Sirius Real Estate Limited · LSE:SRE
Sirius Real Estate — FY2018 Earnings Presentation
48 slides from Sirius Real Estate's earnings presentation, Mar 31, 2018
Slide 1: Year End Presentation 31 March 2018
1 Sirius Real Estate Ltd Year End Presentation 31 March 2018
Slide 2: Sirius Assets
Year End Results – March 2018 2 Industrial Business Parks What We Do Sirius Assets We provide flexible and conventional workspace to companies across Germany
Slide 3: Highlights
Year End Results – March 2018 3 Highlights Acquisition & asset recycling progressing well » Completed the disposal of €103.0m of mature assets with limited further upside » Completed €25m equity raise in Aug 2017 & €40m equity raise in Mar 2018 17.0% » Completed on €163.7m* of acquisitions up to Mar
Slide 4: Financials – Income Statement
Year End Results – March 2018 4 Financials – Income Statement As at Mar 18 €m As at Mar 17 €m Movement €m Rental income 71.1 67.9 3.2 Service charge irrecoverable costs (5.7) (5.7) - Non-recoverable maintenance (1.9) (1.7) (0.2) Net Operating Income 63.5 60.5 3.0 Corporate costs and overheads (17.6)
Slide 5: Earnings Per Share
Year End Results – March 2018 5 Earnings Per Share cps 10 9 8 7 (1.92) 6 5 8.89 (0.82) 4 (0.26) (0.90) 6.94 3 4.20 3.94 2 3.04 3.16 1 0 Basic EPS NOI Overheads Interest & Funds from Amortisation of Adjusted Adjusting items EPRA Earnings Dividend Per Current Tax Operations Facility Fees & Earnings af
Slide 6: Financials – Statement of Financial Position
Year End Results – March 2018 6 Financials – Statement of Financial Position As at Mar 2018 As at Mar 2017 Movement €m €m €m Assets Investment properties (including assets held for sale) 931.2 823.3 107.9 Prepayments for investment properties 35.6 7.0 28.6 Plant and equipment 3.1 2.6 0.5 Goodwill 3.
Slide 7: Adjusted NAV per share (c)
Year End Results – March 2018 7 NAV Growth March 2018 80 Adjusted NAV per share (c) 70 6.40 3.71 (2.71) (1.53) 60 (0.51) 50 40 65.71 64.18 30 58.82 20 10 0 Adjusted NAV at Equity raise, share Adjusted profit Surplus on Scrip & Cash Adjusted NAV per EPRA EPRA Net Assets per 31-Mar-17 awards and after
Slide 8: Completed Acquisitions
Year End Results – March 2018 8 Completed Acquisitions Total Annualised Annualised €163.7m Site Date Investment Cost psm Acquisition Rental Acquisition Acquisition EPRA Net Total Cost of 13 Acquisitions Acquired Occupancy Initial Yield €m Income €m NOI €m Frankfurt Apr-17 4.5 1,107 0.2 0.0 28% 1.0%
Slide 9: Completed Acquisitions I - Pictures
Year End Results – March 2018 9 Completed Acquisitions I - Pictures Frankfurt I Cologne Grasbrunn Mahlsdorf II Neu-Isenburg Neuss Frankfurt II
Slide 10: Completed Acquisitions II - Pictures
Year End Results – March 2018 10 Completed Acquisitions II - Pictures Hamburg Krefeld III Schenefeld Frickenhausen Saarbrücken Düsseldorf II
Slide 11: Acquisitions Completed & Owned >1yr – Returns Achieved
Year End Results – March 2018 11 Acquisitions Completed & Owned >1yr – Returns Achieved Acquisition Mar-18 16 Total Cost €228.8m €53.6m Valuation €282.4m 23% Assets Acquired and Owned for > 1 year €4.4m Rent Roll €21.8m Rent Roll €26.2m 20% 2.3yrs Weighted Average Time Asset Owned Occupancy 76% Occu
Slide 12: Organic Growth – Rental Income Analysis
Year End Results – March 2018 12 Organic Growth – Rental Income Analysis Site Mar-18 Mar-17 Change Rent Roll * €79.5m €71.0m 12.0% Rent Roll (Disposals) -€7.1m - - Rent Roll (Acquisitions) €11.6m - - Rent Roll (LFL) €67.9m €64.0m 6.2% Occupancy (LFL) 82.5% 79.8% 2.7% Occupancy * 79.2% 80.5% (1.3%) R
Slide 13: Organic Growth – Rental Movement Analysis
Year End Results – March 2018 13 Organic Growth – Rental Movement Analysis 90 €m 85 -7.1 11.6 80 75 1.6 7.7 70 -9.1 65 3.8 79.5 71.0 60 55 50 31-Mar-17 Move Outs Capex Move-Ins Other Move-Ins Uplifts on Existing Acquisitions Disposal 31-Mar-18 Tenants
Slide 14: Like-for-Like Valuation Movement
Year End Results – March 2018 14 Like-for-Like Valuation Movement V Core Portfolio Valuation Increases a 850 CORE PORTFOLIO Book Value - Mar 18 - €m l 800 u As at 31 March 2017: Core 784.4 ( 750 28.3 a m 700 55.6 Gross Yield = 8.7% Acquisitions 127.4 € t 650 Non-Core 19.4 ) Net Yield = 7.8% 600 784.
