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Sirius Real Estate to ramp up acquisitions

Demand for office and commercial space in Germany remains strong
November 19, 2018

Germany-focused landlord Sirius Real Estate (SRE) delivered another robust performance in the six months to September, pushing funds from operations ahead by more than a quarter and securing new lettings on 83,000 sq metres of space.

IC TIP: Buy at 60.6p

Demand for industrial assets and office space in Germany underpinned asset values, with the portfolio breaking above the €1bn (£888m) mark thanks to a €56m valuation uplift, increasing adjusted net asset value (NAV) to 70.5¢ a share from 63.4¢ a year earlier.

Two assets were acquired in the first half, costing €29.8m, with a further €9.6m spent on another asset after the half-year end. These were part-funded by the disposal of further non-core assets, which raised €19.3m. Discussions are progressing on a further bank facility, which should give Sirius the ability to make another €70m of acquisitions in the second half. However, at 32.7 per cent, the net loan-to-value ratio remained comfortably below the 40 per cent targeted upper limit.

New lettings more than offset the loss of rental income as three tenants moved out of recently acquired sites, and rent and other income from investment properties grew from €35m a year earlier to €40.8m. There is also plenty of room for growth within the existing portfolio, with the vacancy rate standing at 19 per cent.

Analysts at Peel Hunt have upgraded their forecasts and now expect adjusted NAV at the March 2019 year-end of 72.8¢.

SIRIUS REAL ESTATE (SRE)  
ORD PRICE:60.6pMARKET VALUE:£612m
TOUCH:60.2-60.6p12-MONTH HIGH:69pLOW: 52p
DIVIDEND YIELD:4.7%DEVELOPMENT PROPERTIES:€3.8m
PREMIUM TO NAV:1%NET DEBT:48% 
INVESTMENT PROPERTIES:€1.04bn  
Half-year to 30 SepNet asset value (¢)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
2017 (restated)61.054.75.71.56
201867.378.27.01.63
% change+10+43+24+4
Ex-div:13 Dec   
Payment:18 Jan   
£1=€1.126