Sirius Real Estate shifts target out to 2024
The German-focused landlord grew its euro-denominated dividend by 6.3% in the year to end-March
German business park owner Sirius Real Estate’s plan to double its asset base to €2bn will now take up to five years, as the group struggles to find large enough suitable acquisitions.
The company, which owns multi-let business parks and a personal storage business, had wanted to double its property portfolio to €2bn within the next two years, CEO Andrew Coombs said, but it has decided to be more patient when making large acquisitions so as to ensure it does not overpay for them.
Coombs said the company was at a size at which it needed to improve its cashflow and in turn its dividends. He said the company could not buy properties at the expense of this.
Since listing in December 2014, with €428m in assets, the group has met its first goal of owning €1bn worth of property.
Coombs said the next target was to own €2bn in assets within the next five years while maintaining progressive dividend growth.
Sirius pays its dividends in euros, which means it can act as a rand hedge for investors.
“We are always looking for size and opportunities. Our strategy is to grow and buy better and larger assets along our journey. This is while we remain focused. We have shown we can run the best business parks in Germany, as well as a strong personal storage business,” he said.
The group, which is the only JSE-listed property company with a sole focus on Germany, released results for the year to end-March on Monday, in which it declared a final dividend of 1.73 euro cents per share, taking the total dividend for the year to 3.36c, an increase of 6.3%.
Coombs said that Sirius had a strong year buoyed by a healthy German economy.
“There may be mixed economic data coming out of Germany, but we aren’t seeing many weaknesses or panic signs. People need to realise that now about 70% of the country’s economic output is driven by services. Only 30% is manufacturing. The only area that is having real issues is the car industry, which is about 10% of the economy,” said Coombs.
Miranda Cockburn, an analyst at British investment bank Panmure Gordon, said Sirius’s disciplined management had yielded strong results.
“They have pulled off net asset value (NAV) growth of 16.6% and fund from operations growth of 26%. Not only is the company performing well operationally, with an occupancy rate relatively high at 86%, and average like-for-like rate growth of 4.4%, but we think the assets remain relatively conservatively valued off a net yield of 6.8%,” Cockburn said.
She said the company’s mix of locations and types of business space, including offices, production, warehousing and storage, as well as management’s ability to switch between them depending on market conditions, showed Sirius was run skilfully.
Chris Segar, a portfolio manager at Investec Asset Management, said Sirius had been using an in-house office management and leasing system for a few years, which had made it more efficient.
“This success stems from management’s capabilities to optimise their asset base, by adopting an in-house, vertically integrated leasing and property management team in-house platform,” he said.