SIRIUS REAL ESTATE LIMITED
(Incorporated in Guernsey)
Company Number: 46442
JSE Share Code: SRE
LSE (EUR) Share Code: ESRE
LSE (GBP) Share Code: SRE
ISIN Code: ISIN GG00B1W3VF54
7 October 2020
Sirius Real Estate Limited
("Sirius Real Estate", "Sirius" or the "Company")
Trading Update - Continued strong cash collection and demand demonstrating resilience
Six months to 30 September 2020
Sirius Real Estate, the leading operator of branded business parks providing conventional space and flexible workspace in Germany, provides the following trading update for the six months to 30 September 2020.
· 97.2% cash collection rate for April-September 2020
· Total enquiries up 17.4% on the same period last year
· Sales conversion rate of 13.4% for the six-month period to 30 September 2020
· Total annualised rent roll €89.2 million (30 September 2019: €78.5 million, 31 March 2020: €90.3 million)
· Like-for-like occupancy 83.9% (31 March 2020: 85.2%) with an increase in like for like average rate of 1.1% to €6.03 per sqm (31 March 2020: €5.96)
· Conferencing revenues up over 50% year on year since reopening
· Notarised the acquisition of a business park located in Norderstedt for €9.1 million
· Total cash balances of approximately €128.0 million (€113.0 million unrestricted) following final drawdown of Schuldschein loan and net LTV approximately 33%
· Trading in line with management expectations for the full year (see analyst consensus June 2020)
Significant growth year on year in enquiry levels
The Company is pleased to report an increase in enquiry levels of 17.4% compared to the same period in the last year (8,284 total enquires for the period compared to 7,054 enquiries in the same period last year). Analysis of enquiry data confirms a particular rise in the number of enquiries for storage, which makes up 36% of the Company's total lettable space. This is coming from new commercial tenants as well as from new self-storage customers.
Lettings remain robust as sales conversion ratios return to near targeted levels
Following the immediate impact of the COVID-19 pandemic, the Company's enquiry to sales conversion ratio fell to just under 10% in April, compared to our internal target of 15%. However, since June there has been progressive development in the enquiry to sales conversion ratio which has resulted in an average conversion ratio of 13.4% in the period.
As a result, while the months of April to September 2020 saw a modest increase in the number of new lettings the volume of square metres let reduced by approximately 11% compared to last year (new lettings increased from 1,035 to 1,110 whilst square metres sold reduced from 83,270 to 74,095). From April to June the reduction in square metres let was around 19%, however this subsequently improved to a reduction of c.5% from July to September, largely due to an improvement in overall sales conversion.
Total annualised rent roll of €89.2 million reduced from €90.3 million as at 31 March 2020 primarily as a result of the disposal of the Weilimdorf asset which generated €0.7 million of annualised rent roll. Like for like annualised rent roll at 30 September 2020 remained broadly flat with a modest 0.4% decrease to €89.2 million from €89.6 million. On a year on year basis annualised rent roll has increased by 13.6% from €78.5 million as reported at 30 September 2019.
Whilst the Company experienced a small reduction in like for like occupancy of approximately 1.3% between 31 March 2020 and 30 September 2020 primarily reflecting the impact of known move outs, this was partially offset by a 1.1% increase in average rental rates to €6.03 per sqm (31 March 2020: €5.96).
Cash collection remains strong
The Company's response to the COVID-19 pandemic has been split into three phases. The first phase involved managing the business during Germany's national lockdown while the second phase was focused on working with tenants as they brought their staff back to work.
Since July, the Company has been in the third phase of its response focused on assisting tenants in adapting to changes in their space requirements whilst helping them return to operational normality.
At the end of the six-month period just €2.0 million (excluding VAT) of rent and service charge remained uncollected, representing a high cash collection rate of 97.2%. Of the total outstanding debt €83k relates to insolvency cases whilst €250k relates to 11 deferred payment plans. The largest 50 outstanding balances amount to €1.0 million, with €0.7 million attributable to a smaller tenants.
We have already reduced the previously reported €1.4 million (excluding VAT) of outstanding debts relating to the period from April - June by €0.4 million including write offs amounting to €171k. The Company continues to expect to collect the majority of the outstanding debt for the period April to September over the next twelve months through its regular debt collection activities.
The encouraging cash collection performance to date is reflective of the Company's ability to engage actively with and manage its tenants as well as the extent and efficiency with which the German government has acted to support businesses during the COVID-19 pandemic.
Conferencing revenues up over 50% year on year since reopening in July
As previously announced, the Company made the precautionary move to suspend conferencing following government issued guidelines in early April. The business re-opened in July and has performed well with revenue for the three months between July to September up 53.9% to €431k compared with last year. The increase in activity can be attributed to the way in which businesses in Germany have been returning to operational normality including the resumption of training and development initiatives as well as an increase in demand for larger meeting room spaces in order to accommodate social distancing requirements.
Balance Sheet positions company for growth
As previously announced, the Company successfully drew down the final €20.0 million tranche of its new €50.0 million Schuldschein unsecured facility. This final tranche is charged with a fixed interest rate of 1.6%, maturing in July 2023.
