Sirius Real Estate Limited · LSE:SRE
Sirius Real Estate — Investor Day (May 2019)
65 slides from Sirius Real Estate's investor day presentation, May 16, 2019
Slide 1: Empowering Business, Unlocking Potential - Capital Markets Day
EMPOWERING BUSINESS, UNLOCKING POTENTIAL Leading owner and operator of business parks, offices and industrial complexes in Germany CAPITAL MARKETS DAY 16 MAY 2019 1
Slide 2: Disclaimer
Disclaimer This document may contain certain ‘forward-looking statements’. This presentation is published solely for information purposes. This Such statements reflect current views on, among other things, our markets, presentation does not constitute an offer to sell or the solicitation of an offer
Slide 3: Welcome and Housekeeping
Welcome and Housekeeping 3
Slide 4: Introductions
Introductions Andrew Coombs, Group CEO Simon French, Chief Economist, Panmure Gordon Diarmuid Kelly, Finance Director, Sirius Facilities GmbH Kremena Wissel, Marketing Director, Sirius Facilities GmbH Rüdiger Swoboda, Managing Director, Sirius Facilities GmbH 4
Slide 5: Agenda
Agenda Introduction & Welcome Summary 10:30 Andrew Coombs, Group CEO 12:15 Andrew Coombs, Group CEO Economic Outlook 10:35 Simon French, Chief Economist, 12:20 Q&A Panmure Gordon Sirius Strategy 11:00 12:30 Lunch Andrew Coombs, Group CEO Sirius - AXA RE Joint Venture - Titanium 11:30 • Commercial Ra
Slide 6: Economic Outlook
Economic Outlook Simon French Chief Economist, Panmure Gordon 6
Slide 7: Economic Outlook
ECONOMIC OUTLOOK SIRIUS REAL ESTATE, CMD Simon French ¦ Chief Economist
Slide 8: Global growth set to pick up later in 2019
ECONOMIC OUTLOOK Global growth set to pick up later in 2019 Europe faces modest trend growth Key Themes 7 2019 2020 US Presidential Election 6 5 Chinese Stimulus 4 Weak Productivity GDP, YoY % 3 2 Lack of spare capacity 1 Popularism 0 Source IMF Private and Confidential Page 8
Slide 9: Recent slowdown has underlying theme
ECONOMIC OUTLOOK Recent slowdown has underlying theme Slowdown since Q1 2018 A story of two German economies 60 3% 65 58 60 2% Output PMI 56 55 54 50 1% 52 45 50 0% 40 May 2016 May 2017 May 2018 May 2019 May May May May Global PMI Germany, PMI German GDP, YoY % (RHS) 2016 2017 Services 2018 Manufact
Slide 10: Germany exposed to international trade volumes
ECONOMIC OUTLOOK Germany exposed to international trade volumes Global trade has recently gone into reverse High sensitivity to global trade 6% 50 40 4% 30 20 2% 10 0 0% -2% Exports, % of GDP Jan 2013 Jan 2015 Jan 2017 Jan 2019 Exports, % of GDP (Goods) Source: CPB, Eurostat Private and Confidential
Slide 11: Forget the clichés about Germany
ECONOMIC OUTLOOK Forget the clichés about Germany Services are 70% of the German economy… And a similar share of employment… 100 75 50 25 0 Services Manufacturing Employment Share Construction Agriculture Services Industry Agriculture Source: De Statis Private and Confidential Page 11
Slide 12: Autos. Part of the story – but not the whole story
ECONOMIC OUTLOOK Autos. Part of the story – but not the whole story ZEW: General VS Autos Autos as % of GDP 60 500 100 442 40 375 75 20 Auto Sales, €bn 0 % of GDP 250 50 -20 -40 125 25 13,5 -60 2010 2013 2016 2019 Automobile, Profitability 0 0 All Sectors, Profitability Total Auto Sales % of GDP (RH
Slide 13: Consumer confidence underpinned by falling unemployment
ECONOMIC OUTLOOK Consumer confidence underpinned by falling unemployment… Consumer Confidence hovering around 20Y high Unemployment in a decade-long decline…. 20 12 GFK CONSUMER CLIMATE SURVEY 10 15 8 Unemployment Rate, % 10 6 5 4 0 2 -5 0 2001 2005 2009 2013 2017 Q1 2001 Q1 2009 Q1 2017 Source: Eur
Slide 14: German households deleveraging and building resilience