Slide 15: Value-Add Portfolio Split
Year End Results – March 2018 15 Value-Add Portfolio Split Book Value Rent Roll Capital Value Rate psm Vacant Space Mar-17 * NOI €m Gross Yield Net Yield Occupancy €m €m psm € € sqm Core Value-Add 434.9 38.4 33.2 8.8% 7.6% 568 78.9% 5.49 155,390 Core Mature 265.6 22.6 21.4 8.5% 8.0% 638 93.3% 5.03 2
Slide 16: Value-Add – Vacant Space Analysis
Year End Results – March 2018 16 Value-Add – Vacant Space Analysis Mar-18 Ending Position - Including Saarbrücken & Düsseldorf II Total Space - sqm 1,531,774 Occupancy * 79% Occupied Space - sqm 1,213,565 Vacant Space - sqm 318,209 Mar-18 Sub Optimal Space % of Total Space Sqm Capex ERV (post invest
Slide 17: Original Capex Programme
Year End Results – March 2018 17 Original Capex Programme Completed in Period 28.0k sqm €4.1m €2.2m Vacant Space Refurbished in Period Invested in Period Annualised Rental Income Increase Budget Achieved to date Capex Investment Programme Progress Investment Invest psm Rent Investment Invest psm Ren
Slide 18: Acquisition Capex Programme
Year End Results – March 2018 18 Acquisition Capex Programme * 121k sqm Total Vacant Suboptimal Budgeted Budgeted Rent Budgeted Site Vacancy (for Capex Investment Sqm roll Increase €m Occupancy Plan) sqm €m Sub-Optimal Space to be Refurbished Markgröningen 19,091 13,162 0.8 0.6 90% Krefeld 730 208 0
Slide 19: Asset Recycling
Year End Results – March 2018 19 Asset Recycling Diposals Annualised Annualised Date Total Proceeds Disposal EPRA Net Initial Site Price psm Disposal Rental Disposal NOI Disposed €m Occupancy Yield * Income €m €m Munich RMS May-17 85.0 1,184 5.4 5.3 88% 5.9% Düsseldorf Jun-17 11.0 663 0.9 0.8 96% 7.
Slide 20: Investment from Equity Raises
Year End Results – March 2018 20 Investment from Equity Raises » Investment of €15m (Mar-17) & €25m (Aug-17) placements - COMPLETED Acquisitions Annualised Annualised Date Total Acquisition EPRA Net Initial Site Cost psm Acquisition Rental Acquisition NOI Acquired Investment €m Occupancy Yield Incom
Slide 21: Potential of Acquisitions
Year End Results – March 2018 21 Potential of Acquisitions Annualised Business Plan 3 yr Improvement NOI Site Acquisition NOI €m Potential NOI €m €m Cologne 1.8 2.0 0.1 Grasbrunn (0.2) 1.7 1.9 Mahlsdorf II 0.4 0.7 0.3 Neuss 0.4 1.6 1.3 Neu-Isenburg 0.3 1.0 0.6 Frankfurt 0.0 0.5 0.4 Frankfurt II 0.4
Slide 22: Banking
Year End Results – March 2018 22 Banking INCOME/CASH FLOWS AS AT 31 MARCH 2018 Portfolio Loan Rental Cash Book Value * Amount Income * NOI * Annual Interest Scheduled Annual Amortisation Contribution Loan Expiry Date (after debt €m €m €m €m €m % € % service) €m Deutsche Genossenschafts-Hypothekenban
Slide 23: Banking
Year End Results – March 2018 23 Banking Bank borrowings Mar-18 €373.1m Mar-17 €348.6m Net LTV* 31.9% 38.0% 5.2 Yrs Gross LTV** 38.6% 42.3% Weighted Average Debt Expiry Weighted average interest rate 2.0% 2.0% NOI interest cover 9.5x 8.5x Weighted average debt expiry 5.2 years 5.8 years Historical G
Slide 24: Conclusion
Year End Results – March 2018 24 Conclusion » Total shareholder return of 17.0% despite loss of income from recycling » Proceeds from disposals & August 17 equity raise fully invested » €120m* of firepower to acquire new assets » Strong organic growth on rental income » Capex programme continuing to
Slide 25: Appendices
Year End Results – March 2018 25 Appendices
Slide 26: Case Study – Mannheim Business Park: Site Plan & Impression
