Sirius joint venture with AXA Investment Managers
1 March 2019
Sirius Real Estate Limited
("Sirius Real Estate", "Sirius" or the "Company")
Sirius forms German business park joint venture with AXA Investment Managers - Real Assets
Sirius Real Estate, the leading operator of branded business parks providing conventional space and flexible workspace in Germany, announces that it has formed a real estate investment joint venture (the "JV") with clients represented by AXA Investment Managers - Real Assets ("AXA IM - Real Assets") in which AXA IM - Real Assets, acting on behalf of its clients, will own a 65% interest and Sirius will own the balance of 35%. The JV will be called Titanium.
The JV will initially be formed by AXA IM - Real Assets acquiring, on behalf of its clients, from Sirius a 65% stake in five single asset special purpose vehicles ("SPVs") through which it currently owns two business parks located in Berlin (Berlin Borsig and Berlin Tempelhof) and one in each of Mainz, Nurnberg and Bayreuth. The business parks provide a combination of office, warehouse, industrial and storage space. The implied property value of €168 million equates to a gross yield for the portfolio of 6.2% and reflects a premium to the last reported book value as at 30 September 2018 which was €141.1 million. Total cash commitment from AXA IM - Real Assets amounts to €43.9 million. The transaction is expected to generate total cash proceeds of more than €70 million for Sirius after refinancing and expected related costs.
Sirius has signed an agreement to continue the operation of the assets, using its fully integrated operating platform, on a fee basis. The JV may seek to acquire further assets in Germany, with a clearly defined strategy that will not conflict with Sirius's existing business.
Rationale
As a result of entering the JV, Sirius will have significant resources to invest both for itself and for the JV. Through the newly established relationship with AXA IM - Real Assets, the Company may be able to consider much larger assets and portfolios of assets, with a wider range of return profiles that it might previously have overlooked or have been unable to pursue whilst allowing the Company to derive further benefits of scale. Proceeds from the transaction together with additional lending will provide Sirius with an estimated €140.0 million of acquisition firepower to continue expanding its own portfolio.
Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said: "Sirius is delighted to be partnering with one of the world's largest real asset managers and the fact that Sirius is going into partnership with such an important institution as AXA IM - Real Assets underlines the professionalism and expertise that has been developed within Sirius over the last five years in particular. The formation of this relationship represents an important opportunity for both parties and it will give Sirius key advantages in an increasingly competitive market and through the real estate cycle".
"This will increase the Company's ability to create value for both its investors and the JV from which the Company will benefit as both the manager and as an equity partner".
John O'Driscoll, European Head of Transactions at AXA IM - Real Assets, commented: "This transaction allows us to invest in an attractive portfolio of assets and provides us with immediate scale in this important asset class in Germany, a geography that we are actively growing in. This transaction also enables us to establish a long term joint venture with Sirius Real Estate, a leading operator and investor in branded business parks in Germany. We look forward to working with them on this portfolio and on future opportunities."
The Assets
The assets within the SPVs provide a total net lettable area of approximately 191,000 sqm and, as at 30 September 2018, produced €10.45 million of annualised rental income. Occupancy is 88%. Further details of the underlying properties are as follows:
|
Property Name |
Geographical Location |
Sector |
Net Lettable Area
sqm |
Weighted Average Rental per sqm per month € |
Property Value
€ |
|
Sirius Business Park, Berlin-Tempelhof |
Berlin |
Office, storage and industrial |
25,007 |
6.52 |
18,400,000 |
|
Sirius Business Park, Berlin-Borisgwerke |
Berlin |
Office and industrial |
79,057 |
3.86 |
47,400,000 |
|
Sirius Gutenberg Park Mainz |
Mainz |
Office and warehouse |
27,874 |
8.48 |
31,700,000 |
|
Sirius Business Park Nurnberg |
Nurnberg |
Office, storage and industrial |
36,343 |
4.58 |
25,000,000 |
|
Sirius Business Park, Bayreuth |
Bayreuth |
Office, storage and industrial |
22,871 |
5.13 |
18,600,000 |
|
Total |
|
|
191,152 |
|
141,100,000 |
Note: Valued by Cushman & Wakefield LLP as set out above.
