SIRIUS REAL ESTATE
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irius Real Estate was established in 2007 and was listed on the LSE alternative investment market (AIM) the same year. It obtained a secondary listing on the JSE AltX in 2014, before moving to the main boards of the LSE and JSE in 2017. The company owns and operates a portfolio of business parks exclusively in Germany, which provide conventional and flexible workspace. Germany’s attraction lies in its large, autonomous markets, well-diversified economy and an SME market that accounts for 50% of the economy. By end-May 2021, nearly 45% of the population had received at least one dose of the vaccine, and Covid-related restrictions are due to end by end-June 2021. The economy is forecast to grow 3.5% this year, and a further 4% in 2022. One of Sirius’s major strengths is its operational platform with asset, property and development management functions performed in-house. Marketing and sales are conducted centrally through the Sirius Facilities platform. Sirius’s portfolio consists of 68 light business parks, office buildings and industrial units valued at €1.7bn. The space is used primarily for office (36%), storage (32%), production (24%) and other (8%) needs. While there are more than 5,500 tenants in the portfolio, the top 50 anchor tenants account for 53% of revenue. Over the years, management FINANCIAL MAIL July 2021
has employed an intensely active and proven business model to acquire, transform, manage and recycle assets in this niche market. Its track record has been underpinned by strong capital growth, generated through accretive “transformation” capex on vacant space in the core portfolio, and on newly acquired space from its pipeline of opportunistic acquisitions. The business has weathered the impact of the pandemic remarkably well, with cash collection rates at 98.2% in the Covid-related trading period. This reliance can be attributed to its well-diversified portfolio (in terms of industry type and tenants), and extensive and encouraging fiscal support from
PORTFOLIO SPLIT Total value: €1.347bn
Germany — 100% Frankfurt — 24.7% Berlin — 9.3% Stu gart — 14.4% Cologne — 10.5% Munich — 9.5% Dusseldorf — 12.0% Hamburg — 3.9% Other — 15.5%
Source: Sirius Real Estate
the German government to the SME sector. In 2019, Sirius completed the formation of a joint venture with AXA Investment Managers (known as the Titanium JV), which is 35% held by Sirius and 65% by AXA. The JV’s profile of assets is stable and mature, with less active management opportunities but reliable cash flows for investors. There is a management contract in place to continue to operate the assets in exchange for a fee (0.5% of gross asset value). Sirius’s net loan to value (LTV) was 31% at end-March 2021. Covenants vary between 65% and 75% on the LTV ratio. The strictest interest cover ratio covenants allow for a 40% decrease in net operating income before breaching, so the risk of solvency issues or covenant breaches is minimal. The company is not a real estate investment trust, but aims to pay out 65% of its funds from operations (FFO) annually. While no guidance is provided, Sirius aims to increase its FFO 30% over the next three to five years, largely owing to its capex programme, letting of vacant space, rental uplifts and further accretive acquisitions. Naeem Tilly, head of research, Sesfikile Capital
SIRIUS REAL ESTATE (JSE code: SRE) As at March 31 2021 Head of company and title Market capitalisation Dividend per share NAV per share Total return (12 months to May 31 2021) (%) Total vacancy (%) Loan-to-value ratio (%) Tel no & website
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Andrew Coombs (CEO) €1.15bn 3.80c (FY2021), 3.57c (FY2020) 88.31c 19 13 31.4 +49 (0) 30285010101; www.sirius-real-estate.com
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