Sirius Real Estate Limited · LSE:SRE
Sirius Real Estate — Investor Day (April 2017)
88 slides from Sirius Real Estate's investor day presentation, Apr 25, 2017
Slide 1: 25 April 2017
25 April 2017 Sirius Facilities GmbH - Providing space for business
Slide 2: Andrew Coombs, CEO
Andrew Coombs CEO Sirius Facilities GmbH - Providing space for business
Slide 3: Welcome & Housekeeping
Welcome & Housekeeping 3 Sirius Facilities GmbH - Providing space for business
Slide 4: Introductions
Introductions Andrew Coombs, Group CEO Alistair Marks, Group CFO Rudiger Swoboda, Sales Director, Sirius Facilities GmbH Kremena Wissel, Marketing Director, Sirius Facilities GmbH Diarmuid Kelly, Finance Director, Sirius Facilities GmbH Martin Belik, Cushman & Wakefield 4 Sirius Facilities GmbH - Pr
Slide 5: Agenda
Agenda 10:00 Introduction Andrew Coombs, Group CEO 10:05 German Real Estate market Martin Belik, Cushman & Wakefield 10:30 Sirius In-house Model Kremena Wissel, Marketing Director Rüdiger Swoboda, Sales Director Diarmuid Kelly, Finance Director Q&A 11:10 Break and Refreshments 11:30 Growth Strategy
Slide 6: Journey
Journey 6 Sirius Facilities GmbH - Providing space for business
Slide 7: Returns
Returns 7 Sirius Facilities GmbH - Providing space for business
Slide 8: Marketing
Kremena Wissel Marketing Director Marketing Sirius Facilities GmbH - Providing space for business
Slide 9: Sirius Marketing Structure
Sirius Marketing Structure In-house 8 experts 9 Sirius Facilities GmbH - Providing space for business
Slide 10: Capturing Demand: Enquiries per Month
Capturing Demand: Enquiries per Month <300 2010 >1,000 2017 10 Sirius Facilities GmbH - Providing space for business
Slide 11: Marketing Performance: Enquiries
Marketing Performance: Enquiries >90% Online 11 Sirius Facilities GmbH - Providing space for business
Slide 12: What Makes Us Unique?
What Makes Us Unique? Clear line of sight to the customer Online lead generation 12 Sirius Facilities GmbH - Providing space for business
Slide 13: Brands vs. Products and Services
Brands vs. Products and Services 10 Brands 12 Products & Services 13 Sirius Facilities GmbH - Providing space for business
Slide 14: Sirius Customers: Blue Chip Companies
Sirius Customers: Blue Chip Companies 50% of the revenue in 16/17 • TOP 50 tenants (Siemens, GKN, MAN) • Long leases • Predominantly industrial space 14 Sirius Facilities GmbH - Providing space for business
Slide 15: Sirius Customers: SMEs
Sirius Customers: SMEs 50% of the revenue in 16/17 • 3,650 tenants • Flexible leases • Comprehensive range of space and value-added services 15 Sirius Facilities GmbH - Providing space for business
Slide 16: Case Study: Office
Case Study: Office 16 Sirius Facilities GmbH - Providing space for business
Slide 17: Case Study: Storage
Case Study: Storage 17 Sirius Facilities GmbH - Providing space for business
Slide 18: Sirius Integrated Marketing Process
Sirius Integrated Marketing Process 18 Sirius Facilities GmbH - Providing space for business
Slide 19: Marketing Tactics: Organic Search
Marketing Tactics: Organic Search • In-house • 7 websites • 6,506 landing pages • 100,000 potential keywords 25% of all enquiries 19 Sirius Facilities GmbH - Providing space for business
Slide 20: Marketing Tactics: Affiliates
