Sirius launches JV with AXA-IM, buys new Bochum park

REFIRE managed to catch up with the senior team of listed Sirius Real Estate at the recent MIPIM in Cannes, and recent news from the owner and manager of branded business parks in Germany certainly sounds encouraging for giving the company additional backing for its expansion plans.

Earlier this month the London and Johannesburg-listed Sirius formed a real estate investment joint venture with AXA Investment Managers – Real asset, which will see Sirius owning 35% and AXA-IM holding 65%.

The new JV vehicle, called Titanium, will be seeded by five single asset special purpose vehicles which Sirius owns – two business parks in Berlin (Berlin Borsig and Berlin Tempelhof) and one each in Mainz, Nürnberg and Bayreuth. The business parks contain a combination of office, warehouse, industrial and storage space across 191,000 sqm – typical elements of Sirius’s business parks. The assets, which are 88% let, produced €10.45m of rent last year.

The implied property value of €168m reflects a gross yield for the portfolio of 6.2%, a premium to last reported book value of €141.1m at end-September 2018, as valued by Cushman & Wakefield. AXA-IM Real Assets is stumping up €43.9m in cash and, with leverage, the deal should generate total cash proceeds of more than €70m for Sirius after refinancing and related costs.

Sirius will continue to operate the assets through its own platform, charging fees to the JV. The two companies said the JV might well buy further assets in Germany, in line with a strategy that won’t conflict with Sirius’s main line of business.

CEO Andrew Coombs told REFIRE that the effect of the JV would be more resources for Sirius to invest both for itself and the JV, enabling it to look at much larger assets and portfolios that it might otherwise have been able to finance from existing cash flow. Altogether, with proceeds from the deal and additional borrowing, Sirius can probably access a further €140m in firepower to boost its own portfolio.

In a statement, John O’Driscoll, European head of transactions at AXA-IM Real Assets, said: "This transaction allows us to invest in an attractive portfolio of assets and provides us with immediate scale in this important asset class in Germany, a geography that we are actively growing in. This transaction also enables us to establish a long term joint venture with Sirius Real Estate, a leading operator and investor in branded business parks in Germany.

Separately, Sirius paid €25.7m for a business park in Bochum in the Ruhr region, generating an EPRA net initial yield of 8.9%. The seller is a fund managed by a subsidiary of the Munich-based Doblinger Group, a project developer.

Sirius is funding the deal from proceeds of March 2018’s capital raising, and a part of a €56m, five-year debt facility with an all-in fixed interest rate of 1.4% provided by pbb Deutsche Pfandbriefbank.

The 56,000 sqm mixed-use business park has 65% warehouse, 29% office and 6% other space. The site is 95%-occupied and let to 31 tenants including Pilkington, a subsidiary of the Japan-based NSG Group and GfR, a call centre operator that is part of Thomas Cook Group.

Sirius said the site was acquired at a high yield because Pilkington will be vacating the 26,600 sqm that it occupies when the lease expires at the end of May.

At the same time, Sirius has signed a new lease commencing on 1 June 2019 for 12,600 sqm of the space being vacated, at a higher rent per sqm and with fixed annual uplifts. The new lease has been taken by the Eickhoff Group, a family-owned business which mainly manufactures machinery and gearing technology for the mining and wind turbine industries.

Sirius CEO Coombs said, ‘This acquisition is our first foothold in the important Ruhr area which is one the major industrial regions of Germany. With relatively low site density, a flexible multi-tenant structure, the opportunity to replace the exiting major tenant and stabilise the rent roll in an area where take-up is robust and rents are growing, this site is an exciting value-add opportunity for Sirius.’