Light industrial specialist Sirius raises fresh funds, new listing
The AIM-listed Sirius Real Estate, which operates branded business parks for light industrial and mixed commercial use throughout Germany, has seen a strong recovery in its share price over the past year. That might be set to continue as the company has just completed a further €40m private placement, and gets set for a fast-track secondary listing this week on Johannesburg’s Stock Exchange’ AltX market. The company already has a large (40%) South African shareholder base.
The €40m raised in the private placement, along with a further €36m facility being provided by the company’s existing bankers, will be used to pay €76m for five mixed-use business parks in Berlin (3 parks), Bonn and Aachen. The new portfolio, with an 8.1% initial yield, will boost the company’s German property holdings to €463m. Sirius is paying 2.5% over Euribor for the €36m bank loan over 5 years.
The new portfolio, which has 112,000 sqm of lettable space, has a vacancy rate of 17.1%, a cash on cash yield of 12.9% and a weighed average lease length remaining of 3.9 years. It generates current rental income of €6.8m and net operating income of €6.1m.
Sirius CEO Andrew Coombs commented last week that the market had taken note of the lowering of the discount to NAV from 70% last year to now only 20%, and the fact that the company was re-instating its half-yearly dividend policy representing 65% of its after.-tax profit. This follows several years of debt restructuring in the aftermath of shareholder revolt and the collapse of its share price, which saw occupancy rates tumble in 2010, leading to consolidation and the sell-off of several properties. He said occupancy rates are back up to 70%, the company’s debt expiry profile is 5.3 years and the LTV rate has come down from 65% to 48%.
Overall Sirius now has 38 business parks offering flexible office space across Germany, generating an annual rental income of €43m. Among blue-chip tenants are GKN Aerospace and Siemens, who on average lease out 36,000 sqm on ten-year long leases. However, Coombs said the emphasis now is on mixed-use commercial space for small-to-medium companies (SMEs), since the larger tenants are showing less tendency to increase employment. “The expansion of German activity is high in the SME space, but the supply of suitable space (up to about 1,000 sqm) is low”, he said.