Marketing Tactics: Affiliates • In-house • 20 property portal affiliates • 450 listings/portal • 9,000 online listings • Managed on a daily basis 30% of all enquiries 20 Sirius Facilities GmbH - Providing space for business
Slide 21: Marketing Tactics: Google Campaigns
Marketing Tactics: Google Campaigns • In-house • 433 campaigns per month • >10,000 keywords • Managed on daily basis 25% of all enquiries 21 Sirius Facilities GmbH - Providing space for business
Slide 22: Marketing Tactics
Remaining 20% of Marketing Tactics all enquiries 22 Sirius Facilities GmbH - Providing space for business
Slide 23: Sirius Marketing Success Factors
Sirius Marketing Success Factors Do not have to Clear line of sight Controlling Optimizing rely on agents to to the customer enquiries flow- cost of enquiry fill the space ability to turn up and down flow of enquiries with immediate effect 23 Sirius Facilities GmbH - Providing space for business
Slide 24: Sales
Rüdiger Swoboda Sales Director Sales Sirius Facilities GmbH - Providing space for business
Slide 25: Sirius − Sales Performance 2010
Sirius − Sales Performance 2010 Conversion Deals Per Rate Month 25 Sirius Facilities GmbH - Providing space for business
Slide 26: Sirius − Sales 2010
Sirius − Sales 2010 Structure Training Quality Reporting Control ✔ Vision/ KPIs Broker Mission 26 Sirius Facilities GmbH - Providing space for business
Slide 27: Sirius − Sales Performance Today
Sirius − Sales Performance Today Conversion Deals Per Rate Month 27 Sirius Facilities GmbH - Providing space for business
Slide 28: What Makes Sirius Unique?
What Makes Sirius Unique? 28 Sirius Facilities GmbH - Providing space for business
Slide 29: Sirius − Regional Structure
Sirius − Regional Structure Marketing Regional Sales Manager ✓ 11 Properties 11 Centre Managers Key Account Manager Regional Sales Manager ✓ 11 Properties National 6 Centre Managers Key Account Manager Regional Sales Manager Key ✓ 8 Properties Account Manager 6 Centre Managers Regional Sales Manager
Slide 30: Sirius − Regional Sales Managers
Sirius − Regional Sales Managers Nike ✓ 510,232 Sqm Manuel ✓ 1,631 Tenants ✓ 192,482 Sqm ✓ 647 Tenants Christian ✓ 244,967 Sqm • Training ✓ 843 Tenants • Coaching • New sales • Retention • Rent roll Doris • P&L ✓ 446,958 Sqm ✓ 708 Tenants 30 Sirius Facilities GmbH - Providing space for business
Slide 31: Key Account Managers
Key Account Managers 2 Key Account Managers ✓ New sales & expansions > 600 Sqm ✓ Build and maintain regional brokers network 1 National Key Account Manager TOP 60 TENANTS ✓ 677,060 Sqm ✓ €42,616,677 rent roll 31 Sirius Facilities GmbH - Providing space for business
Slide 32: Sirius − Telesales Team
Sirius − Telesales Team 5 Team Members 1 Team Leader • Schedule viewings • Detailed information is gathered from all enquiries and saved into the CRM system 32 Sirius Facilities GmbH - Providing space for business
Slide 33: Sirius − Process Flow
Sirius − Process Flow Telesales Centre Marketing Team Manager Every staff member has monthly performance targets GENERATING CONVERTING Gets monitored on a daily basis CONSEQUENTIAL Mystery shopped in order toLEADS LEADS TASKS ensure compliance with policies and objectives ✓ 1,000 leads ✓ Answering ✓