As at 30 September 2020, the Company held total cash balances of approximately €128.0 million, of which approximately €113.0 million is unrestricted. The Company holds 12 of its business park assets on an unencumbered basis, has a net LTV of approximately 33%, a weighted average cost of debt of 1.5% and interest cover in excess of 10x at net operating income level.
Acquisitions and disposals
In September 2020 the Company notarised the acquisition of the Norderstedt asset near Hamburg International airport within the wider Hamburg market where Sirius has been increasing its presence. The mixed-use asset is fully let to 12 tenants, generates €783,000 of annualised rent roll and provides operational synergies with the Company's three other assets in and around Hamburg.
In addition, the Company completed the disposal of the Weilimdorf asset in April 2020 which it acquired in the financial year ending 31 March 2016 for a purchase price of €5.2 million. The asset, an office building let to a single tenant operating within the car manufacturing industry, was sold for total proceeds of €10.1 million, representing an EPRA net yield of 6.3% including estimated purchaser's costs.
As markets have stabilised and transactional activity increased in Germany the Company has continued to develop its pipeline of acquisition opportunities for both its own balance sheet and within the Titanium venture with AXA IM - Real Assets.
Half Year Results
The Board looks forward to providing a more detailed report on the Company's trading performance and outlook when it announces half‐year results on 23 November 2020.
The financial information on which this trading update is based has not been reviewed or reported on by the Company´s external auditors or a reporting accountant.
Commenting on trading over the period, Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said: "To deliver these strong preliminary first half figures in the face of the pandemic that we continue to contend with, is clear demonstration of the resilience of our business model and the tenacity of the Sirius team.
"Our portfolio provides a diverse mix of accommodation which attracts a wide range of both global blue chip and SME businesses as well as individuals, and ranges across many different workspace segments, including commercial and self-storage, out-of-town conventional and flexible offices, as well as light industrial, urban logistics and manufacturing assets.
"Furthermore, the portfolio is well diversified by both geography and tenant activity. We have a strong balance sheet providing significant firepower which we will be deploying on our pipeline of acquisitions and investing in the existing portfolio to attract new tenants and grow rents."
There will be a conference call for analysts/investors hosted by Andrew Coombs, Chief Executive Officer of Sirius Real Estate and Diarmuid Kelly, Finance Director of Sirius Facilities GmbH, at 08:30 (09:30 CET/SA time) today, Wednesday 7 October 2020.
Dial-in UK: Toll-Free: 0800 358 9473/Toll: +44 333 300 0804
Dial-in Germany: Toll-Free: 0800 627 0729/ Toll: +49 691 380 3430
Dial-in South Africa: Toll-Free: 0800 111 446/Toll: +27 216 724 118
Participant access PIN (for all participants): 11521455#
For further information:
Sirius Real Estate
Andrew Coombs, CEO/ Diarmuid Kelly FD (Sirius Facilities GmbH)
Tel: +49 (0)30 285010110
Tavistock (Financial PR)
Jeremy Carey/James Verstringhe
Tel: +44 (0)20 7920 3150
Email: [email protected]
NOTES TO EDITORS
About Sirius Real Estate
Sirius is a property company listed on the main market and premium segment of the London Stock Exchange and the main board of the Johannesburg Stock Exchange. It is a leading operator of branded business parks providing conventional space and flexible workspace in Germany. The Company's core strategy is the acquisition of business parks at attractive yields, the integration of these business parks into its network of sites under the Company's own name as well as offering a range of branded products within those sites, and the reconfiguration and upgrade of existing and vacant space to appeal to the local market, through intensive asset management and investment. The Company's strategy aims to deliver attractive returns for shareholders by increasing rental income and improving cost recoveries and capital values, as well as by enhancing those returns through financing its assets on favourable terms. Once sites are mature and net income and values have been optimised, the Company may take the opportunity to refinance the sites to release capital for investment in new sites or consider the disposal of sites in order to recycle equity into assets which present greater opportunity for the asset management skills of the Company's team.
In July 2019, the Company completed the formation of its Titanium real estate investment venture with clients represented by AXA Investment Managers - Real Assets. Titanium was formed through the acquisition by AXA IM - Real Assets, on behalf of its clients, from Sirius, of a 65% stake in five business parks across Germany. Sirius will retain the remaining 35% and will act as operator of the assets, on a fee basis. Subject to suitable investment opportunities, AXA IM - Real Assets and Sirius may consider opportunities to grow Titanium's portfolio primarily through the acquisition of larger stabilised business park assets and portfolios of assets with strong tenant profiles and occupancy. Sirius will continue to grow its wholly owned portfolio through acquisitions of more opportunistic assets, where it can capitalise on its asset management expertise to maximise utilisation of the space, grow occupancy and improve quality of the tenants. The strategies have been clearly defined so that the JV does not conflict with Sirius's existing business.
For more information, please visit: www.sirius-real-estate.com
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JSE Sponsor: PSG Capital