ECONOMIC OUTLOOK German households deleveraging and building resilience… Household debt is steadily falling…. Savings ratio steady, in contrast to other G7 economies… 75 11 70 10 Household Savings Ratio Hhld debt, % of GDP 9 65 8 60 7 55 6 2000 2006 2012 2018 50 2000 2006 2012 2018 Germany G7, Ex Ge
Slide 15: With healthy public finances
ECONOMIC OUTLOOK With healthy public finances… Public sector debt less than 60% of GDP.. German state running a steady fiscal surplus… 120 2,5 100 0 PS Debt, % of GDP 80 PS Deficit, % of GDP 60 -2,5 40 -5 20 0 -7,5 1999 2004 2009 2014 2019 1999 2004 2009 2014 2019 Germany Eurozone, ex Germany German
Slide 16: 2008-14 German Economy
ECONOMIC OUTLOOK 2008-14 German Economy GDP, recovered faster… Hours responded to the economic crisis 108 100 Hours per Worker 104 99 2008=100 100 98 96 97 92 96 Q1 2008 Q1 2011 Q1 2014 2008 2009 2010 2011 Germany Eurozone, Ex Germany Germany EU, Ex Germany Unemployment rate barely broke downward tr
Slide 17: Corporate sector underpinned by low costs
ECONOMIC OUTLOOK Corporate sector underpinned by low costs… Insolvencies falling; accommodative credit conditions… Cost of construction new CRE picking up… 12000 8 8% 7 6% 10000 6 5 4% 8000 4 3 2% 6000 2 0% 1 4000 0 -2% Q1 2000 Q1 2006 Q1 2012 Q1 2018 2007 2010 2013 2016 2019 Insolvencies per quarte
Slide 18: Key Risks
ECONOMIC OUTLOOK Key Risks 1.Incomplete Monetary Union 2.Global Trade Conflict 3.Competitive Devaluation 4.Unfavourable Demographics 5.Ideological policymaking 6.Merkel Transition 7.Change at the ECB Private and Confidential Page 18
Slide 19: Important Notice
Important Notice This document has been produced by Panmure Gordon (UK) Limited (“Panmure Gordon”) which is This presentation and its content are confidential and should not be distributed, published or authorised and regulated in the United Kingdom by the Financial Conduct Authority. reproduced (in
Slide 20: Panmure Gordon offices
London Leeds Panmure Gordon and Company Panmure Gordon and Company One New Change, London EC4M 9AF Park House, Park Sq. West, Leeds LS1 2PW +44 (0)20 7886 2500 +44 (0)113 357 1150 Private and Confidential Page 20
Slide 21: Sirius Strategy
Sirius Strategy Andrew Coombs Chief Executive Officer, Sirius Real Estate 21
Slide 22: About Germany
About Germany 1 Several large Well diversified economy The Mittelstand autonomous markets Machinery, automotive & aviation The German SME market, over 50% of Frankfurt, Berlin, Munich, Hamburg, chemical & medical the German economy in terms of both Dusseldorf, Cologne, Stuttgart…….. energy & environ
Slide 23: About Sirius
About Sirius 1 Leading owner and operator Listed on the main markets FTSE EPRA/NAREIT Global of business parks, offices of the LSE and JSE Real Estate Index and and industrial complexes in Germany FTSE/JSE SA Listed Property Index Market capitalization of €1,045m* of assets owned Fully integrated op
Slide 24: Sirius share price
1 Mar 19 Period TSR 3M 12M 5yr 26 Jun 17 Announced JV Final results for FY 4 Jun 18 with AXA IM – Sirius 5.66% 7.86% 185.90% 2017, with 54% Final results for FY Real Assets FTSE All Share 9.41% 6.31% 34.30% 6 Mar 17 increase in 2018, EPRA NAV 70 recurring PBT to rising 11% to Move from the AIM EPRA/
Slide 25: Total portfolio rental analysis September 2018
Total portfolio rental analysis 30 September 2018 No. Of Tenants as Type of Tenant at 30 Sep18 Occupied Sqm Annual Rent €m Rate psm € Top 50 Anchor Tenants 50 559,913 36.9 5.5 SmartSpace SME Tenants 2,224 57,906 5.3 7.67 Other SME Tenants 2,185 573,002 39.8 5.78 Total 4,459 1,190,821 82.0 5.74 Top T
Slide 26: Sirius operating platform - benefits
Sirius operating platform - benefits Lower Risk Higher Returns Direct sourcing of No reliance on Higher cost Greater lead & new acquisition opportunities agents & brokers recovery tenant generation Increased optionality in Enhanced control, focus & Motivated, target focused space configuration speed
Slide 27: Why invest in Sirius?
