Sirius Real Estate Covid-19 update
25 March 2020
Sirius Real Estate Limited
("Sirius Real Estate", "Sirius" or the "Company")
Covid-19 update
Sirius Real Estate, the leading operator of branded business parks providing conventional space and flexible workspace in Germany, today issues an update on the impact of the Covid-19 virus on the business.
Sirius's business model is built on the breadth of its offer to occupiers and the adaptability of its mix of accommodation, ranging across many different workspace segments, including conventional office, flexible office, manufacturing, storage and self-storage. In addition to this the portfolio is very well diversified in its tenant base as well as from a geographical perspective.
Current trading
The Board does not expect any material impact to its trading profit for the year ending 31 March 2020, as a result of Covid-19.
In response to Covid-19, all meeting room and conference facility hire has been put on hold until the end of April, which will have a marginal impact on revenues and cash flow. The other noticeable effect on the business to date has been a 50% reduction in the run rate of core enquiries for new tenants, which we expect will translate into a 10% reduction in new lettings in March and a 35% - 40% reduction in monthly new lettings throughout April and into May. This could lead to a circa 1% reduction in underlying occupancy.
On the positive side, the Company is seeing an increase in demand for storage space from both new and existing commercial tenants as well as new self-storage customers. Storage makes up 35%* of space in Sirius's portfolio.
Although it is still early on in the spread of Covid-19 in Germany, to date there has been no increase in the level of contract terminations or failure to meet rental payments above normal levels.
Balance Sheet
Sirius has a strong balance sheet with total cash balances currently in excess of €110 million, €90.0 million of which is unrestricted. In addition, the Group has €39.3 million of undrawn facilities and a further €10.1 million to be received on 1 April 2020, upon the completion of the disposal of the Weilimdorf asset announced as part of the Group's interim review in November 2019. Sirius's top 50 tenants make up 44% of the rent roll and comprise some of the world's best known multi-national companies. Across the board, the weighted average lease expiry is 2.8 years and only 6% of the rent roll comes from the Company's flexible SmartSpace products. It is also worth noting that 7% of the Company's total rent roll is derived from government tenants, ranging from the Ministry of Finance to local regional police forces.
The Company has significant covenant headroom and a capital structure that is well placed to absorb a prolonged period of uncertainty. The Company expects to report in its financial results for the year ending 31 March 2020, a net LTV of around 35% and approximately 10.5x interest cover on its debt.
Continuity plans and the German Government Response
The Company's immediate priority is the health and safety of its employees, tenants and contractors, together with the need to comply with the instructions from German central and local government.
The Company activated its business continuity plan some weeks ago, having recognised at an early stage the potential for the Covid-19 situation to escalate and the ramifications that government-enforced restrictions could have on the Company's ability to operate. This means we are now better able to continue the operation of the Company as the German government manages the country's response to Covid-19.
In Germany, there are a number of financial protections in place to help support businesses including 'Kurzarbeit' (the short-working compensation scheme which covers a proportion of workers salaries). In addition, the German government has promised €550 billion of state-backed loans to support business continuity through the crisis, as well as the opportunity for business to defer billions of euros in taxes. The German finance minister has said the government will provide unlimited liquidity assistance to German companies hit by Covid-19.
Trading Update
The Company will be issuing a trading update for the twelve months to 31 March 2020 in the second week of April.
Andrew Coombs, Chief Executive Officer of Sirius Real Estate, commented: "We are maintaining a very close eye on the situation as it develops with the interests of our staff and tenants very much at the forefront of deliberations."
"Our platform across Germany is well placed to maintain the operation of the Company throughout this difficult time and we will continue to adapt and meet the evolving needs of our tenants throughout the crisis period."
ENDS
*includes Smartspace Storage
For further information:
Sirius Real Estate
Andrew Coombs, CEO/Alistair Marks, CFO
Tel: +49 (0)30 285010110
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.
In July 2019, the Company completed the formation of its Titanium real estate investment joint venture with clients represented by AXA Investment Managers - Real Assets. Titanium was formed through the acquisition by AXA IM - Real Assets, on behalf of its clients, from Sirius, of a 65% stake in five business parks across Germany. Sirius will retain the remaining 35% and will act as operator of the assets, on a fee basis. Subject to suitable investment opportunities, AXA IM - Real Assets and Sirius may consider opportunities to grow the JV's portfolio primarily 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 strategies have been clearly defined so that the JV does not conflict with Sirius's existing business.
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
JSE Sponsor
PSG Capital
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