Sirius Real Estate on expansion path after jump in profits

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Regular REFIRE readers will know that we have been bullish on the previously-AIM and Johannesburg-listed Sirius Real Estate for some time and have been following the company closely since its near-demise some years ago and its return to health with new management and more solid funding.

The company, which specialises in German business parks with light industrial properties, moved in March to a full listing on both the London Main Board and the main Johannesburg Stock Exchange in South Africa, where it has a sizeable investor community.

Earlier this month the company turned in good full-year figures, boosting pre-tax profit by 34% to €76.4m from last year's €57.1m. Net operating income was €60.5m, up from €49.6m. The total dividend increased by 32% to 2.92 euro cents a share, up from 2.22 euro cents.

The value of its portfolio increased during the year to €823m, up from €687.5m, sending its net asset value per share up 10.3% to 58.82 cents during the year.

This year, Sirius has already spent €153.2m on buying new properties, including €80.4m on buildings in Frankfurt, a city that is vying with London to attract financial workers after Brexit. It increased its occupancy rate from 80% to 82%

CEO Andrew Coombs commented, "Our ambition is to increase our portfolio by another 50%, whilst also taking advantage of market conditions to recycle mature and non-core assets with greater opportunity.

"We have the operating platform in place today to support our expansion plans and alongside this we have the local market knowledge and expertise to uncover value from more complex assets as we have been doing since inception."

The company has recently sold several assets for about €18m, including in Kiel and Düsseldorf, at net initial yields of over 7% and at a premium to book value. It also bought new assets in Düsseldorf, Neuss, Munich, Neu-Isenburg near Frankfurt, and Cologne, for nearly €67m. Coombs said there continued to be opportunities for Sirius to acquire these types of sites at discounted values as others saw the possible problems and the company saw potential.

Coombs said, "Our focus will be on rebranding, re-configuring and introducing specialist small-medium-enterprise workspace and storage products to match demand in each local area. With the aim, as ever, to increase rental income and market value of each site."

"This, combined with the sales of mature assets all of which are being transacted at prices in line with or above book value, clearly demonstrates the Sirius business model working in practice," he added.