.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [4]

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In terms of property sector, I mean, we've got our traditional table, which I think is helpful. It shows the yields for passing, contracted and ERV. And as I touched on earlier, we -- on the ERV, on the ERV amount of rent, et cetera. It's all calculated from the valuations ERV. And in fact, that ERV from by the value has went up 1.6% from December to June. And yet, our -- all the transactions that we did was up 4.7% ahead of December ERV. So at the moment, we're substantially ahead of the latest ERV. So as I say, you could say that the equivalent yield is actually substantially more than the 9.2%. Why is this such a big difference, I don't know if it's partly because the value is sort of looking in the rear-view mirror, partly because they are in a very prudent frame of mind at the moment post- or pre-Brexit in October. And partly, that they -- because a lot of our tenants are small and unrepresented, the value is like to think they know better than the people who've actually agreed the deals and pay the rent. But I mean, once we continue doing those levels, eventually, the values have to accept that, that is the new ERV. Other things to point out, Belgium and France is obviously -- it's -- I mean, it's very important to us, but it is a small amount of money relative to the main portfolio. And we'll talk a bit about it with -- I mean, our job is to gradually get rid of those and to monetize those properties. Interestingly, both in terms of currency and markets, it feels like the values have gone up since we sold the German and the Dutch properties, and the currency is actually a little more [time] lower than say in terms of the last few years. So crystalizing those sales in the next 12 months is a good time to do it, if we can. And you can see we've got that GBP 41 million of land, which we can also talk about a bit. One of the exercises we did, as we said, look, if we took the GBP 56 million, which is the rent roll of the ERV. As I said, I mean, actually, if we took the actual number, it would be sort of 3.1% higher than that. But if you took the GBP 56 million. You took 95% of that and applied that to the passing rent yield of 7.6%. That would create a U.K. portfolio of GBP 700 million and a built portfolio -- so GBP 700 million compared to the GBP 605 million that we've got at the moment. So you can see that a little bit of occupational increase, which we believe we will continue to get over the next couple of years. And the rental growth bringing it up to ERV. You can add proper money to the capital value of the business. These stats really, I mean, talk about why we love the business. I mean, it's all about granularity and diversity. So probably, again, we're obviously suckers for punishment because lot of property people wouldn't like the granularity. They wouldn't like 2,300 plus tenants, but we think it's fantastic, having that spread and it's not just numerical, I mean, every single commercial activity, you can imagine is on in our units and probably a lot that you could never imagine. So it's -- that's the diversity and granularity that really gives that resilience to the income, we believe. And why we specialize in this and not, for example, in the big boxes. And you can see average rent less than 20 grand a year. Average unit size, less than 5,000 square. And then the truly unique dynamic of the business, I think, which underpins the business is this capital value per square foot. So a GBP 45 a square foot currently. Now if you would -- replacing that stock, including land, it would be GBP 100 plus in any region that we can see really. And the build cost is GBP 60 to GBP 70, just construction cost. So I mean, I can't -- I mean, we racked our brains, and we couldn't find any other bit of the property industry that had that dynamic. It used to be German residential had the same dynamic but the values have gone up so much in Germany that it's not true anymore. So I think that's the only -- the only part of property where you can say we're carrying our costs at around half of a placement cost. And interestingly, the other unique thing, I think is it's the only part of property, where we haven't yet hit the pre-crisis highs. So I think every other, whether it's residential, office, retail lot of the alternatives, I mean, they've all power passed the kind of pre-crisis high values. But we haven't, as you just heard, where our yields are, I mean, those yields were sub 7% in December 2006. So we think it's a very [rent debt] to be in. I mean, really, I think, we'll just zip over this page because we've talked about it before in terms of the activity and the rents and the growth in the rents.

Sales, interestingly, I mean, average yield of 3.4%, but that's not one estate that we sold at 3.4%. It's a basket of properties, some vacant some land as well as some investments. So that's why the yield's so low, and that's part of our approach is to have a running yield and then what we can sell substantially below that yield. So it's enhancing, we do it. Interestingly, the GBP 1.5 million profit above December valuation, so a 10%, probably above the December book. I mean, lots of those sales took place straight after December actually. So probably fairer to look at the regional cost, and that was GBP 3.5 million profit above purchase cost, which was a 22% markup.

