Trading Update and Extension of Banking Facility
2 October 2019
Sirius Real Estate Limited
("Sirius Real Estate", "Sirius" or the "Company")
Trading Update and Extension of Banking Facility
Six months to 30 September 2019
Sirius Real Estate, the leading operator of branded business parks providing conventional space and flexible workspace in Germany, provides the following trading update for the six months to 30 September 2019 (the "period").
Highlights
· Continued strong occupier demand, with total annualised rent roll of €78.5 million
· Completed Titanium joint venture with AXA Investment Managers - Real Assets - pipeline of opportunities
· Major extension to banking facility with BerlinHyp to total €180.2 million, fixed at 0.9% to October 2023
· Total firepower of €170 million to invest into new assets on the balance sheet, capex investment programme and further equity into the Titanium JV
· Attractive acquisitions including €66 million of assets notarised and €22 million completed
· Trading in line with management expectations for the full year
Lettings
This has been another promising six months of trading for the business in spite of the large expected move-outs at the start of the period and we are pleased to report that the Company is trading in line with management expectations for the full year. Continued strong occupier demand has supported positive letting activity with more than 50,000 sqm of move-ins in the period, offsetting the effect of vacating tenants, which included 25,000 sqm of move-outs in recently acquired sites which were known to us prior to acquisition. The annualised rent roll highlights are as follows:
· Total annualised rent roll, which includes the effect of acquisitions and disposals in the period, was approximately €78.5 million compared to €76.5 million at the start of the period
· Like-for-like annualised rent roll increased by approximately 0.9% to €77.2 million compared to €76.5 million at the start of the period, despite the impact of the move-outs mentioned above
· Organic rent roll growth in the period was driven by an average like-for-like rental rate increase in the region of 1.6%, from €5.83 to €5.92 per sqm, while like-for-like occupancy remained flat at 85%
Joint Venture
In addition to the strong letting activity, the Company completed its Titanium joint venture with AXA Investment Managers - Real Assets in July 2019 through the sale of 65% of its interest in five business parks generating net proceeds for Sirius in excess of €70.0 million. The Company has identified a pipeline of potential acquisition opportunities which fit with Titanium's investment criteria, which it is discussing with its partners.
Extension to Banking Facility
The Company has agreed a €115.4 million increase in its existing facility with BerlinHyp. This will increase the facility from €64.8 million as it stands today, to €180.2 million after the extension. As part of the extension agreement, the Company's Nabern-Kirchheim asset will be added to the security portfolio. The Nabern-Kirchheim asset was previously financed as part of the K-Bonds facility and the Company repurchased the K-Bonds facility upon the completion of Titanium. €24.6 million of the proceeds from the completion of Titanium have been used to repay K-Bonds in full. This will mean the Company will on a net basis have approximately €90.0 million of surplus funds available from the extended BerlinHyp facility after taking into account the K-Bonds repayment. The new extended BerlinHyp facility expires on 31 October 2023, has an all-in fixed interest rate of 0.9% and requires amortisation payments of 1.25% per year. The Company expects, when it announces its half-year results on 25 November 2019 after drawing down the increased facility with BerlinHyp, to remain at a net LTV of less than 40%.
Available Funds
Combining the funds remaining from last year's disposals, the proceeds from the formation of Titanium and the new BerlinHyp facility, Sirius has created approximately €170 million of firepower to invest into new assets on its balance sheet, its capex investment programme and further equity into Titanium. The Company has made significant progress in acquisitions in the period, completing three properties totalling €21.9 million and notarising two additional properties for €65.7 million, which are expected to complete shortly after the period end. The assets acquired and notarised for completion provide an attractive blend of stable income and opportunities to lease up vacant space and undertake accretive capital investment. The Company is working on a strong pipeline of opportunities to deploy the remaining funds available to it.
Acquisitions
Details of completed or committed transactions are outlined below:
· On 18 July 2019, the Company notarised for acquisition a property in Alzenau, east of Frankfurt, for €44.5 million including acquisition costs. The mixed-use property comprises eleven buildings constructed between 1985 and 2002 providing a total of 60,000 sqm of lettable space (47% warehouse/production space; 47% office space; and 6% other space) as well as 1,063 parking spaces, on a total plot size of 197,000 sqm. The asset is 93.5% let to 16 tenants with an annual net operating income of €3.5 million with a weighted average lease expiry of 3.5 years. The transaction is due to complete in October 2019.
· On 24 September 2019, the Company notarised the acquisition of a property in close proximity to Munich for total consideration of €20.1 million. The single office building was built in 1993 and provides around 19,600 sqm of mostly office space and 336 car parking spaces. The asset is 61% let to 31 tenants with an annual net operating income of €684,000 with a weighted average lease expiry of 2.3 years. The transaction is due to close in December 2019.
· On 10th May 2019, the Company completed the acquisition of Buxtehude Business Park south west of Hamburg, for a total consideration of €8.7 million including acquisition costs. The business park provides 28,532 sqm of lettable space (90% warehouse / production space; 6% offices; and, 4% of other space) on a plot of 35,425 sqm and was acquired with full vacant possession.
· On 1 September 2019, the Company completed the acquisition of an office building adjacent to its Bochum Business Park, in Bochum. The property was bought for a total consideration of €6.7 million including acquisition costs. The property, constructed in 1970, provides 4,200 sqm of lettable space (81% office space, 15% storage and 4% service space) and 71 parking spaces on a 3,300 sqm plot. It is 100% let, producing an annual net operating income of €370,000, with a weighted average lease expiry of 2.2 years.
· On 1 June 2019, the Company completed the acquisition of a business park in Teningen, north of Freiburg, for €6.5 million including acquisition costs. The property provides lettable space of 20,000 sqm (40% warehouse/production space; 38% offices; 19% laboratory; and, 3% of other space) on a 43,000 sqm plot. It is currently leased to seven tenants, with occupancy at 88% and produces annual net operating income of €542,000. The weighted average lease expiry is 1.6 years.
Disposals
Alongside these acquisitions, Sirius notarised for sale a mature asset as part of the continuing asset recycling programme, as outlined below:
· On 5 September 2019, the Company notarised for disposal an office building in Stuttgart-Weilimdorf for a sale price of €10.1 million. The property comprises a net lettable area of 6,766 sqm, which is predominantly office space. The property is 100% let to a single tenant producing around €690k of annual net operating income with the remaining lease being 4.0 years. The transaction is due to complete in April 2020.
Half Year Results
The Board looks forward to providing a more detailed report on the Company's trading performance and outlook when it announces half‐year results on 25 November 2019.
The financial information on which this trading update is based has not been reviewed or reported on by the Company´s external auditors or a reporting accountant.
Commenting on trading over the period, Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said: "It has been another encouraging six months for Sirius, during which we have completed the Titanium joint venture transaction with AXA, secured a new debt package at a historic low fixed interest rate for the Company of 0.9% and made considerable progress on identifying and securing earnings enhancing acquisitions.
"While our like-for-like annualised rent roll is broadly flat for this period, we are pleased at the speed we have been able to secure enough new income to replace that lost from the known move-outs that we highlighted in our Annual Report. The foundations have been set for a strong second half to this financial year".
Conference Call
There will be a conference call for analysts/investors hosted by Andrew Coombs, Chief Executive Officer of Sirius Real Estate, at 08:30 (UK time) today (Wednesday 2 October).
Tel: +44 (0)333 300 0804
PIN: 91653204#
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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