Sirius Real Estate (SRE) has published its annual results for the year ended 31 March 2024, which its chairman, Daniel Kitchen describes as one of “another year of strong financial and operational performance despite a backdrop of continuing macroeconomic and geopolitical volatility”. The year saw SRE raise €165.3m in November 2023 to take advantage of a pipeline of opportunities both in Germany and in the UK and it believes such acquisitions will contribute to its growth in future years. SRE highlights its £50.1m (€58.6m) purchase of Vantage Point business park in Gloucestershire, UK (its largest since its acquisition of BizSpace in November 2021), saying that it believes further compelling acquisition opportunities will arise in the coming year. SRE says that its asset recycling programme continued on pace, with the €60m of non-core or mature assets recycled in the period.
SRE has sets its sights on a funds from operations (FFO) milestone of €150m and continues to capture rent roll growth in both Germany and the United Kingdom. SRE’s board has authorised a dividend of 3.05c per share for the second half of the financial year, increasing on the 2.98c per share dividend for the equivalent period in the prior year, bringing the total dividend for the year to 6.05c (an increase of 6.5% on the 5.68c dividend for the year ended 31 March 2023).
On sustainability, SRE has established a dedicated team in Berlin to work with its Chief Impact Officer, Kremena Wissel, as additional operational resource to help manage and execute its sustainability agenda. SRE says that there are a number of headwinds on the horizon that will challenge it in the coming years, most notably the higher interest rate environment, continuing broader geopolitical uncertainty and the uncertainty over German and UK future economic growth. However, it is confident that its operating platform, balance sheet, experience and long-term strategic view will enable it to succeed.
The company has provided the following key highlights from its results:
Operating platform continues to drive rental and FFO growth
- 9% increase in Funds from Operations (FFO) to €110.2m (2023: €102.1m and a 14.6% increase in adjusted profit before tax to €110.0m (2023: €96.0m).
- 2% like for like rent roll growth to €188.7m (2023: €176.0m) driven by continued strong organic growth and occupier demand in Germany and the UK
- Profit before tax increased 32.4% to €115.2m (2023: €87.0m) primarily as a result of €12.4m valuation gain in 2024 compared to a €9.8m deficit in the previous financial year.
- 4% increase in FFO per share to 8.95c (2023: 8.74c)
- 7% increase of EPRA EPS to 8.21c (2023: 7.55c)
Sustainable FFO growth supports 20th progressive dividend payout
- Progressive H2 dividend of 3.05c per share (2023: 2.98c per share), amounting to a 6.5% uplift in the total dividend for the financial year to 6.05c (2023: 5.68c)
Income driven valuation gains
- Investment properties valued at €2,210.6m (2023: €2,123.0m)
- €12.4m net portfolio valuation increase in spite of valuation yield expansion
- Portfolio gross yield of 7.5% in Germany (2023: 7.3%) with a net yield of 6.8% (2023: 6.5%) alongside a 14.1% gross yield (2023: 13.2%) and a net yield of 9.9% (2023: 9.3%) in the UK, on a like for like basis
- EPRA NTA per share increasing by 1.6% to 109.82c (2023: 108.11c) demonstrating the resilience of the portfolio
- Adjusted NAV per share increased by 1.8% to 111.12c (2023: 109.21c)
Significant market opportunity captured with €157.8m of acquisitions and €59.7m of disposals, at a premium to book value, supported by €165.3m equity raise
- Net of costs, the Company notarised or completed six UK acquisitions amounting to £90.0m (€104.2m) contributing an annualised NOI of £8.7m (€10.1m) at an average gross yield of 9.5% and 81.1% occupancy. In Germany, the Company notarised or completed €53.6m of acquisitions across three transactions at an average gross yield of 10.2% and 91% occupancy, fuelling future rental growth
- €56.2m of disposals in Germany with annualised NOI of €3.4m and limited further growth opportunity completed across three transactions and one £3.0m (€3.5m) disposal in the UK with an annualised NOI of £0.2m (€0.2m), all at premium to book value
Strong balance sheet with capacity for acquisitions and only 2.9% of total debt expiring within next 2 years
- Cash at bank of €214.5m, providing capacity for further acquisitions and investment (2023: €99.2m)
- 9% net LTV (March 2023: 41.6%) and Net Debt to EBITDA of 5.6x
- Successful issuance of €59.9m bonds post balance sheet, via a tap issue of its €300m 1.75% notes due in 2028
- €170.0m facility with Berlin Hyp AG and €58.3m Deutsche Pfandbriefbank facility have been refinanced to 2030 at 4.26% and 4.25% respectively
Outlook
- The Company is trading in line with management expectations in the new financial year
- Sirius continues to assess further growth options in both Germany and the UK on an opportunistic basis, including recycling of mature assets and reinvesting in value-add opportunities
- Organic growth opportunities remain strong in both markets