Sirius Real Estate does well in first half, agrees to buy UK's BizSpace

Germany-focussed business park operator Sirius Real Estate reported a 25.7% improvement in its first-half profit before tax on Monday, to €78.2m (£67.05m).

It also announced the acquisition of the company that holds the UK-focussed ‘BizSpace’ business for £245m, with associated fundraising activities to help finance that expansion.

The FTSE 250 company said funds from operations grew by 13.4% for the six months ended 30 September, to €33m, while the board hiked the dividend by 12.1% to 2.04 euro cents per share.

Its like-for-like annualised rent roll was 2.5% higher at €98.9m, which the board said was driven by a 2.6% increase in uits like-for-like rate per square metre to €6.33.

Further improvement was expected in the second half of the year, as assets notarised in the period completed and contributed to earnings.

Operationally, Sirius said its platform was delivering against an improving market, with a “high percentage” of the German population now vaccinated against Covid-19, and the country’s economy expected to grow by about 4% in 2022.

Like-for-like occupancy remained “broadly flat” at 86%, while total occupancy reduced to 85% from 87% at the end of March, primarily due to the acquisition of 23,000 square metres of vacant space within acquisition assets that completed within the period.

Sirius said its cash collection rate remained “consistently high” at 97.4% for the six-month period, with its 12-month trailing rate coming in at 98.2%, reflecting its tenant diversification and resilience of the portfolio.

It also maintained its ratings across MSCI, and improved its ratings on Sustainalytics and GRESB Public Disclosure, with a fuller environmental, social and governance (ESG) update to be provided at the end of the financial year.

Looking at the balance sheet, Sirius reported a net asset value per share 4.9% higher at 92.62 cents, with its adjusted net asset value per share increasing by 5.3% to 98.8 cents.

Like-for-like owned investment property increased €62.1m in value to €1.41bn, resulting in like-for-like valuation growth of 4.6%.

The company’s total cash balance stood at €187.6m at period end, up from €65.7m at the end of March, of which €172.7m was unrestricted, providing capacity for further acquisitions and investment.

“The improving economy and renewed market confidence has been reflected in a positive set of results for Sirius for the first half of the financial year,” said chief executive officer Andrew Coombs.

“The business has grown both organically and acquisitively during the period which has resulted in our funds from operations increasing by 13.4% and enabled us to increase our dividend per share by over 12%.

“Additionally, the success of our oversubscribed inaugural corporate bond issuance has allowed us to reduce our cost of debt further and provide us with significant resources for future investment whilst also highlighting the conviction investors have in our strategy.”

Coombs said that as the vaccination roll-out continued across Germany, and trading conditions improved further, Sirius was “well-positioned” to capitalise on the wider macro trends being felt in the market, with increased nearshoring and the localisation of supply chains driving demand for space within its asset class.

“We have made strong progress throughout the first half and, with the contribution from recently notarised properties that have not yet completed to come, we remain well placed to continue to perform in the second half of the financial year and beyond.”

In a separate announcement on Monday, Sirius said it had agreed to acquire Helix Investments, the holding company of BizSpace, from Värde Partners for cash of £245m, based on an enterprise value of £380m.

BizSpace was described by Sirius as a “leading provider” of regional flexible workspace, offering light industrial, workshop, studio and out of town office units to a wide range of businesses across the UK.

“We are very happy to announce the acquisition of a high-quality and well diversified portfolio of assets, in a highly attractive and growing market,” said Andrew Coombs.

“The acquisition of BizSpace brings with it an experienced and enthusiastic management team that we believe will be a good fit with the culture of Sirius' current management team and I look forward to building on the existing relationships between our businesses.

“The transaction provides an opportunity to enter a new geography at scale and extends our successful strategy to target highly strategic locations and assets in order to generate sustainable and growing returns on behalf of investors.”

Finally, Sirius also announced a conditional offer for subscription via PrimaryBid of new shares in the company, as well as a placing of new shares through an accelerated bookbuild and a placing in South Africa, at a price to be determined following the closing of the bookbuild process.

It said the proceeds of those fundraising activities would be used alongside new and existing debt to fund the acquisition of BizSpace.

At 0913 GMT, shares in Sirius Real Estate were down 3.49% at 133.19p.