Why invest in Sirius? 1 2 3 Access to high-yielding Fully integrated & in-house High quality portfolio with industrial asset class asset & property good potential & • Compared to other asset classes management platform conservatively valued • Higher yielding • Eliminates lettings & cost recovery ris
Slide 28: Total Shareholder Accounting Return - development
Total Shareholder Accounting Return - development Total Shareholder Return (%) – Adjusted NAV & Dividends Paid 18,0% 17.0% 16.0% 15.3% • 1/3 of return generated through 16,0% dividends, 2/3 through NAV 14,0% 13.0% growth 12,0% 9.8% • Valuation gains driven 10,0% predominately by income growth 8,0% a
Slide 29: Going forward - Sirius strategy
Going forward - Sirius strategy 1 2 3 Continue to realise Continue with selective Develop Joint Venture opportunity within existing asset recycling income stream portfolio • Selling assets at above book value on • AXA joint venture due to complete July • lower yields 98,000 vacant space going throug
Slide 30: FFO development – the story so far
FFO development – the story so far… Funds From Operations (€m) 120,00 • Medium term ambition €100m 100.0 100,00 • Reinvestment of JV proceeds 80,00 60,00 53.1 56.2 • Share of profit & fee income FFO 46.2 37.1 38.4 40,00 • Impact of capex investment 25.0 14.3 programmes over next 3 years 20,00 0,00 •
Slide 31: Conclusion
Conclusion -1- -2- -3- Aim to own & operate Reinvest proceeds of Grow FFO to €100m – €1 billion of investment JV & complete current medium term ambition property – now capex investment complete programmes With strong and sustainable income growth Sirius is well positioned to continue making double d
Slide 32: Joint Venture – Commercial Rationale
Joint Venture – Commercial Rationale Diarmuid Kelly Financial Director, Sirius Facilities GmbH 32
Slide 33: Joint Venture – recap
Joint Venture – recap Sirius continues Selective process of to operate and identifying partner manage the assets Sale of 65% interest 65% of 5 assets sold in 5 SPVs and new with implied value of €168m Joint Venture and gross yield of 6.2% agreement created €70m of proceeds generated Positive impact
Slide 34: Joint Venture commercial rationale
Joint Venture commercial rationale 1 2 Strength of combining brand & financial Leverage the capacity of the Sirius power of AXA and asset & property operating platform management capabilities of Sirius 3 4 Sirius minority share investment returns Alternative source of capital – ability to boosted by
Slide 35: Joint Venture fees payable to Sirius
Joint Venture fees payable to Sirius 1 2 3 Asset management Property Centre fee management fee management fee 4 5 6 Lettings fee Corporate Acquisition & services fee disposal fee 35
Slide 36: Joint Venture seed asset uplift in income
Joint Venture seed asset uplift in income Mainz Asset Mar 16 Sep 18 Improvement €m €m €m Rent Roll 2,219,000 2,572,000 353,000 +16% Non Recoverables (215,000) (190,000) 25,000 -12% NOI 2,004,000 2,382,000 378,000 +19% Occupancy 80% 95% 15% NOI increase of 19% Improvement driven Asset approaching in
Slide 37: Summary
Summary Positive impact on Crystallisation Fee income from JV NAV and earnings of value offsets cost of Sirius once proceeds for shareholders operating platform reinvested Asset level returns within the JV Strong partnership enhanced through between AXA and share of profit + Sirius fee income 37
Slide 38: Data Driven Asset Management
Data Driven Asset Management Kremena Wissel Marketing Director, Sirius Facilities GmbH 38
