Space letting enquiries jump at business park operator Sirius Real Estate

Sirius Real Estate, owner and manager of branded business parks throughout Germany, issued a recent trading statement to end of September to update investors as to how it was faring with COVID-19. The company, listed in both London and Johannesburg, has a portfolio with a book value of €1.06bn as of last September. 

Here at REFIRE we like reporting on Sirius Real Estate, as the company has taken a very transparent approach to reporting how they are faring in respect of tenants and the willingness and/or ability to pay their rents through the difficult months of the coronavirus.

In short, the company has been doing well during the pandemic after the initial uncertainty which saw the share price tumble and the company initially uncertain as to whether it would continue its uninterrupted dividend payment – which it subsequent decided to maintain. The share price has also recovered strongly since its March lows, as news filters in as to how the company has been performing.

Sirius described its response to COVID as having been split into three phases. The first phase involved managing the business during Germany's national lockdown while the second phase was focused on working with tenants as they brought their staff back to work. Since July, the company has been in the third phase of its response focused on assisting tenants in adapting to changes in their space requirements whilst helping them return to operational normality, it said.

For the period between April and September the company collected 97.2% of the amounts due from tenants – a strong performance in the current climate. At the end of the six-month period just €2m of rent and service charges remained uncollected. Total annual rental income, for comparison, is about €90m. Of the outstanding debt, €250,000 relates to deferred payment plans while €83,000 relates to insolvency cases. The company has written off €171,000.

Letting enquiries have increased by 17.4% on the same period last year, while average rents increased by 1.1% year-on-year to €6.03 per sqm. The increase in enquiry levels, from 7,054 in the same period last year to 8,284 this year, was in particular due to a rise in the number of enquiries for storage, which makes up 36% of the company’s total lettable space. Sirius said this was coming from new commercial tenants as well as from new self-storage customers.

In the trading statement, CEO Andrew Coombs said, “Our portfolio provides a diverse mix of accommodation which attracts a wide range of both global blue chip and SME businesses as well as individuals, and ranges across many different workspace segments, including commercial and self-storage, out-of-town conventional and flexible offices, as well as light industrial, urban logistics and manufacturing assets….Furthermore, the portfolio is well diversified by both geography and tenant activity.”

On financing, the company drew down the final €20.0m tranche of its new €50.0m Schuldschein unsecured facility, which is charged with a fixed interest rate of 1.6%, maturing in July 2023.

At 30th September 2020, Sirius held total cash balances of about €128.0 million, of which approximately €113.0 million is unrestricted. Of its business parks, 12 are on an unencumbered basis, while it has a net LTV of 33%, a weighted average cost of debt of 1.5% and interest cover in excess of 10x at net operating income level.