Sirius Real Estate Limited Business Update (9757V)

TIDMSRE

RNS Number : 9757V

Sirius Real Estate Limited

13 August 2020

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

13 August 2020

Sirius Real Estate Limited

("Sirius Real Estate", "Sirius" or the "Company")

Business Update

Sirius Real Estate, the leading operator of branded business parks providing conventional space and flexible workspace in Germany, today provides an update on the business.

Cash Collection

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 our tenants as they brought their staff back to work.

Following the return to work of many tenants in June and July 2020, the Company is entering the third phase of its response which involves actively assisting tenants in getting back to operating on a business as usual basis, while working, where required, to adapt to changes in their space requirements.

As at 31 July 2020, the Company had collected EUR39.9 million in rent and service charges relating to the period April-June 2020 compared to EUR39.9 million for the same period in the prior year. The cash collection rate relating to rent and service charges for the period April-June 2020 was 95.9% compared to 98.2% for the same period in the prior year and resulted in uncollected rent and service charges for the period April-June 2020, of EUR1.4 million (excluding VAT), of which EUR212k relates to insolvency cases. The majority of the uncollected debt relates to 41 tenants with outstanding rent and service charges totalling EUR0.9 million out of a total tenant base of approximately 5,000.

The Company expects to collect in the region of EUR0.8 million of the uncollected rent and service charges for the period April-June 2020 over the next twelve months through a combination of regular cash collection activities and the use of deferred payment plans. To date a total of seven deferred payment plans have been granted to tenants facing Covid-19 related difficulties amounting to just under EUR0.1 million.

The 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.

Enquiries

The Company is pleased to report an increase in enquiry levels of 6.7% for the period between 1 April and 31 July 2020 compared to the same period in the prior year. Analysis of enquiry data confirms a particular increase in the number of enquiries for storage, which makes up 35% of the Company's total lettable space, from new commercial tenants as well as from new self-storage customers. The table below compares enquiries between 2019 and 2020 in the April-July period.

 
          No. of enquiries   No. of enquiries   Change 
           2019               2020 
 April    1,099              1,202              +9.4% 
         -----------------  -----------------  ------- 
 May      1,188              1,248              +5.1% 
         -----------------  -----------------  ------- 
 June     1,181              1,368              +15.8% 
         -----------------  -----------------  ------- 
 July     1,392              1,367              -1.8% 
         -----------------  -----------------  ------- 
 Total    4,860              5,185              +6.7% 
         -----------------  -----------------  ------- 
 

Lettings

The period April-June 2020 saw an approximate 11% decrease in the number of new lettings and reduction in square metres let compared to the same period in the prior year. The number of new lettings in the month of July 2020 recovered to within 4% of the same month in the prior year; however, in terms of square metre volume represented a 16% increase. Similarly, following the immediate impact of the Covid-19 outbreak, the Company's enquiry to sales conversion ratio fell to just under 10% in April; however, since May there has been progressive development in the enquiry to sales conversion ratio which, by the month of July, had been restored to meet the internal target of 15%.

Details of lettings between April and July 2020, compared to the previous year are set out below:

 
                      April              May              June              July 
                  2019     2020    2019     2020     2019     2020     2019     2020 
                 -------          -------  -------  -------  -------  -------  ------- 
 No of 
  new lettings    87       115     174      130      201      165      224      215 
                 -------  ------  -------  -------  -------  -------  -------  ------- 
 Sqm              12,353   8,025   11,873   11,282   13,276   11,242   11,351   13,170 
                 -------  ------  -------  -------  -------  -------  -------  ------- 
 

In July 2020, a total of 215 new lettings were secured across 13,170 sqm generating EUR1.0 million of annualised rent roll. Total annualised rent roll generated from new lettings in the period April-July 2020 amounted to EUR3.5 million compared to EUR4.3 million for the same period in the prior year.

The Company has experienced a reduction in underlying occupancy of circa 1% between 31 March 2020 and 30 June 2020 primarily reflecting the impact of known move outs; however, this has been partially offset by an increase of 0.7% in average rate per square metre in the same period.

Enquiries for storage have increased as set out above and new lettings for out-of-town conventional and flexible offices remain strong representing 45% of new lettings completed between 1 March 2020 and 31 July 2020.

Balance Sheet

As previously announced, the Company successfully drew down the final tranche of its Schuldschein facility in July amounting to EUR20.0 million. The Schuldschein loan facility is unsecured with the final tranche charged with a fixed interest rate of 1.6% and maturing in July 2023.

As at 31 July 2020, the Company held total cash balances of EUR137.0 million, of which EUR112.5 million is unrestricted. This is before the payment of the dividend relating to the second half of the financial year ended 31 March 2020 on 20 August 2020, which is expected to amount to EUR12.6 million in cash. In addition, the Company has fully guaranteed undrawn facilities of EUR13.1 million. 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 1.49% and interest cover in excess of 10x at net operating income level.

Andrew Coombs, Chief Executive Officer of Sirius Real Estate, commented: "Sirius's business model is built on the breadth of our offering to occupiers and the adaptability of our mix of accommodation, ranging across many different workspace segments, including commercial storage, self-storage, out-of-town conventional and flexible office as well as manufacturing. In addition, the portfolio is well diversified in terms of both geography and tenant base.

"Sirius entered this crisis with a strong balance sheet, and we have navigated the first two phases of our Covid-19 response with relative success. We are now entering the third phase and focussing on managing our client base carefully as the longer-term impacts of Covid-19 are absorbed. We remain focused on delivering attractive risk-adjusted returns through active asset management. With its significant cash resources, Sirius is actively seeking new acquisitions to grow the portfolio, as well as to invest in it in order to attract new tenants and to capture reversionary potential from vacated space."

Disclaimer

The information and numbers in this statement are unaudited. The Company reaches its half year point for the financial year ending 31 March 2021 on 30 September 2020 and looks forward to publishing a trading update around the time of the end of our half year period.

S 

For further information:

Sirius Real Estate

Andrew Coombs, CEO/Alistair Marks, CFO

Tel: [phone]

Tavistock (Financial PR)

Jeremy Carey/James Verstringhe

Tel: [phone]/+ 44 (0)7836 734 625

Email: [e-mail]

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

Follow us on LinkedIn at https://www.linkedin.com/company/siriusrealestate/

Follow us on Twitter at @SiriusRE

LEI: 213800NURUF5W8QSK566

JSE Sponsor: PSG Capital

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August 13, 2020 02:00 ET (06:00 GMT)