And actually, a lot of the properties were out of the [some altering] portfolios. So in fact, we bought them only a few months before. So it's been pretty good. In terms of Belgium and France, we have agreed in principle with the remaining France, French property. It's not done, not exchanged. It's a different system in France. So we have agreed the documents but there would be some ability for them to come out if they want to. So we're not saying it's definitely going to happen, but it looks to us that it's highly likely that in the next 12 months, the French property will have gone. And therefore, then we'll just have the 7 properties in Belgium, which will be circa GBP 10 million or something. So it's really now becoming a very small part of the business.

Purchases, I mean tough, really tough to buy value in the last 6 months, but we did manage to buy some properties, which were exactly our kind of properties, very granular small units. Broadly speaking, we were picking up bits and pieces around our existing properties, where we benefited from having the regional offices. And where we're very familiar with where the rents are. So in these cases, we felt they -- because of the management, we could add value, a bit of refurbishment to make some material rental growth to those properties. But I think the truth is it's a very small amount of property. Because it's very, very tough to [buy out] just at the moment.

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [5]

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Okay, as part of our asset management, these were 8 sales of GBP 20 million, totaling [GBP 120 million], and we continued after June and July, there were another 5 sales total of GBP 1 million -- sorry GBP 1.5 million. So it's part of the working, the assets as well where we -- where either land or vacant property, we are also still selling to tenants and working that through recent tenants.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [6]

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(inaudible) I think, we'll just, Darnley, as you know, we've pretty much sold 90% of the properties. 2% and although the money is coming in over kind of the next few years, but in terms of -- it was about book value so (inaudible) other than helping the cash, it's not very significant.

Gilston, it's turning out to be the longest playing record in history. It's still going. We still believe that at some stage, we'll get a meaningful chunk of residential but it's -- not saying gladiator, where he say, "Not yet." I think it's not going to be yet. But we're very comfortable with where it's in the book at the moment in terms of value. And as and to when we get a chunk of [essential], there should be an uplift there. The biggest port a bit of land, which is [sequentially] 20 acres in our books for the (inaudible), we're very hopeful with that residential this year. And again, we'll then put that on the market at some stage during the next 12 months.

So the lands are definitely accelerating. We did do some sales, obviously in the first 6 months, you saw 20-odd acres. So we're relatively happy with the way that the land is going. Over to Morgan for the outlook?

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [7]

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Yes, what's going on? I mean yes, it's the investment market is quiet. It's summer time. So traditionally sale was a little -- it'll come flooding through in the autumn. And now we've got October 31, there's another kind of reason why, I mean not that people are not doing business. But really, you're not seeing a great deal of activity looking forward. But the other side of the equation is, there seems to have some permanently shifting in relation to the demand for our estates. And it's the contract (inaudible) suffering that is going on in the retail sector. So I mean, that's -- the Internet has enabled really people that used to work, business-to-business and business-to-retail, retail-to-consumers. You can now go from one to the consumer in one move and people are doing that. So yes, you could benefit from that through the big box distribution warehouses and that's -- that's good luck. And I think that -- that will -- that certainly benefited over the last year or 2. But the Internet has affected the businesses in very different ways, apart from affecting them nevertheless quite a great deal. So when we had a look at our tenants and a bit of a survey to try and get a feel for how they use it. I mean, some of them -- some of them use Amazon, some of them use eBay, but that's only part of the story really.

Over 90% of them market their product on the Internet of our tenants. And see the figures here. First, 30%, not only market online, but they will take orders online. So that's quite a significant move to 27%. So this was a survey of about 60, 70 of our industrial units around the country. 27% of them would have done, before the Internet, would have done their activity in either retail or a ledger or even an office before Internet. So basically that -- our game really has been as a result of either shopping or purchasing done online. And we can't see any letup in that -- in that shift. So you work that in a way. It's not -- I mean, in the general economy, we feel is okay, it's true. But it's not in a red hot boon and certainly, if you walk down into lots of High Streets, you might be thinking that it's a pretty poor period. But we're going strong at the moment, where the demand is very much continuing. So hence, we've kind of changed our approach and feel very comfortable in working the portfolio and seeing how far this is going to go.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [8]

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Yes. I mean, it's -- I mean, to bring it sort of live for any of the 2 industrial estate over the last 6 months say. Ten years ago, industrial estate was a relatively hostile place. You go there maybe to have your wind knocked out of your car otherwise, you wouldn't have gone probably to an industrial estate. It would have been a business-to-business kind of environment. But now, just using our own -- some of our own tenants, you could easily go there to kind of buy some blinds, have blinds measured and made, you could be a -- you have a lot -- nowadays, we have Greggs on lot of the estates. So you could go and while you're there, you could have a vegan whatever, and so on and so on. There will be lots of crazy retail activity with a business-to-consumer facing kind of nature.

