7%-yielding Sirius Real Estate boasts £166m acquisition chest

The business park investor in the UK and Germany reports a busy half-year of increases in rent, revenues, profits and funds.

Sirius Real Estate (SRE ) has more than €200m (£166m) of ‘firepower’ to fund new property purchases after delivering double-digit revenue and rent increases that drove a 53% increase in half-year profits.

The £1.3bn investor in UK and German business parks and flexible workspace reported profits before tax of €61.2m (£50.9m) for the six months to 30 September.

This followed an interim increase of 11.7% in total revenues to €156.5m (£130m) and a near 15% rise in rent to €214m.

Chief executive Andrew Coombs said ‘robust performance’ underpinned the declaration of a 22nd consecutive dividend increase – lifting the covered interim payout by 2% to 3.06 euro cents (2.55p) per share. That puts the shares at 86.5p on a 7% yield. 

Valuations, however, remained static with net asset value increasing 1.2% to 112.49 euro cents from 111.12 euro cents in March. German valuations ticked modestly higher as yields stabilised, but decreased marginally in the UK ‘in line with an expansion in yields in the sector’.

Yields in the UK edged out 10 basis points (0.1%) to 9.4% over the period, while remaining stable at 6.8% in Germany.

Net asset value rose 1.2% to 112.49 cents (93.6p) from 111.12 cents per share to leave the shares on a 7.6% discount.

Coombs said that the results were ‘testament to Sirius’ proven ability to drive organic growth through intensive asset management initiatives, reinforced by resilient occupier demand for space within our portfolio, alongside the contribution from a series of well-timed acquisitions’.

The fund raised €174.6m in an equity raise in July and an additional €59.9m from its €300m 1.75% bonds maturing in November 2028, which Coombs said provided ‘sufficient firepower to act opportunistically and make earnings accretive acquisitions as they arise, reinforcing our ability to continue delivering strong returns and a progressive dividend’.

The company completed six acquisitions in the period, with two more buys after the period ended. It invested €101m in the UK and another €39.8m in Germany.

Coombs focused on ‘light industrial assets, with day-one rental income, at attractive yields, yet with value-add opportunities’.

This resulted in the purchase of a business park in Gloucester, an industrial asset in Banbury, and a light industrial building in Wembley. Another three assets were purchased in Germany.

Two ‘sub-scale, non-core properties’ in the UK were sold for £1.9m, which was above book value and at a combined premium of 7.7%.