Year End Results – March 2018 26 Case Study 1 – Mannheim Business Park Site Plan & Impression
Slide 27: Case Study – Mannheim Business Park: Property Overview
Year End Results – March 2018 27 Case Study 1 – Mannheim Business Park Property Overview » Traditional industrial business park totalling 68,722sqm acquired in 2007 and originally built for an owner occupier » Site currently financed by seven-year fixed rate facility at 1.66% interest rate until mat
Slide 28: Case Study – Mannheim: Financials & Returns
Year End Results – March 2018 28 Case Study 1 – Mannheim Business Park Financials & Returns At Actual Total Improvement at Acquired July 2007 Acquisition Mar-18 Mar-18 Total Cost/Valuation € 14.3m € 47.7m € 33.4m Total sqm 68,772 68,772 - Value psm € 203 € 694 € 491 Invested Equity € 7.1m - - Annual
Slide 29: Case Study – Mannheim Business Park: Before After
Year End Results – March 2018 29 Case Study 1 – Mannheim Business Park Before After
Slide 30: Case Study – Potsdam Business Park: Site Plan & Impression
Year End Results – March 2018 Case Study 2 – Potsdam Business Park Site Plan & Impression
Slide 31: Case Study – Potsdam Business Park: Property Overview
Year End Results – March 2018 31 Case Study 2 – Potsdam Business Park Property Overview » Modern post-unification business park with 35,719sqm acquired on attractive net initial yield with value-add potential due to significant structural vacancy and expected major tenant move-out » Financed by seve
Slide 32: Case Study – Potsdam: Financials & 3 Year Returns
Year End Results – March 2018 32 Case Study 2 – Potsdam Business Park Financials & 3 Year Returns At Actual Total Improvement at Acquired December 2014 Acquisition Mar-18 Mar-18 3 Years to Mar-18 Return Analysis €m Total Cost/Valuation € 29.4m € 38.0m € 8.6m Retained Profit ** 6.7 Total SQM 35,931 3
Slide 33: Case Study – Potsdam: Valuation Analysis
Year End Results – March 2018 33 Case Study 2 – Potsdam Business Park Valuation Analysis Rental Purchase Price/Valuation Lettable Space sqm Capex €m Gross Yield Income €m €m Acquisition (Occupied) 30,497 2.4 0 27.8 8.5% Development of Sub-Optimal Space 3,360 0.33 0.5 3.9 8.5% (2,264) (0.25) (2.9) 8.
Slide 34: Case Study – Potsdam Business Park: Before After
Year End Results – March 2018 34 Case Study 2 – Potsdam Business Park Before After
Slide 35: Case Study – Wiesbaden: Site Plan & Impression
Year End Results – March 2018 35 Case Study 3 – Wiesbaden Site Plan & Impression
Slide 36: Case Study – Wiesbaden: Property Overview
Year End Results – March 2018 36 Case Study 3 – Wiesbaden Property Overview » Office building of 18,889sqm acquired at attractive net initial yield of 9.1% with only 65% occupancy and two tenants on a WALT of 2.3 years. » Financed by a seven-year fixed rate facility at 1.48% interest rate until matu
Slide 37: Case Study – Wiesbaden: Financials & 3 Year Returns
Year End Results – March 2018 37 Case Study 3 – Wiesbaden Financials & 3 Year Returns At Actual Business Plan Total Expected 3 Yr Return Return Analysis Expected €m 17 months progress to Acquired Nov-16 Acquisition Target to Sept-19 Improvement Retained Profit ** 5.7 Mar-18 Total Cost/Valuation € 17
Slide 38: Case Study – Wiesbaden: Valuation Analysis
Year End Results – March 2018 38 Case Study 3 – Wiesbaden Valuation Analysis Rental Purchase Price/Valuation Lettable Space sqm Capex €m Gross Yield Income €m €m Acquisition (Occupied) 12,657 1.9 0 16.2 11.6% Development of Sub-Optimal Space 3,360 0.7 2.4 6.4 11.6% Other (0.1) 0.7 Yield Shift 10 (3.
