06 Oct - 8 min read

Trading Update: Strong H1 Organic Growth, Transformational Bond Issuance And Progress On Acquisitions

Trading Update: Strong H1 Organic Growth, Transformational Bond Issuance And Progress On Acquisitions

SIRIUS REAL ESTATE LIMITED
(Incorporated in Guernsey)
Company Number: 46442
JSE Share Code: SRE
LSE (GBP) Share Code: SRE
LEI: 213800NURUF5W8QSK566
ISIN Code: GG00B1W3VF54

6 October 2021
                                       Sirius Real Estate Limited
                           ("Sirius Real Estate", "Sirius" or the "Company")

    TRADING UPDATE: STRONG H1 ORGANIC GROWTH, TRANSFORMATIONAL BOND ISSUANCE AND
                               PROGRESS ON ACQUISITIONS

Sirius Real Estate, the leading owner and operator of branded business and industrial parks providing
conventional space and flexible workspace in Germany, provides an update on trading for the six
months to 30 September 2021.

Highlights

•     2.5% increase in like-for-like annualised rent roll to €98.9 million (March 2021 €96.5** million)
      driven by a 2.6% increase in like-for-like rate per sqm to €6.33 (March 2021: €6.17).
•     Increase in total annualised rent roll to €99.7 million (September 2020: €89.2 million/+11.8%,
      March 2021: €96.5** million/+3.3%).
•     Completion of €400.0 million oversubscribed corporate bond issuance in June 2021 attracting a
      coupon of 1.125% until maturity in June 2026.
•     Repayment of €170.7 million of secured debt leading to an increase in the number of
      unencumbered properties, with a book value of approximately €1.0 billion.
•     Weighted average cost of debt reduced to 1.2% (March 2021: 1.5%) and weighted average term
      of debt extended to 3.7 years (March 2021: 2.7 years).
•     Acquisitive growth continued with eight on balance sheet business park assets and one land parcel
      completed or notarised in the period amounting to €153.9 million in aggregate.
•     Total cash balance of approximately €187.5 million, of which €174.5 million is unrestricted,
      providing capacity for further acquisitions and investment.
•     Net loan-to-value ratio (net LTV) of approximately 38.3% prior to impact of H1 valuation.
•     Trading in line with consensus and management expectations for the full year.

Strong H1 lettings and rental growth

The Company is pleased to report a six-month trading period that has seen an increase in like for like
annualised rent roll of 2.5% to €98.9 million, from €96.5** million at March 2021. This was driven by a
2.6% increase in like-for-like average rental rate highlighting strong occupier demand and the
reversionary potential within the portfolio.

Total annualised rent roll increased by 3.3% to €99.7 million and, with a modest contribution in the
first half of the financial year due to the timing of completions, the impact from acquisitions is
expected to be greater in the second half. Like-for-like occupancy remained broadly flat at 86%, whilst
total occupancy reduced to 85% (March 2021: 87%) primarily as a result of the acquisition of
23,000 sqm of vacant space within the Essen and Ohringen assets that completed within the period.
In line with its strategy, the Company intends to utilise its asset management platform to increase
occupancy and net operating income at these assets.

The effectiveness of the Company’s internal operating platform was demonstrated again during the
period with an average of 1,339 enquiries generated per month relating to its on-balance sheet assets,
of which 77% were converted into viewings. A total of 84,000 sqm of space was let in the period
across 1,051 deals resulting in a sales conversion rate of 13.1%. Renewal rates increased to 71%
(September 2020: 68%).

The cash collection rate for the six-month period to 30 September 2021 was approximately 97.4%,
with €2.0 million outstanding rent and service charges from total billing of €76.7 million, the majority
of which the Company expects to collect within 12 months. The 12-month trailing cash collection rate
was 98.2%. A total of seven write-offs with a combined value of less than €50,000 relating to the
period under review were recorded.


**Excludes €0.7m of annualised rent roll relating to the expected Daimler moveout in the Fellbach 2 asset that was acquired in March 2021.


Transformational inaugural bond issuance

As previously communicated to shareholders the Company had been assessing opportunities to
optimise its funding structure to support its future growth ambitions. The Company’s inaugural bond
issuance was significantly oversubscribed and successfully completed in June 2021 following the
award of a BBB stable investment grade credit rating from Fitch in May 2021. Bonds totalling
€400.0 million were issued attracting a coupon of 1.125% with a maturity date of June 2026.

The bond issuance coupled with the repayment of €170.7 million of existing secured debt provides
the Group with a number of benefits including:

    •    strong financial capacity to fund acquisitions and other investment opportunities;
    •    reduction in the Group’s weighted average cost of debt to 1.2% (31 March 2021: 1.5%) and
         increase in weighted average term of debt to 3.7 years (31 March 2021: 2.7 years);
    •    increase in the number of unencumbered assets to 48, with a book value of approximately
         €1.0 billion.

