TIDMSRE
RNS Number : 2562C
Sirius Real Estate Limited
10 October 2022
SIRIUS REAL ESTATE LIMITED
(Incorporated in Guernsey)
Company Number: 46442
JSE Share Code: SRE
LSE (GBP) Share Code: SRE
LEI: 213800NURUF5W8QSK566
ISIN Code: GG00B1W3VF54
10 October 2022
Sirius Real Estate Limited
("Sirius Real Estate", "Sirius", the "Group" or the
"Company")
TRADING UPDATE: IN LINE WITH EXPECTATIONS, WITH CONTINUED RENTAL
GROWTH AND STRONG BALANCE SHEET
Sirius Real Estate, the leading owner and operator of branded
business and industrial parks providing conventional space and
flexible workspace in Germany and the U.K., provides an update on
trading for the six months to 30 September 2022.
Highlights Germany: Rent growth driven by continued strong
demand
-- 2.4% increase in like for like annualised rent roll to
EUR115.2 million (March 2022: EUR112.5 million) driven by a 3.3%
increase in like for like rate per sqm to EUR6.53 (March 2022:
EUR6.32).
-- 12-month rolling cash collection rate of 98.0%.
-- Refinancing of the EUR170 million BerlinHyp AG Amber Loan
facility with a seven-year term extension to 31 October 2030,
commencing from 1 November 2023 at 4.26% interest, which will
increase the Group's weighted average cost of debt from 1.4% to
1.9% and extend its weighted average debt expiry from 3.8 years to
5.0 years.
Highlights U.K.: Unlocking latent value in the BizSpace
portfolio
-- 4.1% increase in like for like annualised rent roll to
GBP46.5 million (March 2022 GBP44.7 million) driven by a 8.4%
increase in like for like rate per sqft to GBP12.64 (March 2022:
GBP11.67 per sqft).
-- Disposal of Camberwell Lilford Road for GBP16 million,
representing a 2% NIY and a 94% premium to the value at the time of
the BizSpace acquisition in November 2021.
-- 12 month rolling cash collection rate of 99.3%.
Highlights Group: Trading in line with expectations and strong,
flexible balance sheet
-- Trading and FFO in line with consensus and management expectations for the full year.
-- Cash reserves increased to around EUR162 million, of which
over EUR138 million is unrestricted, providing capacity for further
acquisitions and investment.
Strong H1 lettings and rental growth
Total annualised rent roll increased to EUR167.9 million (March
2022: EUR167.1 million) despite the disposals of Magdeburg in
Germany and Camberwell in the U.K. Like for like annualised rent
roll grew by 2.4% in Germany to EUR115.2 million (March 2022: EUR
112.5 million) whilst the U.K. realised growth of 4.1% to GBP46.5
million (March 2022: GBP44.7 million) . These improvements were
mainly driven by a 3.3% and 8.4% increase in the like for like
average rental rate in Germany and the U.K. respectively. Group
total occupancy was marginally lower at 84.4% (March 2022: 85.3%).
The occupancy levels continue to provide good opportunity for
letting up space in the second half of the financial year . The
overall positive performance is pleasing given that the substantial
rent roll increases in the six month period have been achieved in
the face of an uncertain economic environment and despite a number
of large tenants vacating (as expected) in the first half,
following a similar pattern seen over preceding years . The Company
is expecting to replace these tenants quickly which will help drive
further rent roll increases in the near term.
Continued strong interest in the Group's offerings
Despite the current economic headwinds, the Company continues to
see strong demand for the range of conventional and flexible spaces
it offers both in the U.K. and in Germany.
In Germany, Sirius generated an average of 1,259 enquiries per
month in the period, of which 78.1% were converted into viewings.
This led to a total of 79 ,872 sqm of space being let across 869
deals, which resulted in a sales conversion rate of 11.5 %.
In the U.K., an average of 1,343 enquiries were generated per
month, of which 17.3 % were converted into viewings. As a result, a
total of 161,470 sqft (15,001 sqm) of space was let in the period
across 377 deals resulting in a sales conversion rate of 4.7 %.
Cash collections remain very high
Cash collection rates across both the U.K. and Germany remain
good. In Germany, EUR 2.4 million from total billing of EUR 86.5
million of rent and service charges had not been received,
resulting in a cash collection rate of 97.2% in the six month
period under review with EUR41,000 written off. The 12-month
running cash collection rate was 98.0 % and the Company expects to
collect the majority of outstanding rents within the next 12
months.
In the U.K., cash collection rates in the six month period were
98.6% from total billings of GBP24.3 million. The 12-month running
cash collection rate was 99.3%, with less than GBP11,000 written
off and the Company expects to collect the majority of outstanding
amounts within the next 12 months.
Healthy balance sheet
The Group increased its free cash reserves to in excess of EUR
138 million (March 2022: EUR126 million) through a strong trading
period as well as the Magdeburg and Camberwell disposals as
reported in the period under review. The Company will continue to
explore future opportunities to sell properties at premiums to book
value in order to recycle capital and use proceeds in excess of
book value to reduce the overall LTV.
In September 2022, one year in advance of the next major debt
expiry, a EUR170 million facility with BerlinHyp AG due in October
2023, the Company secured a refinancing with the incumbent lender,
agreeing a new 7-year EUR170 million facility commencing on 1
November 2023 with a fixed interest rate of 4.26%. This facility
extends the Group's weighted average debt expiry to 5.0 years from
3.8 years and with the new interest rate, which commences in one
year from now, the Group's weighted average cost of debt will
increase from 1.4% to 1.9%.