And of course, that enables those businesses to make more money and pay more rent because the rents -- the total cost on the industrial estate if somebody can basically retail is unbelievably low. If you're talking of -- the rent is [4,5,6] and of course, the rates have commenced certainly low, and there's probably a very small service charge because you're only basically paying for the cutting the grass and the trimming the hedges. And you compare that to a (inaudible) retail. I mean, we've had a look at Aberdeen standard of selling some [at the time] retail at the moment. We thought we'd go and try to understand the dynamic of it. And talking of rent sort of GBP 30 to GBP 40 a square foot. And the rates [commence] certainly high because the rates are related to the rents, and the service charges are much higher. So it's a brutal difference. And it's no wonder really that where because of the ability to use the Internet to effectively access direct purchases, consumers, why people are doing that and coming on to our kind of estates rather than going into [out of town] retail environments.

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [9]

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Okay. Well, I mean, that's -- repeating the request broadly speaking, we have always had the benefit of granularity and lots of individual tenants making up our rent row. And where -- our teams are able to keep control of our lands, and it makes it a much safer and solid income. And secondly, the -- despite all that, we have high yields. And we've got e-commerce as being a particular one-off perhaps, but a [Phillip] that we don't see reversing in the near future. So that's -- we'll continue to work the portfolio and generate income where we see acquisitions that will work for us. I mean, you have seen from those (inaudible) that where we've sold, we've sold with very little loss of rent and where we thought we bought with high rent and a business while we think we can improve it. So that's part of the day-to-day results we are hoping to achieve. So the only (inaudible) is that it's at the edges, but it's what makes the returns for us. And that really is as far as we are doing in terms of presentation, and we're very happy to take questions. And we also got other members of the team here if we...

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Questions and Answers

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Unidentified Analyst, [1]

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I only have a one (inaudible). So can you talk a bit about your (inaudible)? So can you talk a bit about (inaudible) any (inaudible) how the businesses are sensitive to the [city cycle]? Because the question is, is it a lot a long macro that drive your tenants' ability to pay the rent, to pay higher rent. You've got [Gilston](inaudible) low volumes in economic recession and everybody has a problem.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [2]

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Yes. Well, I mean, I think it's a brilliant question for us to answer because it comes back to this whole feeling we have the slightly misprices in the business and the quality of the income that we produce because, I mean, the only explanation for these to the high-yield is in people's mind, this is a kind of subprime and kind of incomes to flow. Now the only benefit of getting old like us is you've been going for a long time, and we've been through 2 brutal property recessions. And both times our tenant base stood up at least as well, if not better than pretty much any other kind of property.

And for example, from our own experience in the Netherlands, we had, for various reasons, we started buying big boxes as well as multi-lets in sort of 2006. And we had unquestionably, if there had been a room of uniquely property people here, they would say that property in ....

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [3]

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Tilburg.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [4]

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Yes, Tilburg. The best property Hansteen in years, it's look like shiny, it's big, it's new, it's got an interesting tenant, blah, blah, blah, and probably we lost more on that property than any other in the crisis because the tenant went bust, and it took a long time to relet it and when we relet it, the rent was right down. Meanwhile, all the kind of rubbishing covenants, just kind of power on because these people -- it is their livelihood. I mean, they only have one unit. When you're [Arcadia] or [William Hill] you've got 800 shops, things get tough, you can chop out 200 shops. And probably, you have to, but if it's you and you're making business from one unit and things get tough, you will do everything. You'll work 24 hours a day, you'll borrow from the family because once the roof over your head goes, you've got no -- nothing, your livelihood's gone. So paradoxically, our experience has been that the type of tenants that we have are very, very resilient that -- I mean, of course, when the economy burns, we will have some casualties. But it's nowhere near as bad as you would think if you just look at it and say, how do you assist these covenants because, I mean we do what we do, I mean you can't get financial information on most of those. So you take 3-months deposit, then you see if they pay. And if they don't pay, you vote them out and you get somebody else in. But Rick, I don't know if you want to talk about bad debt, something are we seeing the bad debts rising at the moment?

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Richard Phillip Lowes, Hansteen Holdings PLC - Finance Director & Executive Director [5]

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(inaudible) Then you keep one-off individual (inaudible) that will be your general trend that you say that we're going to be going through some bad debt (inaudible) usually the recession is got to go where we want to trade down (inaudible) rent (inaudible).