Slide 39: Case Study – Wiesbaden: Before After
Year End Results – March 2018 39 Case Study 3 – Wiesbaden Before After
Slide 40: Property Valuations & Book Value as at 31 March 2018
Year End Results – March 2018 40 Property Valuations & Book Value as at 31 March 2018 Capital Value Vacant Space Mar-18 Book Value €m Rent Roll €m NOI €m Gross Yield Net Yield Occupancy Rate psm € psm € sqm Core Assets 911.8 73.5 67.4 8.1% 7.4% 645 84.4% 5.55 203,482 Non-Core Assets * 19.4 2.3 0.8 1
Slide 41: Portfolio at a glance - Mar 18
Year End Results – March 2018 41 Properties Portfolio at a glance - Mar 18 No. Of % of Total Rate psm Annualised Value Mar-18 Occupancy Portfolio Gross Yield Properties Sqm'000 € Rent €m By Rent €m * Frankfurt 12 286 86.7% 5.89 17.6 22% 210.4 8.3% Berlin 6 204 93.6% 5.57 12.7 16% 156.7 8.1% Stuttgar
Slide 42: Total Portfolio Rental Analysis – 31 March 2018
Year End Results – March 2018 42 Properties Total Portfolio Rental Analysis – 31 March 2018 Tenant Split by Revenue 2.6Yrs 4,432 Top 50 Anchor Tenants Portfolio WALT No. Of Tenants 48% 45% SmartSpace SME Tenants 7% Usage Split Other SME Tenants Historical Rental Movement Annual Office CAGR 8% (Ex Ac
Slide 43: Core Portfolio Renewals Analysis to March 2019
Year End Results – March 2018 43 Properties Core Portfolio Renewals Analysis to March 2019 * Core Up for Renewal (Sqm, Income & No. Tenants) 2018/19 € No. Tenants Thousands 300 450 400 250 350 200 300 250 150 200 100 150 100 50 50 0 0 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Ja
Slide 44: Enquiries/Viewings/Sales
Year End Results – March 2018 44 Properties Enquiries/Viewings/Sales 1,395 1,472 1,500 enquiries Average per Month 1,308 1,224 1,208 1,250 1,237 1,214 1,230 1,120 1,112 1,360 Twelve months to Twelve months to 1,032 Mar 17 Mar 18 1,225 1,232 1,000 1,179 1,082 1,105 1,234 1,052 1,065 1,073 1,037 1,014
Slide 45: Smart Space (SmSp) Products
Year End Results – March 2018 45 Properties Smart Space (SmSp) Products Annualised Rental % of Total Annualised Rate per sqm (excl. Smartspace Product Type Total sqm Occupied sqm Occupancy % Income (excl. SmSp Rental Income Service charge) € Service Charge) € First Choice Office 1,275 510 40% 176,00
Slide 46: Vacant Space – Path to 90% Occupancy
Year End Results – March 2018 46 Vacant Space – Path to 90% Occupancy » Dispose of non-core assets & complete 80% of major capex programmes Total Space - sqm 1,531,774 Occupancy 79% Total Space – sqm 1,363,002 Occupancy 90% Occupied Space - sqm 1,213,565 Occupied Space – sqm 1,228,091 Vacant Space -
Slide 47: Acquisitions Completed in Prior Years
Year End Results – March 2018 47 Acquisitions Completed in Prior Years Total Acq. Mar 18 Valuation Acq. Rental Mar 18 Rental Rental Income Acq. Mar 18 Occupancy Capex Since Site Cost €m Valuation €m Increase €m Income €m Income €m Increase €m Occupancy Occupancy Increase Acq. €m Potsdam 29.4 38.0 8.
Slide 48: Acquisitions Completed in Prior Years – Valuation & Rent Roll
Year End Results – March 2018 48 Acquisitions Completed in Prior Years – Valuation & Rent Roll 23% Rent Roll Increase Since Acquisition 9% 3 € Millions 17% 26% 30% 11% 13% 2 27% 56% 2% 2.9 3% 3.0 358% 2.6 2.8 2.3 Rent Roll 2.3 2.3 2.2 2.1 Acquisition 1 1.8 1.8 2.1 1.9 1.8 1.7 Mar-18 9% 1.5 0% 1.5 1.