Sirius commits to dividend, sees NAV rise by 8.9%
Sirius Real Estate, owner and manager of branded business parks throughout Germany, decided in May to press ahead with its dividend payment following improving levels of rent collection in April and early May, against a background of an easing of the lockdown.
The group said it plans to maintain its dividend policy of paying at least 65% of funds from operations (FFO) citing its strong second half of its financial year (to 31 March 2020), the strength of its balance sheet and the good cash collection rates in April and May.
The dividend (of €1.80, for a full-year 3.57% dividend yield) in respect of the second half of the year ended 31 March 2020 will be payable in August.
In its full year results posted on June 1st, it saw a 23% fall in annual profits, due to lower gains on the value of its assets and higher finance expenses. NAV per share increased to €77.35 from €71.01, a rise of 8.9%. It grew its rent roll year-on-year by 6.1% to €81.2m, with average rents increasing by 4.1% to €6.07 per sqm (per month). FFO increased by 15.1% to €55.7m.
REFIRE reported last month that Sirius HAD been experiencing a 50% reduction in the run rate of core enquiries from new tenants following the lockdown, leading to a drop in letting throughout April. Still, it said office space enquiries in March and April averaged 1,200 per month, which represents a slight increase on the same period last year, adding a similar level of enquiries had been maintained in the first two weeks of May.
This led to 115 new lettings in April covering 8,025 sqm. New lettings in March and April have generated annualised rental value of €1.6m, as and when the tenancies begin over the next few months. May should provide a similar level of lettings to April, it said. It also said there had been no noticeable increase in lease terminations in the period.
Sirius said that 85% of its on-site business park employees have now returned to work, while those working at the company's head office will increase to 50% from 25%, with the rest continuing to work remotely.
According to CEO Andrew Coombs, "We faced this crisis with the benefit of a strong balance sheet, significant covenant headroom and a capital structure well placed to absorb a prolonged period of uncertainty. While it is impossible to predict the course this crisis will eventually take, it is encouraging to see how the business has handled it to date, as well as the country as a whole."
“We’ve acquired a further €120m of additional assets, increasing our presence in our target cities, from which we are confident of extracting significant value by playing to the strengths of our integrated business model and track record of maximising occupation and growing rental levels.”
Coombs did however refer to possible pressure on rents later this year as tenants balance the getting of their teams back to work with the simultaneous loss of government subsidies. The group has cash resources of €96.6m and fully-committed but undrawn facilities of €33.1m, so has a solid buffer against falls in income or asset values.
Coombs said he hoped to use the resources available as a result of Sirius’s joint venture with insurance giant AXA to take advantage of any forced sales of larger assets by competitors. “I’ll know they’ve got to move fast and I know there’s a level of distress in there so I can buy at a level that I know is good value,” he said. Sirius invested €20.6m (£18.6m) into the JV in March to fund its first acquisition.
The company, listed in both London and Johannesburg, has a portfolio with a book value of €1.06bn as of last September. Its share price, initially hammered when the lockdown was announced, has recovered more than three-quarters of its losses since then.