Slide 34: Sirius − 10 Step Sales Process
Sirius − 10 Step Sales Process Enquiry & Scheduling Welcome Viewing & Relationship Telesales Building Presentation & Guided Tour Final Discussion & Recommen- Centre dation ‘Quick Manager Quote’ & Sales Closure Follow Up 34 Sirius Facilities GmbH - Providing space for business
Slide 35: Sirius − Sales Metric
Sirius − Sales Metric Enquiries 95 % at least of all enquiries should be personally answered (Contact Ratio) Viewings 70 % at least should be appointed to our sites (Appointment Ratio) 60 % at least should actually show up for the viewing (Viewing Ratio) Letting 25 % at least of all viewings should
Slide 36: Sirius − Telesales Metric
Sirius − Telesales Metric 2016 ~ 58 % Enquiries Enquiries to VIEWING to VIEWING HELD DEALS SCHEDULED to Enquiries 2016 ~ 73% 2016 ~ 12 % 36 Sirius Facilities GmbH - Providing space for business
Slide 37: Sirius − Telesales Performance
Sirius − Telesales Performance Incoming Calls Per Month Outgoing Calls Per Month Total Calls Per Year ✓ Answering all enquiries within 20 working minutes ✓ Up to 10 follow up activities for 1 lead ✓ Using phone calls, SMS and e-mail 37 Sirius Facilities GmbH - Providing space for business
Slide 38: Sirius − Mystery Shopping
Sirius − Mystery Shopping Sales Process • Evaluate adherence to sales process Enquiries And Viewings • Ensure a consistent approach to handling enquires and viewings Sales Performance Increase • Performance increases naturally, if employees know they are being monitored Conversion Rate • Increase ou
Slide 39: Sirius − Mystery Shopping Minimum Standards
Sirius − Mystery Shopping Minimum Standards 39 Sirius Facilities GmbH - Providing space for business
Slide 40: In Addition − Relationship With Brokers
In Addition − Relationship With Brokers Broker framework contracts 40 Sirius Facilities GmbH - Providing space for business
Slide 41: Sirius − On Site Service
Sirius − On Site Service 31 Operations Managers ✓ Manage needs of customers ✓ Repair & maintenance ✓ Provider relations ✓ Service charges 41 Sirius Facilities GmbH - Providing space for business
Slide 42: In Summary
In Summary ✓ Quality and Quantity of input determines the output ✓ Largest Industry ✓ Sales Process Sales Force ✓ Mystery Shopping ✓ 31 Centre Managers ✓ Managed through KPIs ✓ Everything Inhouse ✓ Monitored daily ✓ 3,829 Tenants ✓ Sirius Training Academy ✓ Incentives with Sales Commission 42 Sirius
Slide 43: Service Charge
Diarmuid Kelly Finance Director Service Charge Sirius Facilities GmbH - Providing space for business
Slide 44: Service Charge Improvement
Service Charge Improvement • Since 2010 Sirius has built a highly specialised in-house team that has delivered tangible results • Irrecoverable service charge costs have decreased by 53% over 6 years which equates to a €5.8m annual benefit March 2010 March 2016 Change Service Charge Income (€m) 24.8
Slide 45: What are Service Charge Costs?
What are Service Charge Costs? Service charge costs include all costs directly related to the ongoing running of our properties – 27 cost positions Facility Running Property Utilities management costs management • Sewage water • Garden care • Land tax • Fresh water • Technical • Insurance • Heating
Slide 46: How Does Sirius Increase Recovery?
