Sirius Real Estate (SRE) has secured £77m in an oversubscribed fundraise which it will use to plough cash into German defence-related assets.

In a show of support for the long-suffering property market, the £1.5bn portfolio of business parks, offices and mixed-use workspaces in Germany and the UK, drew in £75m from institutions and another £2m from private investors through RetailBook in an raise that was oversubscribed multiple times.

The fund will issue just under 75.5m of new shares which were priced at 102p or a 1% premium to yesterday’s closing price and in line with net asset value (NAV). The issue increases the company’s equity by 5%.

Shares in SRE rose 3.7% to 104p, delivering a swift gain for those who took part in the raise.

The proceeds of the raise will be used to fund two ‘attractive’ opportunities in Germany that fit with the fund’s ‘particular focus on defence-related assets and tenants in the near-term’. The two acquisition targets – a long-term leaseback on a production site in south-west Germany and a multi-tenanted site in northern Germany − have an estimated value of €130m (£113m).

The fund has exclusivity on the assets, which have a blended yield of 7.6%, and the sales are expected to be completed in the second quarter.

Germany’s real estate market is underpinned by a ‘resilient and well-diversified economy spread across several large autonomous markets, a strong small and medium-size enterprise market, and high replacement costs for light-industrial buildings’.

On top of this, the German government delivered a €1trn fiscal stimulus package last year that is directed at infrastructure and defence spending, and SRE said is ‘expected to result in increased occupier demand for industrial space which, coupled with a noticeable uptick in transaction volumes, provide a further tailwind to the sector’.

Andrew Coombs, chief executive of SRE, said the past two years have seen the portfolio grow through acquisition.

‘While we remain resolute in focus on extracting the latent value within our existing portfolio, an overriding priority for the group is to ensure we continue to fully capitalise on the remaining window of opportunity to make acquisition before the next cycle begins in earnest,’ he said.

He added that Germany is an attractive market on which to focus given ‘notable strengthening’ in industrial transactional markets, and specifically those related to the defence sector where government spending will drive occupier demand.

Coombs said the assets are in ‘established locations, with strong tenants, high occupancy and stable day one income’.

‘They are complementary to our existing value-add portfolio in Germany and the UK and increase our exposure to the fast-growing defence sector,’ he said.

‘We will continue to progress our pipeline with a firm focus on disciplined capital allocation and recycling to achieve our recently increased medium term funds from operations target of €175m.’

Peel Hunt analyst Matthew Saperia said the capital raise and associated acquisitions will be accretive to funds from operations in the next financial year and support the company’s progressive dividend policy.

‘The stock trades on 14 times full-year 2027 earnings per share, offers a well-covered yield of 5.7%, and remains one of our top picks,’ he said.