Sirius Real Estate has announced its interim results for the six-months ended 30 September 2015. During the period, the company’s adjusted net asset value per share increased by 5.5% to 50.13c (31 March 2015: 47.51c) despite the payment of €7.6m in early termination fees for the repayment of loans from Macquarie, which the company says where equivalent to 1.0c reduction in NAV per share. According to the company, the total shareholder return (based on the adjusted NAV), including the 0.84c per share final dividend paid in July, was 7.3% in the six month period. They say that the benefit of acquisitions and the reduced interest cost will impact future periods. A dividend of 0.92c per share has been declared for the six months to 30 September 2015, with a scrip dividend alternative.
The company says that demand for its workspace continued to be strong and in spite of an expected but higher than usual number of move-outs in the period, the like-for-like gross annualised rent roll increased to €50.1m (31 March 2015: €50.0m). They say that, including acquisitions the gross annualised rent roll has increased to €53.4m, whilst recurring profit before tax increased to €8.6m, with like-for-like recurring profit before tax increasing by 35.3% to €6.9m (2014: €5.1m). The company also says that profit before tax (including property revaluations) increased to €28.3m (2014: €15.3m), whilst funds from operations was €9.9m, an increase of 60% (2014: €6.2 million). FFO per share increased to 1.4c (2014: 1.2c) despite the acquisitions funded by the €50 million capital increase in June making only a small contribution.
The company says that the cost of debt reduced significantly during the period with the refinancing of the Macquarie debt facilities, through a new seven year €59m facility from SEB AG with a fixed cost of 1.84% per annum. The company says that this refinancing, which reduced the average cost of debt to the Group from 4.3% to 3.3%, will reduce interest cost by €2.6 million per annum going forward.
The valuation of the portfolio increased to €615.2m (31 March 2015: €550.0m) with the like-for-like portfolio increasing by €31.4m or 5.7% to €581.4m. The company achieved new lettings in the period of 70,201 sqm at an average rate of €5.10 per sqm (3.87% above the average rate achieved across the existing portfolio), with like-for-like lettings of 62,886 sqm at an average rate of €4.86 (2014: 54,713 sqm at €5.11).
In June, Sirius completed a Private Placement raising €50m of new equity capital. The purpose of the new capital was to fund the acquisition of five mixed-use business parks and the early repayment of the two Macquarie debt facilities previously discussed. The company says that the five assets were acquired in September and October 2015 from different vendors for a total consideration of €57.24 million, including acquisition costs. A new €25.4 million 5-year debt facility was drawn down against four of these assets in October 2015 with a fixed all-in interest rate through a swap of 1.66%.
In terms of outlook, the company says that it continues to experience high demand for its various offerings and is becoming one of the key providers of mixed-use space to the German SME market. However, they say that they have started to see some of the yield compression that the market is experiencing and, whilst they anticipate this trend to continue, they will continue to focus on delivering valuation and FFO improvements through asset management initiatives as well as selective acquisitions.
They say that one of the biggest drivers of organic growth is converting previously unlettable or under-rented space into a combination of conventional workspace and their Smartspace products which often achieve rental rates of up to double that of the average rate across our portfolio. They say that their remains significant opportunity to continue this through their initial capex investment programme, by investing into the vacant space of their new acquisitions and investing into the large spaces that have been vacated in the last six months. The company says that in their view there remain further opportunities to acquire suitable business parks at attractive pricing with value add potential.
Sirius Real Estate sees 5.5% increase in NAV during H1 with reduced interest cost and acquisitions still to kick in : SRE