Sirius Real Estate (SRE) has raised €40m (£33.25m) of new equity at 24¢ a share to restore its balance sheet to financial health. The proceeds will be used to refinance the German industrial landlord’s expiring loans with RBS and BerlinHyp. New facilities with Macquarie, BerlinHyp and a second (unnamed) German bank have already been agreed. Once all the paperwork is signed and a couple of "non-core" properties sold, Sirius will have debt facilities of €227m against 27 properties worth €415m – a maximum loan-to-value ratio of 55 per cent. Crucially, none of the loans will expire before 2017.
This should give Sirius’ management breathing space to sort out the portfolio. Chief executive Andrew Coombs reckons he can overcome the dilutive impact of the placing to achieve earnings per share of 2.2-2.3p a year within two years. His method will involve continuing to cut costs while refurbishing and letting out vacant space – the portfolio is currently a quarter empty following years of under-investment. He also wants to sell assets in weaker cities like Magdeburg and Bremen and buy in Munich, Berlin and Bonn.
The market is now mercifully supportive. The company posted a 1.9 per cent valuation gain on its investment portfolio over the six months to 30 Sep, following years of declines. With German employment at record levels, tenant demand is also healthy, reports Mr Coombs.
House broker Peel Hunt expects adjusted book value to fall from 49¢ to 42¢ by March as a result of the placing.
SIRIUS REAL ESTATE (SRE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 26¢ | MARKET VALUE: | €90.4m | |
| TOUCH: | 25-27¢ | 12-MONTHS HIGH: | 26¢ | LOW: 17¢ |
| DIVIDEND YIELD: | nil | TRADING PROP: | €7.7m | |
| DISCOUNT TO NAV: | 46% | |||
| INVESTMENT PROP: | €421m | NET DEBT: | 152% | |
| Half-year to 30 Sep | Net asset value (¢) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 55 | -5.5 | -2.2 | nil |
| 2013 | 48 | 11.0 | 3.1 | nil |
| % change | -12 | -299 | -240 | - |
Ex-div: na Payment: na | ||||
