Sirius Real Estate expected like-for-like rent roll growth of more than 5% for the 10th consecutive year, with similar levels of growth reported across its UK and Germany operations.
The group, which operates branded business and industrial parks and which has a listing on the JSE and in London, said in a trading update yesterday that cash collection for the year to March 31, 2024 had remained robust at above 98%, on a rolling 12-month basis.
“The group expects to deliver full-year results in line with market expectations,” its directors said.
“We continue to see attractive acquisition opportunities that meet our acquisitions criteria in the UK and Germany, alongside opportunities to sell mature or non-core assets with the aim to do so at or above book value,” directors said.
The overall rent roll increased by 8.2% for the year, reflecting an ability to improve both rates and occupancy across the group in spite of the tougher, wider macroeconomic conditions.
In Germany, rent roll benefited from greater occupancy as more effort went into selling vacant space and improve tenant retention.
“With inflation now much lower than last year, we again demonstrated the strength of our in-house asset-management platform to manage product-mix and occupancy carefully alongside rates to generate the best overall returns from our space,” Sirius’s directors said.
They said some yield expansion in year-end property valuations for Germany was expected, but a strong operational performance would translate into an increase in value of the German portfolio.
In the UK, above-inflation rate increases in rent were achieved, although at slightly lower levels, a focus on occupancy delivered an improvement. Like for like rent-roll growth in both countries ended the year at broadly similar levels, and in the UK recent acquisitions had a positive effect on the absolute rent roll.
“We expect to see valuation yields continue to expand in the UK, albeit our continued operational focus on driving rental income will offset much of the effect of yield changes on the portfolio valuation. Overall, we expect to announce a positive valuation movement at group-level at the year end,” the directors said.
In November, an oversubscribed equity fundraising of £165 million (R3.8 billion) provided funds to execute on a pipeline of acquisition opportunities.
In the second half of the financial year, assets of about £150m were notarised or acquired, with £96m of these in the UK. Four acquisitions were also made in Germany totalling £55m.
Disposals amounted to £51m. All sales were completed at or above book value and focused mainly on mature assets in Germany, according to the directors.
The balance sheet remained strong with free cash reserves of about £220m as at March 31, 2024 and no significant debt maturities until June, 2026.
“While the group is mindful of the expected higher interest expense arising from future re-financings, it is also confident that leverage will continue to have a positive overall effect on shareholder returns, given the relatively high yielding nature of the assets and the growth in the rent roll which will help to offset future increases in financing costs.”
CEO Andrew Coombs said: “Sirius has delivered another 12 months of strong operational performance, increasing rates and occupancy, and quickly executing on our significant pipeline of acquisitions in Germany and the UK.”
He said raising capital at that time proved opportune, allowing them to acquire high-quality real estate on attractive financial terms.
“Our acquisition pipeline remains strong and we believe there will continue to be opportunities to deploy our capital on an accretive basis in the coming year,” he said. The annual results are expected on June 3.
BUSINESS REPORT