Slide 39: Why is Sirius such a strong JV partner? Data
From a marketing perspective why is Sirius such a strong JV partner? 1 2 PROPERTY PROSPECT DATA INTELLIGENCE CUSTOMER 3 39
Slide 40: Property data: properties assessed by Sirius
No. – properties assessed by Sirius 0 10 20 30 40 50 60 70 80 90 100 8 April May 18 June 23 July 17 August 22 September 41 October 46 November 297 18 December 10 January Business year 2014/2015 21 February 34 March 39 April 31 May 26 June 44 July 33 property data August 26 September 35 October 52 40
Slide 41: Property data: depth of information
Property data: depth of information HAMBURG BERLIN € site desktop EPRA NOIY region city status visit date calc LOI LOI date purchase price main usage GIY bid GIY asking EPRA NOIY bid asking gIRR Investment type central A... under review yes 15.04.2019 yes yes 08.04.2019 47.000.000 mixed use 8.9% 8.7
Slide 42: Net absorption forecast model
Price Bid Asking Annual Running Costs € €/sqm /mly) €/sqm (yly) % of Income New Sales Capex €/sqm € ERV €/sqm ERV ROI Cash flow projection - geared Purchase Price 21.000.000 31.000.000 Non-recoverable SC 37.210 1,20 14,4 1,6% Office 180 0 6,50 0 Day1 Y1 Y2 Y3 Y4 Y5 RETT North Rhine-Westphalia 6,50%
Slide 43: Existing and prospective tenant data
Second & third dimension: existing and prospective tenant data SIRIUS CRM PLATFORM SIRIUS SAP PLATFORM PROSPECT INTELLIGENCE CUSTOMER INTELLIGENCE > 13 years of data >10 years of data 155,000 prospects NEW TENANT CUSTOMER 13,588 customers PROFILE PROFILE 19,000 JV prospects 1,693 JV customers 11,500
Slide 44: Tactical execution: using tenant profile to mine data sources
Tactical execution: Use of new tenant profile to mine internal & external data sources Define Identify Follow Capture siriusfacilities.com Mylager.de fcbc.de MEDIA B1businesspark.de Meetinn.de Display audience extension (online media, platforms, etc) New tenant leads New tenant 3rd Party property So
Slide 45: Importance of data analysis
Importance of data analysis “We can have all the “Knowledge is only potential knowledge in the world, power. It becomes power only but it means nothing when, and if, it is organised into without the wisdom to definite plans of action, and know what to do with it.” directed to a definite end.” Marie
Slide 46: Summary
Summary Sirius data intelligence Sirius is not giving Sirius develops is 3 dimensional- knowledge away models to capture property, customer and (our data platforms are the most value in prospect data built and analysed the right place with the right customer inhouse) 46
Slide 47: Field Operations
Field Operations Rüdiger Swoboda Joint Managing Director, Sirius Facilities GmbH 47
Slide 48: The Sirius platform in Germany
The Sirius platform in Germany 250 Finance, IT, HR, Asset & Property Mgt. Sales Inbound Team Legal Strategic & operational Scheduling appointments Support Marketing Team Generating leads Employees at Service Charge Team 60 Development Team National Sales Team Top 100 tenant management Acquisitions T
Slide 49: Current investments
Current investments Sept-18 No. Of Total Occupancy Annualised % of Properties Sqm m Rent € m Portfolio By Rent Frankfurt 13 0.3 88.5% 19.5 24% Berlin 6 0.2 91.9% 12.7 15% Stuttgart 7 0.3 85.9% 12.2 15% Cologne 7 0.1 87.1% 9.4 11% Munich 2 0.1 80.6% 6.6 8% Düsseldorf 8 0.1 73.5% 5.2 6% Hamburg 2 0.1
Slide 50: Titanium starting portfolio
Titanium starting portfolio Due to go live 01.07.2019 Berlin Berlin Tempelhof Borsig Bayreuth Nürnberg Mainz 6% 12% 6% 6% 6% 12% 20% 20% 16% 30% 18% 18% 33% 48% 32% 66% 31% 8% 56% 56% Office Industrial Storage Other 50
