Industrial property investment company Hansteen sent a circular to shareholders over the return of £145m of capital on Tuesday, following its announcement on 5 February that it had agreed to dispose of the Industrial Multi Property Trust portfolio for £116m to an entity owned by Warehouse REIT, with completion expected to occur at the end of March.
The FTSE 250 firm had also announced on 13 March that the Secretary of State for Transport had acquired Saltley Business Park, Birmingham from a subsidiary of the company, by way of compulsory purchase.
As part of the compulsory purchase order process, the group received an initial advance payment of £36.96m, with a mutual valuation process underway designed to establish the property's aggregate market value.
The group's cash balance of £71.2m as at 31 December was therefore expected to rise significantly, Hansteen's board explained.
It said that, owing to the current high level of demand for industrial property investments, opportunities to reinvest the substantial cash deposits in properties that fit the Hansteen business model were likely to be limited.
As the cash deposits would earn virtually no interest, and therefore materially diluted the returns from the business, the board said it considered that returning capital to the shareholders by means of a reduction and return of capital was in the best interests of all shareholders.
Hansteen proposed to reduce its share premium account, and cancel its capital redemption reserve by an aggregate amount of £145m, and pay that amount to the shareholders as a return of capital.
The board said the effect of the proposed reduction and return of capital would be that for every fully paid ordinary share held at the record date, a shareholder would receive 35p in cash.
It said the proposals were conditional on the approval of shareholders at a general meeting of the company, to be held at 1100 BST on 11 April in London, as well as approval of the court.
"While opportunities to acquire properties or portfolios from which we can generate value are likely to be limited, we continue to see good potential to drive further value growth both through increasing income from our remaining portfolio by improving occupancy and growing rental levels and capitalising on the demand for industrial assets from the investment market," commented joint chief executives Ian Watson and Morgan Jones in a statement.