Sirius Real Estate, a leading owner and operator of branded business and industrial parks, says demand is high for its conventional space and flexible workspace in Germany and the UK.
This is despite fear in Europe of the Ukraine war leading to supply constraints, rising inflation and an uncertain economic environment.
“Sirius is in a strong position to deal with any shortfalls in gas or electricity supply or further hikes in prices, having fixed rates for its and its occupiers’ gas supply until the end of 2023,” said CEO Andrew Coombs.
Coombs said Sirius secured gas supplies for its tenants at fixed rates in 2020. Unless the German government moves the country to emergency level status in relation to gas supply, Sirius does not believe there will be any material changes to its fixed-rate agreements for gas supply expiring in December 2023.
In September, the German government announced a relief package of up to €200bn (R3.5-trillion) to cushion the effects of expensive energy on citizens and businesses until 2024. That enables Germany to borrow up to that amount to finance the gas price brake and extra support measures for struggling businesses, the company said on Monday in its trading statement for the six months to end-September.
Coombs told Business Day that the energy situation in Germany is stabilising. That 75% of company debt is hedged against rising interest rates for the next five years gives Sirius confidence to deliver amid economic headwinds.
Sirius is listed on the main and premium market of the London Stock Exchange and the main board of the JSE. At the end of March 2022, its portfolio was valued at more than €2bn and generating a total annualised rent roll of €167.1m. It also has a 35% stake in Titanium, its German-focused joint venture with clients of AXA IM Alts.
During the reporting period, like-for-like annualised rent in Germany rose 2.4% to €115.2m. This was due to rising demand for space and a 3.3% rise in like-for-like rental per square metre.
In the UK, the BizSpace portfolio had a 4.1% rise in annualised rent to £46.5m. As many as 377 deals for new space were signed during the period.
“Our platform gives us the power to increase rentals by 8% in the UK and Germany, and this is an advantage other companies do not have,” said Coombs.
With about 40% gearing, he said their balance sheet is strong and the focus for the company is to leverage its platform to protect and maintain property values.
Coombs said trading in its portfolio was in line with expectations and a strong and flexible balance sheet. Sirius has cash reserves of about €162m, of which more than €138m is unrestricted, providing capacity for further acquisitions and investment.
Coombs said group occupancy was 85%-90%, and Sirius has enough space to meet demand for the next three years.
Though the company will continue with capital recycling, Coombs said it is a difficult market in which to sell. “If one looks harder, there are buyers who are prepared to pay a premium for assets that they convert into last mile logistics or data centres as these are in demand currently,” he said.
Update: October 10 2022
This article has been updated with new information throughout.
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