Sirius Real Estate, the listed operator of branded business parks across Germany, has seen its shares hammered along with its peers since the onset of the coronavirus crisis. In a recent update the company said it did not expect any material impact to its trading profit for the full year ending 31st March, but there would obviously be effects on the business beyond that, given the current pandemic.
Since the onset of the crisis, there has been a 50% reduction in the run rate of core enquiries for new tenants, which Sirius expects will translate into a 10% reduction in new lettings in March, along with a fall of between 35% and 40% in monthly new lettings through April and May. Overall this could lead to a reduction of about 1% in underlying occupancy. On the positive side, it said it was experiencing an increase in demand for storage space from both new and existing tenants and potential customers. Storage makes up about 35% of the space within Sirius’s portfolio.
The board also said in a statement that to date there had been no increase in the level of contract terminations or any abnormal failure to meet rental payments. It will issue a further trading update in the second week of April.
Sirius said its balance sheet remained strong, with total cash balances currently in excess of €110 million, €90 million of which was unrestricted. In addition, it has access to €39.3 million of undrawn facilities and a further €10.1 million to be received on 1 April from the disposal of a property in Weilimdorf. It said it had significant headroom within its current debt covenants and was well placed to absorb a prolonged period of uncertainty. The German government had also introduced a number of financial protection measures to help support businesses.
According to CEO Andrew Coombs, “We are maintaining a very close eye on the situation as it develops with the interests of our staff and tenants very much at the forefront of deliberations. Our platform across Germany is well placed to maintain the operation of the Company throughout this difficult time and we will continue to adapt and meet the evolving needs of our tenants throughout the crisis period."
Based on figures for the first half, the company’s like-for-like occupancy was holding steady at 85%, FFO1 figures were up 16.3% to €27.1m, its LTV was 30.6% (down from 32.4% at March 2019), its NAV was up 7.3% to €0.76 per share, and its weighted average interest rate was 1.7%. The company has maintained a generous and growing dividend policy of paying out 65% of FFO. Sirius is listed on the London and Johannesburg Stock Exchanges.
On the debt side, the group has €335m in borrowings, from a range of different lenders. In March it issued a €50m unsecured ‘Schuldschein’ loan offering a blended interest rate of 1.60%, with an average maturity of 3.7 years. It was the first such loan facility issued by Sirius - in fact, the first by any UK listed real estate business - and was subscribed to by a number of German and international investors. The loan, arranged by HSBC and Bayerische Landesbank, was structured in tranches, with maturities of three and five years, and the blended rate of 1.60% was made up of fixed and floating rates, with no amortisation.