Sirius still has EUR1.6 billion of unencumbered assets. The
portfolio was last valued in March 2022 at, comparative to the rest
of the sector, a relatively high gross yield of nearly 7% in
Germany and nearly 12% in the UK. Due to the strong rent roll
performance in the period in both Germany and the U.K., together
with the highly diversified income streams within the portfolio,
the Company is expecting values to increase as at 30 September
2022, in spite of potential yield expansion across the multi-let
sector. Additionally, with the improved FFO from continued rental
growth, the lower quarterly debt repayments from introducing
corporate bond financing last year and the lower capex requirements
of Sirius over the next year or so, the Group has the strongest
operational cash flows it has ever had.
Acquisitions and Disposals
Having deliberately slowed the Company's acquisition programme
due to market conditions, the only purchase in the period was the
completion in May of a property in Potsdam, Germany, which is
adjacent to an existing site owned by Sirius, for EUR0.9 million.
The Company also agreed to EUR43.7 million of acquisitions in
Düsseldorf (EUR39.8 million) and Dreieich (EUR3.9 million), which
completed in October 2022.
The acquisitions noted above were predominantly funded by the
disposal of two assets in the period in Magdeburg, Germany and
Camberwell in the U.K., with a combined book value of EUR27.6
million for an aggregate sales price of EUR33.6 million.
Additionally in the period the Company notarised the sale of
surplus land for EUR1 million in Heiligenhaus, Germany, which has a
book value of EUR0.25 million.
Energy Crisis
In its statements on 30 September 2022, the Bundesnetzagentur,
the German Federal Agency responsible for the co-ordination of the
supply of gas throughout Germany, confirmed that the events at the
Nord Stream 1 and 2 pipelines were not affecting gas supply in
Germany. No gas has been delivered through Nord Stream 1 since the
beginning of September 2022 and Nord Stream 2 has never been put
into operation. German gas reserves are now more than 90% of
capacity and gas continues to be supplied from a range of different
sources other than Nord Stream.
As previously communicated, Sirius secured gas supplies for
customers at fixed rates in 2020 and those fixed rate agreements do
not expire until December 2023. Therefore, unless the German
government moves Germany to emergency level status in relation to
the supply of gas, the Company has no reason to believe there will
be any material changes to its fixed rate agreements for gas
supply.
In September 2022, the German government announced a relief
package worth up to EUR200 billion to fight soaring energy prices
in Germany.
German chancellor Olaf Scholz said the government will establish
a "defence shield" with a volume of up to EUR200 billion to cushion
the impact of expensive energy on citizens and businesses until
2024. It allows Germany to borrow up to that amount to finance the
" gas price brake " as well as additional support measures for
struggling businesses .
Half Year Results
Sirius will announce results for the six months to 30 September
2022 on Monday, 21 November 2022, at which time there will be an
in-person presentation and virtual webinar for analysts and
investors.
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 : "Despite the
concerns in Europe over the impact of the war in Ukraine, the
resulting issues with energy supply, and the current inflationary
and uncertain environment, Sirius has continued to see high demand
for all of its product offerings in the period. The Company is in a
strong position to be able to deal with any shortfalls in gas or
electricity supply or further hikes in prices, having fixed rates
for its and its occupiers' gas supply until the end of next
year.
"We are confident that we can continue to grow our dividend as
planned and believe that our ability to re-finance a substantial
amount of debt so far in advance of expiry and in these markets
demonstrates both the strength of our relationships with our
financiers, as well as the confidence they have in our business
model and Sirius' ability to continue to perform in good times and
bad. While we continue to review opportunities, we have
deliberately held back on acquisitive growth in the period and
further improved our balance sheet so that we can be on the front
foot once we feel it appropriate to begin investing again."
Conference Call
There will be a conference call for analysts/investors hosted by
Andrew Coombs, Chief Executive Officer of Sirius Real Estate and
Alistair Marks, Chief Investment Officer and Interim Chief
Financial Officer of Sirius Real Estate, at 08:30 BST (09:30 CET/SA
time) today, 10 October 2022.
Dial-in U.K.: +44 (0) 33 0551 0200
Dial-in Germany: Toll-Free: 0800 673 7932
Dial-in South Africa: Toll-Free: 0800 980 512
Password (for all participants): Quote Sirius Real Estate when
prompted by the operator
For further information:
Sirius Real Estate
Andrew Coombs, CEO / Alistair Marks, CIO and Interim CFO
+49 (0) 30 285 010 110
FTI Consulting (Financial PR)
Richard Sunderland / James McEwan / Talia Shirion
+44 (0) 20 3727 1000
SiriusRealEstate@fticonsulting.com
NOTES TO EDITORS
About Sirius Real Estate
Sirius is a property company listed on the main and premium
market of the London Stock Exchange and the main board of the JSE
Limited. It is a leading owner and operator of branded business and
industrial parks providing conventional space and flexible
workspace in Germany and the UK. As of 31 March 2022, and following
the acquisition of BizSpace, a leading UK provider of regional
flexible workspace, the Group's portfolio comprised 140 assets let
to 9,452 tenants with a total book value of over EUR2 billion,
generating a total annualised rent roll of EUR167.1 million. Sirius
also holds a 35% stake in Titanium, its EUR350+ million
German-focused joint venture with clients of AXA IM Alts.
The Company's strategy centres on acquiring business parks at
attractive yields and integrating them into its network of sites -
both under the Sirius name and alongside a range of branded
products. The business then seeks to reconfigure and upgrade
existing and vacant space to appeal to the local market via
intensive asset management and investment and may then choose to
selectively refinance or dispose of assets once they meet maturity,
to release capital for new investment. This active approach allows
the Company to generate attractive returns for shareholders through
growing rental income, improving cost recoveries and capital
values, and enhancing returns through securing efficient financing
terms. The Company has a strong track record for growing its income
and has delivered like-for-like rent roll growth in excess of 5%
for the last eight consecutive years.
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
JSE Sponsor
PSG Capital
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