Slide 51: Sirius - AXA Joint Venture
Sirius - AXA Joint Venture Titanium Portfolio 65% 35% Sirius plans to increase Sirius Facilities will The Titanium portfolio will be its own portfolio value manage and acquire complementary to the Sirius from currently c.€1 properties in the name portfolio billion of AXA . 51
Slide 52: Joint Venture support
Joint Venture support Operations Finance Yield Management Marketing Joint Venture IT Titanium HR Asset Management Sales Acquisitions 52
Slide 53: Investment profile
Investment profile TITANIUM INVESTMENT STRATEGY •• Value-add & opportunistic Significant asset management potential ▪ Core+ ▪ Focus on stable cashflows ▪ Single-Investmemnts > €50 m • Single investments €10 – 50 m* ▪ Portfolios €50 – 100 m INVESTMENT VOLUME • Towns on and around the edge of the Top
Slide 54: Investment focus TOP 7 cities
Investment Aachen focus Bochum Dresden Dortmund HAMBURG Essen Heidelberg Hannover Karlsruhe BERLIN Mainz Leipzig Mannheim Ludwigshafen DÜSSELDORF Nürnberg Rüsselsheim Wiesbaden Ulm KÖLN Pforzheim FRANKFURT Würzburg STUTTGART Towns around the Complimentary New MÜNCHEN TOP 7 cities 54
Slide 55: Broker events
Broker events April 2019 – key 7 cities / events Purpose Explain the investment criteria - how it differs Titanium / Sirius Result More than 250 attendees Substantial increase of investment opportunities 55
Slide 56: How we operate on ground: Acquisitions
How we operate on ground Acquisitions April 2018 to March 2019 Desk evaluation 600 Viewings 90 Titanium >2% LOIs 37 Value-add & Core + opportunistic Focus on asset 6 Stable cash flows management potential Refurbishment Low vacancy need = 1% Conversion rate Open land development opportunity Sub-optim
Slide 57: How we operate on ground: Lead allocation
How we operate on ground Lead allocation April 2018 to March 2019 14,400 Leads 11,076 Titanium >15 % Viewings scheduled 8,772 Large customer Medium & small Viewings customer Minimal service requirements Service 1,718 new Tenants intensive Long WAULT Medium & short WAULT Development of Building vacan
Slide 58: How we operate on ground: Product offering
How we operate on ground Product offering Titanium BV BV
Slide 59: What the Joint Venture brings to Sirius?
What the Joint Venture brings to Sirius? 1 2 3 Higher overall sale Better acquisition Contributes to the costs of conversion opportunities the operating platform 4 5 AXA experts in property – Wider selection of assets to knowledge transfer cross sell tenants into 59
Slide 60: Conclusion
Conclusion Andrew Coombs Chief Executive Officer, Sirius Real Estate 60
Slide 61: Conclusion
Conclusion 1 2 Strength of combining brand & financial Leverage the capacity of the Sirius power of AXA and asset and property operating platform management capabilities of Sirius 3 4 Sirius minority share investment returns Alternative source of capital – ability to boosted by asset & property mana
Slide 62: Conclusion
Conclusion -1- -2- -3- Aim to own & operate Reinvest proceeds of Grow FFO to €100m – €1 billion of investment JV & complete current medium term ambition property – capex investment now complete programmes With strong and sustainable income growth Sirius is well positioned to continue making double d
Slide 63: Questions
Questions 63
Slide 64: Lunch
Lunch 64
Slide 65: Index constituent
Sirius Real Estate is proud to be a constituent of the EPRA, SAPY, FTSE SmallCap and MSCI Small Cap indices. 65