Sirius Real Estate
Sirius Business Park Rostock
Sirius has grown strongly since opting for a dual listing on London's main exchange and in Johannesburg, where it fills a niche of being the only German-focused property stock listed on the JSE.
London’s AIM-listed Sirius Real Estate, which owns and operates business parks, offices and light industrial complexes across Germany, does seem to be undergoing a reversal in its fortunes after technically breaching its banking covenants three years ago.
The company’s latest results show it swinging into profit for the full year, as it announced the placing of a €40m share issue to pay down its debt. This is a dramatic turnaround for the company which saw several large institutional investors, such as F&C and Henderson, abandon their holdings when the company seemed on the verge of default in 2010. The latest results show a pre-tax profit of €11.0m compared with a €5.5m loss a year ago, largely due to an upward revaluation of its property portfolio following two years of painful write-downs.
The portfolio at September 30 was valued at €434.3 million, compared with €426.2 million at March 31, adjusted for disposals. Sirius said the portfolio was boosted by asset-management activities and the sale of non-core assets. Typical Sirius business parks offer a range of flexible workspaces and services tailored to small and medium-sized enterprises. The company has 33 business parks with more than 1 million sqm of lettable space across Germany.
Recurring profit before tax, which excludes property revaluations and change in fair value of derivative instruments, rose to €6.9 million from €3.9 million in 2012. However, rental income dropped to GBP 23.6m from GBP 23.9m as occupancy levels fell to 75% from 76% in March.
Sirius has agreed new terms in principle with two banks led by Berlin Hannoversche Hypothekenbank and another German bank for a new five-year facility of €115m, while also securing a new facility with Macquarie Bank in London for a minimum of €32.5m, which will help to pay down existing loans at BerlinHyp and RBS.
Sirius issued 166m new ordinary shares at €0.24, a slight discount to the prevailing share price, and representing half of the company’s market cap. CEO Andrew Combs said that the new €40m share issue was oversubscribed by a factor of two. “This fundraising represents the final stage of recovery for Sirius”, he commented. “It has allowed us to lower our loan to value ratio to just under 55%, which has in turn allowed us to get better banking arrangements and free up €40m of cash flow a year, which will help with the future dividend.” He indicated that the company would recommence paying a dividend after several years’ absence after next year’s full-year results.
