Sirius buys two further German business parks for €46.3m
The AIM-listed Sirius Real Estate, which focuses on German business parks, is is about to add a further two multi-let business parks to its portfolio, investing €46.3m.
As we reported in June, Sirius made a successful private placement of €30m before expenses in June 2016, which would pay for a large chunk of the purchase price. The placement was higher than the original €20m planned, and involved placing 66.2m new shares at €0.53, with the offer being three times oversubscribed. The share placement represented about 7.5% of the share capital prior to the placement.
At the time, Sirius said the new funding will support the acquisition of a new portfolio of three business parks and the refinancing of an existing €39.6m facility which is currently paying interest of 2.68% with three and a half years remaining, with a new €77m seven-year bank facility at 1.6% with the same lender.
The first of the two business parks being purchased for €28.6m and is located nearby the airport at Dresden, where the multi-let centre has 53,200 sqm of gross lettable area, of which 45.9% is offices and 39.3% is warehousing.
The occupancy upon acquisition is 65.7% across a broad base of 60 tenants, paying a total annual rental income of €2.78m, or €4.35 per square metre, with a weighted average lease length remaining of 3.3 years.
The second business park, in the heart of Wiesbaden’s commercial district, is costing €17.7m, the company said. The total gross lettable area of the property is 19,602 sqm of office space, of which 64.6% is let to three tenants paying an annual rental income of €1.88m, equating to €7.99 per square metre, with a weighted average lease length remaining of 2.7 years.
The Guernsey-headquartered Sirius owns and operates 35 business parks across Germany. For the year ending March 31st, Sirius grew FFO by 31%, while the like-for-like book value of the company's business parks increased by 10.4% to €687.5m.
Commenting on the results, CEO Andrew Coombs said, "Our ability to acquire German mixed-use property portfolios yielding in excess of 8%, combined with the availability to us of seven-year debt at very low interest rates, creates an opportune time for the company to be expanding and locking in these valuable opportunities for our shareholders, for the longer term."
Sirius' classical modus operandi is to buy old industrial buildings, generally on city outskirts, and then redevelop them into mixed-used business parks offering a combination of offices, warehouses, conference rooms and self-storage units. Describing the company's approach, Coombs himself said recently: “Our strategy is to buy horrible, old warehouses and turn them into funky, modern business parks, enabling us to create new income from dead space. We can typically take rents from below €3/m² to €6/m², which significantly boosts income streams and valuations.”
Coombs said the German economy was in good shape, with continued growth in the country’s small business sector, which is an important market for the company’s flexible space product, aimed at tenants that typically require less than 500m² on shorter leases. It also offers longer-term leases (ten years) on some of its assets, with blue-chip tenants including firms such as GKN Aerospace and Siemens.
The company's shareholders are distributed about equally between UK-based and South African-based investors, with the company also listed on the Johannesburg Stock Exchange. The South African connection is important for the company, as with little dynamism domestically many local investors have been backing rand hedge property stocks.
As a pure play on German industry, Sirius has been attracting more attention in Johannesburg recently, after delivering a total return of 47% in 2015, well above that returned by the JSE SA Listed Property Index of 8%. Sirius said it plans a move to the JSE main board later this year.