Sirius Real Estate Regulatory News (SRE)

8 April 2019

Sirius Real Estate Limited

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

Trading Update

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 twelve months to 31 March 2019, ahead of the announcement of its full-year results on 3 June 2019.

Summary

The Company confirms that the results for the twelve-month period are expected to be in line with market expectations and is pleased to announce stronger than expected organic growth on its existing portfolio, good progress on acquisitions and disposals and, as announced previously, a substantial new joint venture with AXA IM - Real Assets.

Continued strong tenant demand combined with the Company's intensive asset management initiatives has generated another year of improved rental growth with the like-for-like increase in annualised rental income expected to be greater than the 6.2% reported over the same period last year.

Additionally, the planned disposal of non-core assets has progressed well during the period and the Company has now successfully exited the Bremen market. The disposal of three Bremen assets generating proceeds of €25.6 million completed in the period which included the final two non-core assets within Sirius' portfolio. In addition, the Company sold a piece of non-income producing land and a residential building, generating further proceeds amounting to €1.8 million, which will be re-invested into the Company's accretive capex investment programme.

In February 2019, the Company announced the establishment of a joint venture with AXA IM - Real Assets (the "JV") through the sale of 65% of its interests in five Group subsidiary companies to AXA IM - Real Assets. The transaction is expected to complete at the end of June 2019. With an implied property purchase price of €168.0 million compared to the last reported book value of €141.1 million, the JV crystallises excellent value for Sirius, provides significant firepower for acquisitions both for itself and for the JV and creates an attractive income stream as a result of Sirius' continued management of the assets.

The JV will also allow Sirius to consider much larger assets and portfolios of assets, with a wider range of return profiles and development opportunities that it might previously have overlooked or was unable to pursue, allowing the Company to derive further benefits from scale, whilst not conflicting with Sirius's existing business.

The combination of the March 2018 equity raise, asset disposals and proceeds generated by the sale into the JV has in total provided the Company with resources, including additional lending, to acquire approximately €230.0 million of acquisitions. This has so far been deployed into the acquisition of four assets totalling €65.1 million which completed in the period. In addition to this, two assets totalling €15.2 million have been notarised for completion in the new financial year and three assets totalling €64.8 million are currently in exclusivity. Assuming these all complete, the Company will then have the capacity to invest a further €85.0 million into acquisitions. Approximately €70.0 million of the equity used to fund these acquisitions will come from the proceeds of the sale to AXA IM - Real Assets in June.

In summary, combining the continuing strength of Sirius' internal operating platform, with the selective asset recycling completed in the period and the new strategic partnership with AXA IM - Real Assets, shows that the Company is well placed for the new financial year and is confident of delivering attractive, sustainable returns for shareholders going forward.

Operational and Strategic Highlights

The main highlights for the period include: 

· Total annualised rental income, including acquisitions within the period, is expected to have increased by approximately €8.2 million to €87.7 million as at 31 March 2019.

· Like--for-like annualised rental income in the period is expected to have increased by more than the 6.2% growth recorded for the prior year, the fourth consecutive year of increases greater than 5%.

· Strong lettings activity with more than 170,000 sqm successfully let in the period including major long term deals with well covenanted tenants including Porsche AG, Land Berlin (a government agency) and FOM (an educational body).

· Significant acquisition activity including the completion of €101.2 million of acquisitions in the period, which includes two assets totalling €36.1 million that were prepaid before the start of the period. Two further assets were notarised in the period totalling €15.2 million and are expected to complete early in the new financial year.

· Successful completion of the sale of three assets situated in non-core locations, generating proceeds of €25.6 million, providing further firepower for accretive acquisition activity. The Company also disposed of a piece of non-income producing land and a residential building generating further proceeds of €1.8 million in the period.

· The Company continues to secure advantageous long-term borrowing facilities on attractive terms with a new 5-year loan facility totalling €56.0 million from PBB agreed in the period with a margin of 1.20%. As at 31 March 2019, €36.4 million had been drawn down and hedged with 5-year SWAPs.

· In September 2018, the Company announced the appointment of Danny Kitchen as Chairman. Danny brings over 25 years of property and finance experience in both public and private markets and we look forward to our next phase of growth under his stewardship.

The financial information on which this trading update is based has not yet been reviewed or reported on by the Company´s external auditors.

Recent Notarisations

On 22 March 2019, Sirius notarised the acquisitions of two business park assets located in the metropolitan regions of Freiburg and Hamburg.

The Freiburg property comprises a combination of office, storage and production space totalling 20,000 sqm of lettable space which is currently 87.6% occupied. The total expected acquisition costs amount to €6.5 million. The site generates €542,000 of net operating income, representing an attractive EPRA net initial yield of 8.3% and will act as a replacement for the recently disposed Bremen-Dötlinger asset that forms part of the existing SEB I loan facility.

The Hamburg property provides a combination of office, storage and production space totalling 28,500 sqm of lettable space which is currently fully vacant. Total expected acquisition costs amount to €8.93 million.

Andrew Coombs Chief Executive Officer of Sirius Real Estate, said: "We've had another very good year, achieving considerable progress enhancing the portfolio and diversifying our operating model, which now includes the joint venture partnership with AXA."

"With our ability to acquire assets for our own account and for the joint venture, with differentiated strategies, we have a much wider pool of assets to target and ways in which to generate our returns. We are confident in our ability to provide shareholders with exposure to attractive and stable returns from our portfolio in the world's fourth largest economy."

A conference call for analysts will be held at 09.00 (BST) today. If you wish to dial in, please email james.verstringhe@tavistock.co.uk for details.

For further information:

Sirius Real Estate

Andrew Coombs, CEO/Alistair Marks, CFO

+49 (0)30 285010110

Tavistock (Financial PR)

Jeremy Carey/James Verstringhe

+44 (0)20 7920 3150

siriusrealestate@tavistock.co.uk

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.

On 1 March 2019, Sirius announced that, in a transaction due to complete in June 2019, it had formed a real estate investment joint venture with clients represented by AXA Investment Managers - Real Assets in which AXA acting on behalf of its clients, will own a 65% interest and Sirius will own the balance of 35%. The JV is being formed initially by AXA acquiring, on behalf of its clients, from Sirius a 65% stake in five business parks, two located in Berlin (Berlin Borsig and Berlin Tempelhof) and one in each of Mainz, Nurnberg and Bayreuth. The business parks provide a combination of office, warehouse, industrial and storage space. The implied property value of €168 million equates to a gross yield for the portfolio of 6.2% and reflects a 19% premium to the last reported book value as at 30 September 2018 (€141.1 million). The transaction is expected to generate total cash proceeds of more than €70 million for Sirius after refinancing and related costs.

For more information, please visit: www.sirius-real-estate.com

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