Sirius Real Estate calms stakeholders about inflation impact

Roger Pettingell Sarasota Real Estate


Sirius Real Estate, owner and operator of branded business and industrial parks in Germany and the UK, has begun trading in its new financial as planned, chairman Daniel Kitchen said yesterday.

He said at the annual meeting that this was in spite of the economic uncertainty and inflationary environment in both markets.

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The share price traded 1.3 percent lower at R17.21 yesterday morning, having fallen some 45.28 percent from a peak early this year, despite the company expanding its focus into the UK last year and good recent financial results.

Sirius’ portfolio comprises 140 assets let to 9 452 tenants with a total book value of more than €2 billion (R34bn).

In its year to March 31 Sirius had generated a total 20 percent accounting return, including a 16.1 percent in dividend for shareholders.

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“Whilst the company will not be alone in feeling the impact of inflation on its cost base, a combination of forward purchase agreements, volume-based discounts, and the use of selected suppliers continue to act as effective mitigants and provide us with a competitive advantage,” said Kitchen.

He said their financial profile was enhanced from last year’s bond issuance, as part of its strategy to transition towards unsecured debt, which allowed it to lock in low rates on extended maturities ahead of anticipated rises in interest rates this year.

This reduced the company’s average cost of debt to 1.4 percent, lengthened average term of debt to 4.3 years and increased the value of unencumbered properties to €1.6 billion, as of March 31.

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Having slightly increased leverage to 41.6 percent at March 31, after the acquisition of BizSpace, Sirius planned to reduce loan-to-value below 40 percent through income-led capital growth, capital investment and asset recycling, he said.

The sale of the Camberwell property in London was expected to be completed this month – the sale had been agreed at a 94 percent premium to the valuation at the time of its acquisition last year as part of BizSpace. Further asset recycling opportunities in the UK and Germany were being explored, he said.

A large percentage of the tenancy agreements included inflation indexations, and Sirius was confident it could generate further increases in average rental rates in the coming financial year, he said in a statement.

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