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6 Oct 2009 07:00
Sirius Real Estate Limited
Trading Update
Sirius Real Estate Limited (the "Company" or "Sirius"), the real estate company established to acquire large mixed-use commercial sites for upgrading to flexible workspaces in Germany, is pleased to provide a trading update for the period ended 30 September 2009.
Key Highlights
Sirius continues to offer flexible, affordable, high quality workspace to tenants. During the six months to 30 September 2009, the Company invested approximately €18 million in its ongoing programme of upgrading the portfolio, the benefits of which are being evidenced by higher rental rates achieved and a significant increase in the number of new enquires being converted into lettings.
In the six month period, 45,283 sqm of new leases were signed with an average rent of €5.20 psm, compared to 55,900sqm signed at €4.50 psm for the full year to 31 March 2009. 52,807 sqm of space was vacated in the period which was being let for around €3.26 psm. At this stage in the development of the portfolio it is this rental increase which best demonstrates the increasing appeal of our sites.
According to an index published by German state owned bank KfW, sentiment amongst the German SME sector improved by a record amount in August 2009. Driven by a sharp increase in business expectations, the indicator rose by 5.5 points to a positive balance of 6.8. The rise was the fifth in a row and the strongest since 1991, the starting point for the data. The SME sector accounts for the vast majority of firms in Germany and around 70 per cent. of the country's workforce.
This has translated into continued healthy demand for office, storage and production space from the SME sector. In April 2009, the 'smartspace' campaign was launched, offering very small units for office, light industrial and storage purposes. This product targets start-up companies and small businesses and is proving successful having achieved lettings of 2,788 sqm at an average of €8.40 psm which represents a significant premium above conventional letting rates. The smartspace product is now available at ten sites across the portfolio with the intention of expanding the service across the board. The Sirius team continues to monitor and adapt to local market trends, and our flexibility combined with the high quality and affordable space we offer remains a key advantage in the current market.
Developing on surplus land on a pre-let basis continues to be an important component of the Group's strategy, and three new deals have been signed since 31 March 2009: with Burger King at Pfungstadt, ZK Glasbau in Maintal and OPC in Dusseldorf. A total of nine pre-let development deals have now been signed, creating an additional 5,877 sqm of pre-let space at a net initial yield on cost of 12.4 per cent.
The Company is pleased to announce that it has received approval following negotiations to consolidate its two portfolios financed with ABN Amro Bank N.V. ("ABN") for a non material one off fee. As previously announced, while one of the two portfolios has significant headroom, the other was believed to be in breach of its LTV covenant based on the Company's valuations. Following the consolidation of these portfolios, the new LTV covenant is 85 per cent., creating the headroom to accommodate a 16% drop in property values. In addition a cure provision has been added such that should a financial covenant be breached it can be cured by paying down the loan. Consequently all of the Company's banking facilities are within their respective covenants and the Company has sufficient cash to fund its planned capital expenditure programme for the foreseeable future.
Kevin Oppenheim, Chief Executive Officer of the Asset Manager, said: "Although the environment for real estate companies remains challenging, the resilience of the Sirius model is apparent as our transformation process is enabling us to achieve substantially higher rents. Tenant demand from the SME sector remains robust and as the market leader in our specialist sector we are ideally positioned to capitalise on any increase in demand for flexible, affordable, high quality workspace."
Enquiries:
Principle Capital Sirius Real Estate Asset Management Limited
Kevin Oppenheim, CEO 07973 821 008
J. P. Morgan Cazenove
Robert Fowlds 020 7588 2828
Bronson Albery
Cardew Group
Tim Robertson 020 7930 0777 /
Shan Shan Willenbrock 07900 927 650
Catherine Maitland
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