How Does Sirius Increase Recovery? • Market practice is to recover in line with occupancy • Sirius recovers in excess of occupancy Transparency Cost Control Sirius Customer Increase Measure & Recovery Prepayments Allocate Satisfaction Understanding 46 Sirius Facilities GmbH - Providing space for bus
Slide 47: Recovery in Action
Recovery in Action Cost Control • Scope of services • Bulk buying power • On-site management Measurement & Allocation • Installation of more than 11,000 meters to accurately measure consumption since 2010 • Inventory lists of technical equipment created for all sites to drive cost allocation 47 Siri
Slide 48: Recovery in Action
Recovery in Action Increase Prepayments • Prepayments as a percentage of service charge costs have increased from 60% to 89% 2010 2011 2012 2013 2014 2015 2016 Prepayments (€m) 19.3 25.9 27.7 30.9 31.5 34.5 37.0 Service charge costs (€m) 32.2 33.7 36.0 39.3 38.6 39.2 41.8 Prepayment coverage 60% 77%
Slide 49: Service Charge – The Future
Service Charge – The Future • 87.8% recovery of costs as at March 2016 • Annual benefit to Sirius of €5.8m per year • Over time we will continue to implement and benefit from our recovery strategies • Further improvements to come from occupancy and implementation of recovery strategies – every 1% in
Slide 50: Growth Strategy
Andrew Coombs Group CEO Growth Strategy Sirius Facilities GmbH - Providing space for business
Slide 51: Sirius Growth Strategy
Sirius Growth Strategy • The portfolio has doubled in the last three years and is now valued at c.€800 million • Platform engineered to manage €1.2 billion of German real estate • The business benefits from increased scale – gross to net ratios continue to improve as we move closer to the €1.2 billi
Slide 52: Sirius Growth Strategy
Sirius Growth Strategy Organic Target 40% ROI Mature assets into Recycling opportunistic acquisitions Assets with stable Acquisitions income & value add potential Low-risk exposure to Joint Venture large projects 52 Sirius Facilities GmbH - Providing space for business
Slide 53: Organic Growth
Organic Growth ACHIEVED TO DATE RENT INVESTMENT RATE SQM INVEST PER SQM € IMPROVEMENT OCCUPANCY € € € COMPLETED 139,900 10,823,356 77 7,627,219 5.82 78% • Programme continues to deliver good returns • 45,000 sqm of sub-optimal space identified for the development programme expected to add a further
Slide 54: Recycling – Mature To Opportunistic
Recycling – Mature To Opportunistic Sales • Sale of mature assets and non-core assets (Munich, Dusseldorf, Merseburg) at blended 10% premium to book value • Sale of land (Colln Parc land) at 81% premium to book value • Total proceeds of €103m Previous opportunistic acquisitions Date of Profit since
Slide 55: Acquisitions
Acquisitions Owned for more than 1 year Capex Since Acquisition to Occupancy Market Value Annualised NOI Site Sep 2016 Increase Increase Increase € % % % Mahlsdorf 524,163 5% 16% 19% Potsdam 235,413 11% 17% 11% Bonn II 78,510 17% 108% 99% Aachen I 352,337 12% 18% 17% Ludwigsburg 331,282 6% 28% 25% W
Slide 56: Joint Venture
Joint Venture • A strategic partnership • Specifically for larger opportunities – typically over €50 million • Sirius would be a minority partner • Sirius Facilities GmbH would be the asset manager, thereby attracting management fees • Targeting larger transactions with cash-on-cash returns of 20%+
Slide 57: In Conclusion
In Conclusion • The platform can sustain significant growth from here • We will continue to recycle mature assets... • ...and to invest in sites with investment management opportunities • We will also consider joint ventures as a low risk way of gaining exposure to larger assets 57 Sirius Facilities