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [6]

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And that's the other thing that you find in a downturn is people do trade down. So some people would have smart and more expensive property then things get very tough. So they move into [a house] because they're fundamentally very simple, very in expected -- in expensive relative to other properties. So a lot of the people we have are kind of people who -- there's nowhere else to go other than losing their businesses. So it's surprisingly strong. I mean, that's all we can say. And when you talk about -- I think if in so far as we have bad debt, they fall into the irrecoverables, don't they? That number that Morgan was talking about earlier of the sort of 11% to 12% as a rule of thumb. We take off the gross rent to get to the net rents. And that hasn't changed really forever, has it then. I mean with that 11% to 12% is kind of been the number that we give people year after year. So we're not on...

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [7]

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In fact, we have a lot of... We have a lot of small units. Our core business is a lot of small units and the leases are not very, very long. They are 4 or 5 years so. So that somebody going (inaudible) fortune on their debts. I mean, it's -- it soon clears out the system where I think if you were -- if we come to a recession, it's the bigger boxes with the longer leases that have to watch out because if that hit they do go, it's disastrous.

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Unidentified Analyst, [8]

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So it's just to go back on the question, you get the (inaudible) in normal conditions, about 11%, 12% of your rent.

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [9]

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Yes, depending on the occupancy level but they set this level of occupancy.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [10]

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That's not bad yet -- not bad debt. That's all the area of the property level irrecoverables. So everything, so leasing, repair and maintenance, net irrecoverables, service charge element

(technical difficulty)

And everything that's at the property level that comes off the rent.

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Unidentified Analyst, [11]

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So from that -- from the number 8-point-something yield, so [those] that you have the number you charge and just as you would take an extra 1% less (inaudible) so you'll [net]...

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [12]

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Yes, that's probably -- I think that's fair. Wouldn't you say that's fair?

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [13]

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Yes.

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Unidentified Analyst, [14]

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Just one more question. From your previous experience (inaudible) your focus, really, was for 2 cycles, where do you get (inaudible) number to 11% to 12% , if you were to (inaudible) seen before, when would you expect it to go to 20%?

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [15]

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Right. The recoverable cost? Once you get -- if you -- I mean, if you get to 15% vacant, you're looking at 15% to 14%, 15% you're (inaudible) .

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [16]

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Yes. I think -- Yes, and our kind of rule of thumb had been that if you're 20% vacant, you might have 20% irrecoverables, if you have 15% vacant you have 15% recoverables -- or irrecoverables, but you have to understand that when we have the experience of that, it's been where we're buying distressed properties that are only 80% occupied, potentially, from the banks in the kind 2009, 2010, the stabilized properties that we held throughout the crisis wouldn't perform that much in terms of occupancy. I mean, it definitely falls but it wouldn't fall by that extent which is, for example, the stuff we bought, we bought from UniCredit in Germany, EUR 330 million. That was 20% vacant, probably a bit more than 20% vacant. And -- but it was in the hands of UniCredit, hadn't been properly managed, weren't allowed having a CapEx, et cetera. And that's, of course, what -- that's the opportunity for us that we can come in and then turn the whole thing around, which we did. And then as you push up the occupancy, you also benefit from the irrecoverables going down.

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Unidentified Analyst, [17]

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Hi, (inaudible). I mean, you touched on the acquisition side of market, quite far from the [residing] assets. Do you think given Brexit and some of your [headwinds] they need to run, do you see that (inaudible) rate for next 6, 12 months, and if without the (inaudible) regarding competition, (inaudible) are buying assets, you think there is a (inaudible) for this, perhaps, in a couple of years?

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [18]

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I'll take in the first bit and then (inaudible) because it's -- I mean, it could clearly go either way. I think we've got a fundamentally strong subsector. But the outturn of this political situation could -- I mean they're wanting on the one hand, any kind of firm decision might mean everybody's back to business and the liquidity improves. On the other hand, I haven't really been able to see a firm way that we are going to solve it. So there's uncertainty to continue, in which case, the market will continue uncertain or pretty quiet, actually.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [19]

