TIDMSRE
RNS Number : 4009V
Sirius Real Estate Limited
08 April 2019
8 April 2019
Sirius Real Estate Limited
("Sirius Real Estate", "Sirius" or the "Company")
Trading Update
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 twelve
months to 31 March 2019, ahead of the announcement of its full-year
results on 3 June 2019.
Summary
The Company confirms that the results for the twelve-month
period are expected to be in line with market expectations and is
pleased to announce stronger than expected organic growth on its
existing portfolio, good progress on acquisitions and disposals
and, as announced previously, a substantial new joint venture with
AXA IM - Real Assets.
Continued strong tenant demand combined with the Company's
intensive asset management initiatives has generated another year
of improved rental growth with the like-for-like increase in
annualised rental income expected to be greater than the 6.2%
reported over the same period last year.
Additionally, the planned disposal of non-core assets has
progressed well during the period and the Company has now
successfully exited the Bremen market. The disposal of three Bremen
assets generating proceeds of EUR25.6 million completed in the
period which included the final two non-core assets within Sirius'
portfolio. In addition, the Company sold a piece of non-income
producing land and a residential building, generating further
proceeds amounting to EUR1.8 million, which will be re-invested
into the Company's accretive capex investment programme.
In February 2019, the Company announced the establishment of a
joint venture with AXA IM - Real Assets (the "JV") through the sale
of 65% of its interests in five Group subsidiary companies to AXA
IM - Real Assets. The transaction is expected to complete at the
end of June 2019. With an implied property purchase price of
EUR168.0 million compared to the last reported book value of
EUR141.1 million, the JV crystallises excellent value for Sirius,
provides significant firepower for acquisitions both for itself and
for the JV and creates an attractive income stream as a result of
Sirius' continued management of the assets.
The JV will also allow Sirius to consider much larger assets and
portfolios of assets, with a wider range of return profiles and
development opportunities that it might previously have overlooked
or was unable to pursue, allowing the Company to derive further
benefits from scale, whilst not conflicting with Sirius's existing
business.
The combination of the March 2018 equity raise, asset disposals
and proceeds generated by the sale into the JV has in total
provided the Company with resources, including additional lending,
to acquire approximately EUR230.0 million of acquisitions. This has
so far been deployed into the acquisition of four assets totalling
EUR65.1 million which completed in the period. In addition to this,
two assets totalling EUR15.2 million have been notarised for
completion in the new financial year and three assets totalling
EUR64.8 million are currently in exclusivity. Assuming these all
complete, the Company will then have the capacity to invest a
further EUR85.0 million into acquisitions. Approximately EUR70.0
million of the equity used to fund these acquisitions will come
from the proceeds of the sale to AXA IM - Real Assets in June.
In summary, combining the continuing strength of Sirius'
internal operating platform, with the selective asset recycling
completed in the period and the new strategic partnership with AXA
IM - Real Assets, shows that the Company is well placed for the new
financial year and is confident of delivering attractive,
sustainable returns for shareholders going forward.
Operational and Strategic Highlights
The main highlights for the period include:
-- Total annualised rental income, including acquisitions within
the period, is expected to have increased by approximately EUR8.2
million to EUR87.7 million as at 31 March 2019.
-- Like--for-like annualised rental income in the period is
expected to have increased by more than the 6.2% growth recorded
for the prior year, the fourth consecutive year of increases
greater than 5%.
-- Strong lettings activity with more than 170,000 sqm
successfully let in the period including major long term deals with
well covenanted tenants including Porsche AG, Land Berlin (a
government agency) and FOM (an educational body).
-- Significant acquisition activity including the completion of
EUR101.2 million of acquisitions in the period, which includes two
assets totalling EUR36.1 million that were prepaid before the start
of the period. Two further assets were notarised in the period
totalling EUR15.2 million and are expected to complete early in the
new financial year.
-- Successful completion of the sale of three assets situated in
non-core locations, generating proceeds of EUR25.6 million,
providing further firepower for accretive acquisition activity. The
Company also disposed of a piece of non-income producing land and a
residential building generating further proceeds of EUR1.8 million
in the period.
-- The Company continues to secure advantageous long-term
borrowing facilities on attractive terms with a new 5-year loan
facility totalling EUR56.0 million from PBB agreed in the period
with a margin of 1.20%. As at 31 March 2019, EUR36.4 million had
been drawn down and hedged with 5-year SWAPs.
-- In September 2018, the Company announced the appointment of
Danny Kitchen as Chairman. Danny brings over 25 years of property
and finance experience in both public and private markets and we
look forward to our next phase of growth under his stewardship.
The financial information on which this trading update is based
has not yet been reviewed or reported on by the Company's external
auditors.
Recent Notarisations
On 22 March 2019, Sirius notarised the acquisitions of two
business park assets located in the metropolitan regions of
Freiburg and Hamburg.
The Freiburg property comprises a combination of office, storage
and production space totalling 20,000 sqm of lettable space which
is currently 87.6% occupied. The total expected acquisition costs
amount to EUR6.5 million. The site generates EUR542,000 of net
operating income, representing an attractive EPRA net initial yield
of 8.3% and will act as a replacement for the recently disposed
Bremen-Dötlinger asset that forms part of the existing SEB I loan
facility.
The Hamburg property provides a combination of office, storage
and production space totalling 28,500 sqm of lettable space which
is currently fully vacant. Total expected acquisition costs amount
to EUR8.93 million.
Andrew Coombs Chief Executive Officer of Sirius Real Estate,
said: "We've had another very good year, achieving considerable
progress enhancing the portfolio and diversifying our operating
model, which now includes the joint venture partnership with
AXA."
"With our ability to acquire assets for our own account and for
the joint venture, with differentiated strategies, we have a much
wider pool of assets to target and ways in which to generate our
returns. We are confident in our ability to provide shareholders
with exposure to attractive and stable returns from our portfolio
in the world's fourth largest economy."
A conference call for analysts will be held at 09.00 (BST)
today. If you wish to dial in, please email
james.verstringhe@tavistock.co.uk for details.
For further information:
Sirius Real Estate
Andrew Coombs, CEO/Alistair Marks, CFO
+49 (0)30 285010110
Tavistock (Financial PR)
Jeremy Carey/James Verstringhe
+44 (0)20 7920 3150
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.
On 1 March 2019, Sirius announced that, in a transaction due to
complete in June 2019, it had formed a real estate investment joint
venture with clients represented by AXA Investment Managers - Real
Assets in which AXA acting on behalf of its clients, will own a 65%
interest and Sirius will own the balance of 35%. The JV is being
formed initially by AXA acquiring, on behalf of its clients, from
Sirius a 65% stake in five business parks, two located in Berlin
(Berlin Borsig and Berlin Tempelhof) and one in each of Mainz,
Nurnberg and Bayreuth. The business parks provide a combination of
office, warehouse, industrial and storage space. The implied
property value of EUR168 million equates to a gross yield for the
portfolio of 6.2% and reflects a 19% premium to the last reported
book value as at 30 September 2018 (EUR141.1 million). The
transaction is expected to generate total cash proceeds of more
than EUR70 million for Sirius after refinancing and related
costs.
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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END
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