Slide 58: Munich Rupert-Mayer Strasse Business Park
Munich Rupert-Mayer Strasse Business Park Sirius Facilities GmbH - Providing space for business
Slide 59: Acquisition – July 2008
Acquisition – July 2008 • Owner occupied by Siemens • Leaseback of 100% of space to Siemens • Located in Munich • 72k SQM of office & warehouse space • Total purchase price - €57.5m • Net yield 7.4% 59 Sirius Facilities GmbH - Providing space for business
Slide 60: Asset Transformation – Change of Tenant Mix
Asset Transformation – Change of Tenant Mix Tenant Mix - At Acquisition At Exit • Replaced single tenant OTHER ASM SMEs 32% 34% Siemens • Secured core anchor tenants 100% on conventional long term contracts SMART BECKMAN SPACE 11% • Total of 109 tenants 13% UNIFY 10% 60 Sirius Facilities GmbH - Prov
Slide 61: Asset Transformation – Income
Asset Transformation – Income TOTAL INCOME 6.00 Post Acquisition Replace and Reposition Grow & Recycle 5.80 ▪ Siemens Move Out over 4 year period 5.60 ▪ Anchor Tenants Move Ins & Expansions: ASM, Beckmann, Unify ▪ Average rate €8.25 5.40 ▪ Occupancy 90% ▪ Investment in vacant space – creation of SMS
Slide 62: Developing Sub-Optimal Space
Developing Sub-Optimal Space Before SmartSpace Office After Total Sqm 1,561 Investment €101k Annual Rent €170k SmartSpace Conferencing SmartSpace Storage - Basement Total Sqm 1,634 Total Sqm 616 Investment €108k Investment €70k Annual Rent €300k Annual Rent €60k 62 Sirius Facilities GmbH - Providing
Slide 63: Disposal
Disposal • Increased average rate from €5.92 to €8.28 VALUATION 90 85 Notarised • Improved service charge 80 for sale at €85m recovery by €600k 75 70 €m 65 • Notarised for sale at 60 75% increase in value from €85m, 9% premium to Sep 55 low point in 2012 16 book value 50 49% premium to acq costs 45
Slide 64: Crystallising Profit
Crystallising Profit • Replaced single tenant with multiple tenants on higher rents • Invested into sub-optimal space to create higher yielding products to drive income and value • 30% increase in Net Operating Income • Successfully re-positioned asset and sold at premium to book value • Management
Slide 65: Ludwigsburg Business Park
Ludwigsburg Business Park Sirius Facilities GmbH - Providing space for business
Slide 66: Ludwigsburg – Acquisition Rationale
Ludwigsburg – Acquisition Rationale Opportunistic • Purchase in region around Stuttgart (June 2015) • Operational synergies • Space to develop • High tenant demand • Purchased at a discount to market value 66 Sirius Facilities GmbH - Providing space for business
Slide 67: Ludwigsburg
Ludwigsburg 67 Sirius Facilities GmbH - Providing space for business
Slide 68: Ludwigsburg – Investment Case
Ludwigsburg – Investment Case OPPORTUNITY • 28k Sqm of Storage, Production & Office Space • Located in Ludwigsburg (pop. 90k), 12km north of Stuttgart • Total purchase price: €7.4m • Net yield 10.3%, €266/Sqm 68 Sirius Facilities GmbH - Providing space for business
Slide 69: Ludwigsburg – Asset Integration/Transformation
Ludwigsburg – Asset Integration/Transformation KPIs AT ACQUISITION Value: €7.4m SC Irrecs: €(0.20m) Occupancy: 76% NOI: €0.77m Rent Roll: €0.97m Rate/Sqm: €3.96 06/2015 09/2015 12/2015 NOTARIZATION INTEGRATION • Sales & marketing plan COMPLETION • CAPEX investment • Services integration plan • Brand
Slide 70: EXAMPLE – Before Investment
EXAMPLE – Before Investment 70 Sirius Facilities GmbH - Providing space for business
Slide 71: EXAMPLE – After Investment
EXAMPLE – After Investment 71 Sirius Facilities GmbH - Providing space for business
Slide 72: EXAMPLE – Investment Details
