Sirius Real Estate reports positive trading update

Sirius Real Estate has provided the company’s trading update for the six months ended to 30th of September 2018.

Yet another good trading period for the group, the results have been underpinned by strong occupier demand for conventional and flexible space and positive letting activity, which together has resulted in an increase in organic rental growth despite some large expected move outs at the start of the year. The company has made progress in deploying the proceeds of the March 2018 €40.0 million equity raise, having completed the acquisition of three investment properties totalling €39.3 million before or immediately after the period end and with another  €57.5 million of property in exclusivity.

Sirius continues to improve the quality of its real estate and realise significant returns from its assets through its highly accretive capital investment programme. The company is primarily focused on the capex investment opportunities within the acquisitions it has completed over the last two financial years, whilst still finalising the few remaining projects from the original programme started in January 2014.  These investments are expected to make a strong contribution to results over the second half of the financial year.

Sirius has reported that the company is trading in line with management expectations. 

The main highlights for the period include:

• Total annualised rental income, including acquisitions and disposals within the period, increased by €2.5 million to €82.0 million from €79.5 million at the start of the period.
• Like for like annualised rental income increased by 2.6% to €79.7 million compared to €77.7 million at the start of the period, despite the impact of several large expected move outs which occurred at the start of the period.
• Organic growth in the period was driven by an average like for like rental rate increase of 2.5% from €5.62 to €5.76 per sqm whilst like for like occupancy was broadly flat at 81%. This demonstrates the strength of the Company’s asset management capabilities and ability to deal with large move outs effectively. Sirius continues to generate the vast majority of its leads through its internal operating platform, which provides much greater flexibility and the ability to achieve higher rental rates.
• Growth through acquisitions and portfolio optimisation through asset recycling continues to be a focus for the company. In the period, the company acquired a combination of assets with stable income and higher value add assets where the company’s asset management initiatives through its internal operating platform can grow both income and capital values. Alongside this, Sirius was able to complete the sale of one non-core site and notarise the sale of the last remaining non-core site, as well as sell some non-income producing land and a residential building. This activity is expected to be particularly accretive to shareholders over the next few years. The specific details of these transactions are outlined below:

1. On 1 August 2018, the company completed the acquisition of Sirius Business Park Friedrichsdorf, located in Friedrichsdorf, near Frankfurt for a total consideration of €17.8 million. The site offers around 17,300 sqm of lettable space comprising 8,200 sqm of offices, 8,100 sqm of warehouse space and 1,000 sqm of other space. At the time of acquisition, the asset was 91.8% let to 18 tenants producing an annual rental income of €1.4 million and net operating income of €1.3 million.
2. On 1 August 2018, the company completed the acquisition of a business park located in Sirius Business Park Fellbach, near Stuttgart for a total consideration of €12.1 million.  The site provides around 25,500 sqm of lettable space, comprising 2,100 sqm of offices, 15,100 sqm of warehouse space and 8,300 sqm of other commercial space. At the time of acquisition, the asset was 79.0% let to 19 tenants producing an annual rental income of €1.0 million and net operating income of €0.9 million. 
3. On 1 October 2018, the Company completed the acquisition of a second business park located in Mannheim, for a total consideration of €9.6 million. The site offers around 15,000 sqm of lettable space comprising 7,050 sqm of offices, 4,950 sqm of warehouse space and 3,000 sqm of other space. At the time of acquisition, the asset was 68.9% let to 57 tenants producing an annual rental income of €0.8 million and net operating income of €0.6 million.
4.  On 1 May 2018, the Company completed the sale of the non-core Sirius Business Park Bremen Brinkmann for €15.5 million, in line with book value and generating net operating income of €0.7 million.
5. On 4 June 2018, the Company notarised the sale of Sirius Business Park Bremen Hagstrasse, the final non-core site, which is expected to complete in October 2018.
6. On 1 June 2018, the Company completed the sale of a plot of non-income producing land and also the sale of a non-income producing residential building, which together generated proceeds of €1.8 million.

Andrew Coombs Chief Executive Officer of Sirius Real Estate, said:

“We’ve made excellent progress deploying the proceeds from our fund raise in March and recycling capital from the sale of the portfolio’s non-core assets into an attractive mix of stable income producing assets and those with value-add opportunity. The new assets fit well within our investment criteria, and provide stability through well covenanted long-term tenants as well as opportunity through sub-optimal vacancy and leases.

The ability of our operating platform to deal with large move outs and attract, secure and retain tenants on favourable terms is highlighted by the strong increases in like for like income that we have seen again over the last six months. During the period, we also signed several significant long-term tenancy agreements, which included leases with a leading German sports car manufacturer based in Stuttgart and CARE Deutschland-Luxembourg, as well as getting to the advanced stages of negotiations on a significant five-year renewal with Daimler-AG. The fact that we are able to secure these big deals alongside the many smaller tenants that we sign up every month highlights the diversity of our lettings capabilities.

In September, the Company was pleased to sponsor and participate in the EPRA 2018 conference in Berlin, taking part in panel discussions and hosting investor tours around some of its sites.

“The Company was also delighted to welcome Danny Kitchen to the Board as non-executive chairman. Danny has more than 25 years of property and finance experience in both public and private markets and we look forward to working with him as we continue to deliver our future growth ambitions.”