Following the bond issuance and related secured debt repayments, the Company has a total debt of
€698.2 million of which €450.0 million or 65% is unsecured (March 2021: 11%). The transformation of
the Company’s financing arrangements is expected to positively support Sirius’ operations and make
asset recycling notably easier and less expensive. Net LTV, which excludes restricted cash balances,
was approximately 38.3%.


Progress with acquisitions

Building on the momentum achieved when the investment markets in Germany reopened at the end
of last year, the Company made good progress in terms of capital deployment. A total of
€153.4 million was committed to eight on balance sheet business park acquisitions, with two assets
completing in the period and the remaining six notarised for completion post period end. In addition,
the Company completed the purchase of a land parcel adjacent to an existing business park asset for
€0.5 million.

The acquisition assets are located in areas underpinned by strong micro market demand that in some
cases are complementary to the Company’s existing business parks. With total annualised net
operating income of €7.5 million the acquisition assets provide attractive and well-diversified
cashflows. Additionally, the assets provide potential to add value through the selective investment
into, and subsequent let up of, vacant space which amounts to approximately 82,000 sqm.

The Company also completed the previously announced acquisition of a business park in Augsburg for
€79.9 million through its Titanium venture with AXA IM Alts, which now comprises seven assets with
a combined value of approximately €325.0 million.


Half Year Results

Sirius will announce results for the six months to 30 September 2021 on Monday, 8 November 2021,
at which time there will be a conference call for analysts and investors.

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: “As the vaccination programme continues to be successfully rolled out across Germany,
trading conditions have begun to normalise and confidence is returning. As with many countries,
corporates in Germany are now focused primarily on the re-organisation of their supply chains to
within European borders and adapting to more flexible ways of working. Both of these challenges play
to the strengths of Sirius’ portfolio and will help drive demand to our out of town business parks which
offer a range of storage, warehouse, manufacturing spaces and out of town offices. We remain
confident that the experience and service levels of our operating platform, the quality and affordability
of our assets, as well as the diversity and resilience of our tenant base will continue to underpin the
Company’s growth.

“While the attractive yields available from our asset class have continued to drive competition in the
investment markets, we are also pleased with the strong progress we have made in deploying capital
into new opportunities throughout the first half. However, we have kept our focus fixed firmly on
acquiring assets which are either under managed and/or underutilised where we are confident our
specialist asset management teams can extract value and drive net operating income. The success of
our inaugural bond issuance underlines the belief capital markets investors have in our strategy and
puts us in a good position to fund further acquisitive growth.”


Conference Call
There will be a conference call for analysts/investors hosted by Andrew Coombs, Chief Executive
Officer of Sirius Real Estate, Alistair Marks, Chief Financial Officer of Sirius Real Estate and Diarmuid
Kelly, Group Finance Director of Sirius Facilities GmbH, at 08:30 BST (09:30 CET/SA time) today,
6 October 2021.

Details as follows:
Dial-in UK: Local: +44 (0)330 336 9126/ Toll-Free: 0800 358 6377
Dial-in Germany: Local: +49 (0)69 2222 25574 / Toll-Free: 0800 589 4609
Dial-in South Africa: Local: +27 11 844 6054 / Toll-Free: 0800 998 654
Participant access PIN (for all participants): 9986131
For further information:
Sirius Real Estate
Andrew Coombs, CEO / Alistair Marks, CFO
+49 (0) 30 285 010 110

FTI Consulting (Financial PR)
Richard Sunderland / Claire Turvey / James McEwan / Talia Jessener
+44 (0) 20 3727 1000
SiriusRealEstate@fticonsulting.com

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
purpose is to create and manage optimal workspaces that empower small and medium-sized
businesses to grow, evolve and thrive. Sirius seeks to unlock the potential of its people, its properties,
and the communities in which it operates, so that together we can create sustainable impact, and
long-term financial and social value.

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.

Sirius also has a venture with clients represented by AXA IM Alts. Titanium was formed through the
acquisition by AXA IM Alts, on behalf of its clients, from Sirius, of a 65% stake in five business parks
across Germany. Sirius retained the remaining 35%. The venture seeks to grow primarily through the
acquisition of larger stabilised business park assets and portfolios of assets with strong tenant profiles
and occupancy. As well as its equity interest, Sirius acts as operator of the assets in the venture, on a
fee basis. 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 venture 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

JSE Sponsor
PSG Capital

Date: 06-10-2021 08:00:00
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