EXAMPLE – Investment Details Space 755 Sqm Sirius branded Product SmSp offices Investment €285k, €377/Sqm Finished Conversion 30/11/2016 Forecasted €58k p.a. Rental Improvement at 80% occupancy Actual Achieved €28k p.a. Rent Roll 03/17 at 41% occupancy ROI 20% 72 Sirius Facilities GmbH - Providing s
Slide 73: Ludwigsburg – Lead Flow (As at Mar 31 2017)
Ludwigsburg – Lead Flow (As at Mar 31 2017) converted into 73 Sirius Facilities GmbH - Providing space for business
Slide 74: Ludwigsburg – Asset Management Summary
Ludwigsburg – Asset Management Summary June 2015 March 2017 Rent Roll €0.97m €1.21m + €0.24m Rate/Sqm €3.96 €4.64 + €0.68 Asset Value €7.4m €9.95m + €2.55m Occupancy 76% 77.1 % + 1.1 % 74 Sirius Facilities GmbH - Providing space for business
Slide 75: Ludwigsburg – Asset Integration/Transformation
Ludwigsburg – Asset Integration/Transformation KPIS AT ACQUISITION KPIS AFTER 3 YEARS Value: €7.4m Value: €15.8m + €8.4m Occupancy: 76% Occupancy: 97% + 22% Rent Roll: €0.97m Rent Roll: €1.57m + €0.60m SC Irrecs: €(0.20m) SC Irrecs:€(0.05m) + €0.13m NOI: €0.77m NOI: €1.52 m + €0.75m Rate/Sqm: €3.96
Slide 76: Aachen Business Park
Aachen Business Park Sirius Facilities GmbH - Providing space for business
Slide 77: Aachen Region Maas/Rhein
Aachen Region Maas/Rhein 77 Sirius Facilities GmbH - Providing space for business
Slide 78: Aachen
Aachen 78 Sirius Facilities GmbH - Providing space for business
Slide 79: Aachen
Aachen 79 Sirius Facilities GmbH - Providing space for business
Slide 80: Aachen – Acquisition Rationale
Aachen – Acquisition Rationale VALUE ADD Aachen ✓ Location ✓ 24k Sqm of Office, Production & Storage space ✓ Good building conditions ✓ High tenant demand ✓ Space to develop (25%) ✓ Great availability of parking ✓ Purchased at a 14% discount to market value (€18.7m) ✓ Net yield of 8.3% 80 Sirius Fac
Slide 81: Aachen – Asset Integration/Transformation
Aachen – Asset Integration/Transformation KPIs AT ACQUISITION Value: €18.7m SC Irrecs: € (0.20m) Occupancy: 75% NOI: €1.54m Rent Roll: €1.75m Rate/Sqm: €7.95 01/2015 03/2015 07/2015 NOTARIZATION INTEGRATION ✓ Sales & marketing plan COMPLETION ✓ CAPEX investment ✓ Services integration plan ✓ Branding
Slide 82: EXAMPLE – Before Investment
EXAMPLE – Before Investment 82 Sirius Facilities GmbH - Providing space for business
Slide 83: EXAMPLE – After Investment
EXAMPLE – After Investment 83 Sirius Facilities GmbH - Providing space for business
Slide 84: EXAMPLE – Investment Details
EXAMPLE – Investment Details Space 843 Sqm 24 Sirius branded Product SmSp offices Investment €104k, €123/Sqm Finished building Dec 2015 Forecasted €73k p.a. (March´18) rental improvement at 80% occupancy Actual achieved €65k p.a. rent roll 3/17 at 71% occupancy, 17 out of 24 offices rented ROI 62.5
Slide 85: Aachen – Lead Flow (as at 31 Mar 2017)
Aachen – Lead Flow (as at 31 Mar 2017) converted 14 % into 85 Sirius Facilities GmbH - Providing space for business
Slide 86: Aachen – Asset Management Summary
Aachen – Asset Management Summary At acquisition Today 03/2015 03/2017 Rent Roll €1.75m €2.1m + €0.35m Rate/Sqm €7.95 €8.14 + €0.19 Asset Value €18.7m €22.4m + €3.7m Occupancy 75% 89 % + 14 % 86 Sirius Facilities GmbH - Providing space for business
Slide 87: Aachen – Further Upside Potential
Aachen – Further Upside Potential KPIS AT ACQUISITION KPIS AFTER 3 YEARS Value: €18.7m Value: €27m + €8.3m Occupancy: 75% Occupancy: 96% + 21% Rent Roll: €1.75m Rent Roll: €2.27m + €0.52m SC Irrecs: €(0.20m) SC Irrecs: €(0.12m) + €0.08m NOI: €1.54m NOI: €2.15 m + €0.60m Rate/Sqm: €7.95 Rate/Sqm: €8.
Slide 88: Q&A Questions?
Q&A Questions? Sirius Facilities GmbH - Providing space for business