The SPVs had a net asset value of €39.9 million, as at 31 March 2018, being the date of their most recent unaudited financial statements. The total profits after tax, including valuation gains, attributable to the SPVs for the year ended 31 March 2018, were €15.2 million, based on their last unaudited annual financial statements. The annual financial statements of the SPVs were prepared in accordance with Dutch GAAP. Although unaudited, Sirius is satisfied with the financial statements.
These underlying properties were last independently valued by Cushman & Wakefield LLP, as at 30 September 2018 at €141.1 million. The implied sale value at €168 million equates to a gross yield of 6.2% and represents a premium of €27.4 million to book value, as at 30 September 2018. The valuer is independent and is accredited in terms of the Royal Institution of Chartered Surveyors (RICS) but is not registered in terms of the South African Property Valuers Profession Act, No. 47 of 2000.
Joint Venture
Subject to suitable investment opportunities, the JV partners may grow the portfolio including through the acquisition of larger stabilised business park assets and portfolios of assets with strong tenant profiles and occupancy. Sirius will continue to grow its wholly owned portfolio through acquisitions of more opportunistic assets, where it can capitalise on its asset management expertise to maximise utilisation of the space, grow occupancy and improve quality of the tenants.
The ongoing operation and management of the assets contained in the JV is governed by an Operational Management Contract ("OMC") which ensures Sirius will continue to act as operator of the assets.
Sirius has provided guarantees and warranties to AXA IM - Real Assets which are customary for a transaction of this nature. The transaction also includes standard drag along rights in favour of the majority shareholder as well as tag along rights in favour of Sirius, and dispute resolution clauses. The estimated costs incurred by Sirius in the transaction amount to €0.2 million.
Timetable
The transaction is expected to close and become effective after the last of the closing conditions have been fulfilled, which is anticipated to be June 2019. The principal closing conditions are as follows:
· merger control clearance being granted or being deemed to be granted by all competent merger control authorities;
· agreements being concluded to transfer existing crane leases to DDS Lime B.V., one of the SPVs;
· receipt of written confirmation that the securities under existing financing agreements have been released; and
· the conclusion of new financing agreements in respect of the SPVs.
Analyst Call
There will be a call for analysts hosted by Andrew Coombs, CEO of Sirius, at 09:00 this morning (Friday 1 March). To register, please contact Charlotte Dale at charlotte.dale@tavistock.co.uk or on +44 (0)20 7920 3150
For further information:
Sirius Real Estate
Andrew Coombs, CEO/Alistair Marks, CFO
Tel: +49 (0)30 285010110
Berenberg (Joint Broker)
Chris Bowman/Toby Flaux/Marie Stolberg
Tel: +44 (0)20 3207 7800
Peel Hunt (Joint Broker)
Capel Irwin/Carl Gough/Harry Nicholas
Tel: +44 (0)20 7418 8900
Tavistock (Financial PR)
Jeremy Carey/James Verstringhe
Tel: +44 (0)20 7920 3150
Email: siriusrealestate@tavistock.co.uk
NOTES TO EDITORS
About Sirius Real Estate
Sirius is a property company listed on the main market and premium segment of the London Stock Exchange and the main board of the Johannesburg Stock Exchange. It is a leading operator of branded business parks providing conventional space and flexible workspace in Germany. The Company's core strategy is the acquisition of business parks at attractive yields, the integration of these business parks into its network of sites under the Company's own name as well as offering a range of branded products within those sites, and the reconfiguration and upgrade of existing and vacant space to appeal to the local market, through intensive asset management and investment. The Company's strategy aims to deliver attractive returns for shareholders by increasing rental income and improving cost recoveries and capital values, as well as by enhancing those returns through financing its assets on favourable terms. Once sites are mature and net income and values have been optimised, the Company may take the opportunity to refinance the sites to release capital for investment in new sites or consider the disposal of sites in order to recycle equity into assets which present greater opportunity for the asset management skills of the Company's team.
For more information, please visit: www.sirius-real-estate.com
Follow us on LinkedIn at https://www.linkedin.com/company/siriusrealestate/
Follow us on Twitter at @SiriusRE
LEI: 213800NURUF5W8QSK566
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