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Yes. I mean, I would say there's a lot of people talking about the (inaudible) funds, I mean, they've got a lot of capital, most of them. They've got a big cash margin. But I mean, as you see, we'd like -- would feel any of these, if there's a real run on a fund, even if you've got 30% cash, it goes and you have to start selling. And of course, the interesting dynamic for the open-ended funds is that a lot of them have a lot of retail, which at the moment is very illiquid. So they would probably be forced to sell the stuff they could sell, which would probably be the industrials. Now lots of them won't necessarily have multi-let. They'll have big boxes, they might not have multi-let, but there might be some opportunity. So that's, if you like, the good thing. The bad thing, the second part of your question is, are there people poised to take advantage of that? And the answer is, yes. I mean, there is unbelievable amount of capital in the private equity funds at the moment. I mean, I just saw Jeremy's email this morning. He was at (inaudible) who just announced another GBP 1.8 billion fund they've raised for sort of open value-added European purchases. And that's just -- that's just one of so many private equity companies who've got a lot of capital. And on top of that, you've got a lot of private investors in the U.K. and institutions, not the open-ended funds but the permanent capital in the institutional world, who are looking for industrials. So it's -- I think it won't -- just because there might be a bit of fore-selling, and I'm not saying there will be but a certain people are saying there might be.

I think it'll still be very competitive, probably. So if -- if it were easy, everyone would do it. Wouldn't they?

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [20]

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Any other questions in the room?

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Unidentified Company Representative, [21]

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(inaudible) there must be a question.

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [22]

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No, Is there any questions on the telephone?

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Operator [23]

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(Operator Instructions)

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Unidentified Analyst, [24]

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So I'm assuming with your (inaudible) [4.8] that's not part of you core strategy, is it? I mean land, is it (inaudible) to develop it? I know you're trying to sell it. How long does that come about? Where does it fit in the big Hansteen strategy?

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Unidentified Company Representative, [25]

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So who will we be able to answer this?

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [26]

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Yes, I mean 2 quick answers. One is we get a lot of land as part of our acquisitions when we buy portfolios and industrials. There are land adjoining the estates, which we work. And secondly, we've always thought about having a strong yield on one and the major part of the business enables us to be opportunistic for things where we feel -- we see capital gains. So particularly, that's Darnley and Gilston where we've gone out and directly purchased land. But it's -- we kept it as a benefit of the high income background that we could bring in some capital profits, but it's not core of our business, but it is things that we have to -- we have gained from over the years quite well.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [27]

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And we're not -- we've never bought with the intention of developing. It's always been the intention just to add value through the planning process and then sell.

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Unidentified Analyst, [28]

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So what kind of ...

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [29]

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What can I just see -- are there any questions on the telephone.

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Operator [30]

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No. No questions registered on the telephone.

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [31]

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Okay, so we're continuing then with more, with another one here in the room, so. Sorry.

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Unidentified Analyst, [32]

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So what kind of (inaudible) are you expecting to make from your (inaudible) ? (inaudible) in the past, I mean, (inaudible)

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [33]

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Well, if you say, when you -- I mean, there's interest in -- so at the back of the presentation, there are 3 case studies and we pick in one, which is the kind of thing we love where there is just a bit of land, sort of, rough land between 2 industrial units. And to make it into a bigger plot, asset managers did a deal with amazing (inaudible) for GBP 1,200 to buy a bit more land to make it -- and then spent GBP 72,000 to turn into a proper fenced yard, and then we sold it for GBP 210,000. So the net profit was GBP 136,000, and the cost was just the GBP 72,000 for making it up. So in that sense, the IRR was incredible. In terms of -- have we got the IRR on the one we sold out of Signet? So we sold some land in the modern portfolio, and there was a big chunk of land in (inaudible) that we sold in the first 6 months. And again, it was very profitable and a very high IRR. So if you get it right -- Darnley is a good one. So what do we pay for Darnley?

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [34]

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GBP 4.5 million.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [35]

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Yes, GBP 4.5 million. So again, we got in the main presentation, just that picture of Darnley. We paid under GBP 5 million. And so far, I think we've sold for about GBP 10 million, probably owned for 2.5 years. So you can see the returns are high, if you get it right. On the other hand, we've owned Gilston for 20 years, and we haven't yet sold it. So -- but that's the joy of being able to twin the 2 businesses, as Morgan says, because we don't have a clock. I mean, if that was the only thing we owned, Gilston, we'd be a bit sad today, probably, but when you're against a very high-yielding portfolio, you can afford to be patient in a couple of situations because when you get them right, they can add real value.

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Morgan Lewis Jones, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [36]

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I think, then, thank you very much, everybody on the telephone and everybody in the room. And we look forward to chatting again.

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Ian Richard Watson, Hansteen Holdings PLC - Joint Chief Executive & Executive Director [37]

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Thanks very much.