Sign In
Last checked at 
22 Sep 2014 07:00
Sirius Real Estate Limited
("Sirius" or "the Company" or "the Group")
Ā
Trading Statement
Ā
Sirius Real Estate, the leading operator of branded business parks providing conventional and flexible workspace to the German SME market, is pleased to announce that trading in the current financial year is expected to be in line with market expectations and the Company's capex programme is ahead of plan. Annualised recurring rent roll is expected to increase to around ā¬42.0 million (ā¬41.3m* - 31 March 2014) by the interim stage at 30 September 2014, largely through the initial impact of the capex programme even though it is in its early stages. In addition the company has completed and notarised land sales to the value of ā¬4.541m in the period. In light of the incremental income from the investment programme as well as cash generated from the disposal of non-income and low-income producing assets, the Board has decided it has the ability to increase the dividend to shareholders by amending the dividend payout to 65% of Funds From Operations ** ('FFO') rather than the previously announced policy which referred to recurring earnings after tax. The Board intends to set out more detail at the interim results announcement in December 2014, but the new policy is expected to materially improve the dividend available to shareholders.
* Smartspace all-inclusive rents adjusted by ā¬180k to allocate actual service charge costs to service charge income rather than estimated. This is now like-for-like with the September 2014 position.
** Funds From Operations refers to recurring earnings after tax, adjusted for depreciation, amortisation of debt arrangement fees and other non-cash items
Ā
Having materially strengthened the Company's capital structure with the capital increase and refinancing of all Group borrowings in the last financial year, the Company has since been focused on generating additional value from within the existing portfolio. The most significant organic growth opportunity comes from converting c. 100,000 sqm of currently vacant space, where we know there is high rental demand, into lettable areas.
Ā
In June 2014, the Company announced a new ā¬9 million capital investment programme aimed at transforming this c. 100,000 sqm of predominantly unlettable space into a combination of conventional space and the Company's premium, high-quality Smartspace products, which will create an Estimated Rental Value of around ā¬5.8 million. Of this space 72,808 sqm will be part of the Capital Investment Programme for which the results to the end of August 2014 can be seen in the table below:
Ā
Captial Investment Programme Progress | Area | Investment | Rental Increase | ||||||
ā¬ | Occupancy | Rate | |||||||
Sqm | Budget | Actual | Budget | Achieved to Date | Budget | Achieved to Date | Budget | Achieved to Date | |
Completed | 26,818 | ā¬2,197,000 | ā¬1,823,610 | ā¬1,358,559 | ā¬678,653 | 80% | 33% | 5.27 | 6.40 |
In Progress | 7,680 | ā¬1,687,000 | ā¬392,902 | 75% | 5.70 | ||||
To be Commenced This Financial Year | 15,009 | ā¬1,481,766 | ā¬663,444 | 72% | 5.11 | ||||
To be Commenced Next Financial Year | 23,301 | ā¬2,431,000 | ā¬1,148,508 | 80% | 5.13 | ||||
Total | 72,808 | ā¬7,796,766 | ā¬1,823,610 | ā¬3,563,413 | ā¬678,653 | 78% | 5.24 | ||
Ā
As set out above, the first 26,818 sqm of the capital investment programme has been completed with an investment spend coming in 17% lower than budget. The completed space has not been on the market for long, but the early indications are encouraging and the rental rates achieved so far are more than 20% higher than expected. The incremental annual rental income from the space already let up to the end of August 2014 was ā¬678,653 and is the major contributor to the increase in recurring rent roll reported above. Supporting the Company's investment is the continued demand from the German SME market for Sirius's alternative and flexible workspaces. We are only investing where we know there is good demand for the space. The programme is particularly focused on responding to the demand for the high yielding Smartspace offices which should see the representation of Smartspace products in the estate increase from 7.5% to around 12% of the Company's net lettable area. The Sirius brand is well known in Germany and through its online portals continues to attract in excess of 1,000 enquiries each month, whilst continuing to achieve industry leading conversion rates of enquires into lettings.
Ā
Alongside looking to maximise the rental generation from the existing portfolio, Sirius has continued to evaluate the potential for selling excess land and non-core properties to reinvest in the estate. In the period under review, the Company has completed the sale of 4,736 sqm of non-income producing land in Bremen to Aldi for ā¬2.15 million, as well as a separate 2,743 sqms of non-income producing land in Bonn Siemmenstrasse for ā¬186,725, in addition a further 27,000 sqm of land at the back of the Berlin Gartenfeld site has been notarised for ā¬2.205 million. The Gartenfeld Land was contributing ā¬22k of income per annum. The three aforementioned transactions amount to just under 35,000 sqms of land at an average price per sqm of ā¬130. Funding the high yielding capital investment programme with the proceeds from the disposal of non-income producing land is very accretive both from an earnings and NAV perspective and the Company has over 80,000 sqms of non-income producing land from which we have identified a number of additional opportunities within the portfolio that can be considered for sale in the future.
A further part of Sirius' strategy is to increase returns to shareholders by seeking highly accretive acquisition opportunities which can enhance earnings and the longer-term capital value of the Company. We continue to evaluate business parks which are immediately earnings accretive and where there is potential to grow capital value through the Company's asset management and investment models, thereby generating high total returns for shareholders. A number of lenders have offered financing for acquisitions on attractive terms.
Ā
Andrew Coombs, CEO of Sirius Real Estate commented, "In the light of the progress made with the major capital investment programme and the returns already being generated, the management is confident that the Company is well placed to meet expectations this year and together with the successful identification and execution of non-core land sales I am delighted that the Board has decided to make significant enhancements to the dividend policy. The strong organic growth being realised, together with the potential returns to be added from external growth opportunities, underpins our confidence in the potential of the business to continue to generate high total returns, consisting of income returns and net asset value growth, to shareholders."
Sirius expects to announce its interim results in December 2014.
Ā
Enquiries:
SiriusĀ Real Estate
Andrew Coombs, CEO +49 (0)30 285010110
Alistair Marks, CFO
Ā
Peel Hunt
Capel Irwin +44 (0)20 7418 8900
Hugh Preston
Ā
Novella
Tim Robertson +44 (0)20 3151 7008
Ben Heath
Ā
Follow the stocks
