Sirius Real Estate Announces 8.2% Increase in Group Rent Roll Amid Strategic Acquisitions

Sirius Real Estate Limited, a key player in the German and U.K. business and industrial park sector, has announced a robust 8.2% increase in...

Sirius Real Estate Limited, a key player in the German and U.K. business and industrial park sector, has announced a robust 8.2% increase in its group rent roll for the financial year ending March 31, 2024. This growth underscores the effectiveness of the company's strategic approach to enhancing both rental rates and occupancy levels, even amidst challenging macroeconomic conditions.

Notably, Sirius has consistently achieved over 5% like-for-like rent roll growth for the past decade, with both its U.K. and German operations contributing significantly to this performance. The company's cash collection efficiency remains high, exceeding 98.0% on a rolling 12-month basis. The company projects that its full-year results will align with current market expectations.

German Operations: Occupancy and Rate Optimization

In Germany, the company's rent roll benefited from increased occupancy rates, a direct result of targeted efforts to lease vacant spaces and retain existing tenants. With inflation rates moderating from the previous year, Sirius has capitalized on its in-house asset management platform to fine-tune its product offerings, occupancy, and rental rates, with the overarching goal of maximizing returns. The company anticipates a modest yield expansion in its year-end property valuations in Germany, reflecting the translation of strong operational performance into enhanced portfolio value.

U.K. Operations: Strategic Acquisitions and Occupancy Focus

The U.K. operations also demonstrated positive performance, reporting above-inflation rate increases, although slightly lower than in recent years. The company strategically focused on improving occupancy rates, which positively impacted the rent roll. Recent acquisitions in the U.K. have substantially boosted the rent roll, and valuation yields are expected to expand further. Overall, Sirius forecasts a positive valuation movement at the group level by the end of the financial year.

Strategic Capital Allocation and Acquisitions

Sirius Real Estate successfully completed a significant equity fundraising in November 2023, securing £147 million. These funds were strategically deployed to pursue acquisition opportunities, resulting in approximately £150 million of notarized or acquired assets.

• U.K. Acquisitions: Acquisitions in the U.K. totaled £84 million, with a weighted average net initial yield (NIY) of 8.9%.

• German Acquisitions: In Germany, four acquisitions were completed for a total of £55 million, acquired at a weighted average NIY of 9.3%.

Disposals and Capital Recycling

During the second half of the year, Sirius strategically disposed of £51 million worth of assets, focusing on mature German properties. These assets were sold at or above book value, with a weighted average NIY of 6.4%. This strategy underscores the group's commitment to efficient capital recycling, seeking attractive acquisition opportunities while divesting mature or non-core assets at favorable valuations.

Strong Financial Position and Debt Management

Sirius maintains a robust balance sheet, with approximately £220 million in free cash reserves as of March 31, 2024, prior to completing four post-balance sheet acquisitions totaling £91 million. The group faces no significant debt maturities until June 2026, with a weighted average cost of debt at 2.1% and a weighted average maturity of 3.9 years, reflecting recent refinancing efforts.

Interest Rate Environment and Future Outlook

While Sirius anticipates increased interest expenses from future refinancings, the company remains confident in the positive impact of leverage on shareholder returns, supported by its portfolio of high-yielding assets and consistent rent roll growth. The current interest rate environment has also presented attractive acquisition opportunities for the group.

CEO Commentary

Andrew Coombs, Chief Executive Officer of Sirius Real Estate, commented on the company's performance, stating: "Sirius has delivered another twelve months of strong operational performance, increasing rates and occupancy and quickly executing on our significant pipeline of acquisitions in both Germany and the U.K., following our successful £147 million equity raise last November. Raising capital at that time has proved to be opportune, allowing us to acquire high-quality real estate on very attractive financial terms. Our acquisition pipeline remains strong, and we believe there will continue to be opportunities to deploy our capital on an accretive basis in the coming year."

Upcoming Full-Year Results Announcement

Sirius Real Estate will release its full-year results on Monday, June 3, 2024. The event will include an in-person presentation and a virtual webinar for analysts and investors. It's important to note that the financial information presented in the trading update has not undergone review by external auditors or a reporting accountant.