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SIRIUS REAL ESTATE LIMITED - Trading Update And Extension Of Banking Facility

Release Date: 02/10/2019 08:00
Code(s): SRE     PDF:  
 
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Trading Update And Extension Of Banking Facility

SIRIUS REAL ESTATE LIMITED
(Incorporated in Guernsey)
Company Number: 46442
JSE Share Code: SRE
LSE (EUR) Share Code: ESRE
LSE (GBP) Share Code: SRE
ISIN Code: ISIN GG00B1W3VF54


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

Date: 02/10/2019 08:00:00
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