Sirius’ added firepower boosts further business park deals

Sirius Real Estate, the operator of branded business parks across Germany, is continuing on its acquisition trail with a couple of notable deals in the last quarter. The company’s stock has been a stellar performer as it prunes existing holdings and now has more firepower to expand its mission of buying up business parks on the edges of Germany’s seven biggest cities.

In its latest deal it bought an office complex in Halbergmoos near Munich Airport for €20m, with the seller being Imcon Immobilien Consulting, acting on behalf of KCM Invest. Property Advisor Savills brokered the off-market deal.

The 16,900 sqm property currently has a vacancy of around 40%, following a partial repositioning by Imcon, according to local sources. Amongst its 28 tenants are companies such as Heinz von Heiden, Mentor Deutschland and Dorma Time + Access.

Sirius is thought to be contemplating transforming the asset, currently dubbed Leonardo, into its fourth branded First Choice Business Center, after launching another three in Essen, Neuss and Wiesbaden.

CEO Andrew Coombs said of the deal, “This asset fits well with our acquisition criteria, in particular the low capital value, the level of vacancy within the building and the low average rent compared to the local market. It offers a great opportunity to add significant value by playing to the strengths of our integrated business model and track record of maximising occupation and growing rental levels.”

Earlier in the month Sirius completed its largest single acquisition since its establishment under its current management regime after the onset of the financial crisis. It bought the Alzenau Business Park, 34km east of Frankfurt am Main, for €44.5m, representing a net initial yield of 7.9%. The sellers were RWE Generation SE and GfV Gesellschaft für Vermögensverwaltung mbH represented by Innogy SE.

The business park comprises eleven buildings constructed between 1985 and 2002 providing a total of around 60,000 sqm of lettable space. The park is split 47% warehouse/production space, 47% office space and 6% other space, is 93.5% let to 16 tenants with an annual total income of €4.1m and generated an annual net operating income of €3.5m as at July 2019.

The asset has a weighted average rent of €5.51 per sqm with a remaining average lease length of 3.5 years. Tenants include Applied Materials, the global leader in materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries; Bühler Alzenau, manufacturers of high-vacuum deposition equipment; and Nukem Technologies, operating in the management of radioactive and hazardous waste, decommissioning of nuclear facilities as well as engineering and consulting services.

There is also an 8,200 sqm plot of land let to Aldi until 2048 producing an annual income of €101,000.

The company said the acquisition will initially be funded using proceeds from recent asset recycling activity and will be injected into an existing facility in the near future.

According to CEO Coombs: “Alzenau Business Park is the largest single acquisition since the current management took over at Sirius, reflecting our capacity to acquire larger lot sizes, of which we expect to do more both for our own portfolio and through our Titanium joint venture with AXA.

“This asset provides an attractive running yield, which will support our strategy to grow our funds from operations. Furthermore, there is a good mix of long-standing tenants with strong covenants.”

Sirius’s shares have been hitting new 52-week highs recently, and it has also increased its dividend. It now has a market cap of $904.12 million and a PE ratio of 7.37. The company has a debt-to-equity ratio of 45.72, a current ratio of 2.06 and a quick ratio of 1.79, and is now attracting more attention from research analysts, who mostly seem to be raising their target prices.

The company owns or manages 60 business parks around Germany and its portfolio had a book value of €1.06bn at the end of its six months to end-September. Over that period, it completed acquisition of three sites for €21.9m, with two more assets notarised for €64.6m, and a further three in exclusivity for €57.8m. The company said it had further funds of about €80m for further acquisitions or other ventures.

The company said at the time investor interest in industrial and office parks in Germany is driving yields and valuations down, but added this was partially due to lower finance costs, which it said it was well-positioned to take advantage of.