Sirius Real Estate refinances €115m with German banks

The AIM-listed Sirius Real Estate, which operates branded business parks providing flexible workspace to small and medium-sized German businesses, has been on the recovery path for the last year, with the near-doubling of its share price and improved business prospects. The company said last week that it had managed to refinance its existing BerlinHyp facility which was due to expire at end-March, with a new €115m facility with Berlin Hyp and new lender Deutsche Pfandbriefbank AG.

The new facility will be secured against nine properties (out of the 30 owned and managed by the group across Germany) valued as at 30th September 2013 at €212 million, and will expire on 31st March 2019. It will have a total interest rate of 3.69% of which 50% of the loan is fixed with a 5-year swap and 50% is floating with a cap at 4.5%. The facility will amortise at an average rate of 2.5% per annum over 5 years and is subject to a 1% arrangement fee, said the company.

Sirius has been engaged for over a year in refinancing its outstanding liabilities, and it has now completed four new debt facilities totaling €227 million over the last 15 months, with debt expiries ranging between January 2017 and August 2023. As a result, the weighted average expiry of the group’s bank facilities and outstanding secured bonds will increase to 5.5 years along with reducing the group's loan-to-value ratio to a much more manageable 54%.

The Sirius portfolio consists of 30 business parks with about 900,000 sqm of lettable space, and has 3,000 tenants across 700 mixed-use buildings in 21 separate locations, housing offices, conference rooms, storage warehouses and light industrial facilities. Much of the company’s development in Germany has been about repositioning, revitalising and updating former industrial sites which are then centrally managed by Sirius. The company’s portfolio is now valued at €428m.

Although about half of Sirius’s income from its business parks is secured by long-term leases with large groups such as Siemens, Daimler and GKN Aerospace, the company is increasing its focus on mixed-use flexible workspaces with its popular packages including “Smartspace” and “FlexiLager” aimed at startup and early-stage businesses. According to Andrew Coombs, Sirius’s CEO, this segment is showing the most rapid growth. “There’s high demand for flexible commercial and industrial spaces that can be refurbished for the specific needs of smaller tenants that typically require less than 500 sqm. Yet few German landlords are interested in renting out spaces smaller than 1,000 sqm.”

Coombs said recently that Sirius was considering a move to the main board of the London Stock Exchange along with a further parallel listing in South Africa, given existing investor interest there. An existing 30% shareholder is Luxembourg-listed Karoo Fund, which is backed bySou th African listed developers Attacq and MAS Real Estate. Several other South African specialist asset managers, such as ClucasGray, Corocap, Flagship, Bateleur, Anchor and Laurium, are also shareholders.

Meanwhile, the original founders of Sirius, brothers Frank and Kevin Oppenheim, are teaming up with UK private equity real estate firm Henley to launch Henley360, a new business to invest in light-industrial, multi-let properties, including sale-and-leaseback deals, in the German and Benelux markets. With €500m of assets under management, this is Henley’s first move into mainland Europe.

The new joint venture will target deals of €5m upwards with the aim of investing at least €200m over a three year period, and it says it has already identified more than €50m of potential deals in the two prospective core markets. The plan is that Henley will provide the capital and handle investor relations, while the Oppenheims will source investments and provide asset management.

Kevin Oppenheim commented on the new project, “It is an exciting time to join forces with Henley. We are confident that the merger of our expertise in the multi-tenant business park sector combined with Henley’s track record in raising capital for real estate will enable us to build a sizeable European portfolio over the coming years.”