Sirius Real Estate Limited plans to raise £150 million through a non-pre-emptive share placing. The funds will support its acquisition strategy in Germany and the UK.
Capital Raising Details
Sirius Real Estate, a leading owner of business parks and industrial complexes, announced the capital raising on July 10, 2024. The company intends to issue new ordinary shares at 94 pence each. This offer price aligns with Sirius’ adjusted NAV per share as of March 31, 2024.
Placing and Offer Structure
The capital raising will include:
- Institutional Placing: An accelerated bookbuild process targeting new and existing eligible investors.
- South Africa Placing: A specific placing for qualifying investors in South Africa.
- Retail Offer: Managed by PrimaryBid Limited, this will raise up to £2.5 million, allowing retail investors in the UK to participate.
The company’s directors and PDMRs also plan to participate, contributing approximately £125,000.
Key Dates
| Event | Date |
|---|---|
| Announcement of Capital Raising | July 10, 2024 |
| Results of Capital Raising | July 11, 2024 |
| Publication of Prospectus | July 11, 2024 |
| Launch of PrimaryBid Offer | July 11, 2024 |
| Results of PrimaryBid Offer | July 12, 2024 |
| Admission and Dealings Commence | July 16, 2024 |
| Despatch of Share Certificates | July 30, 2024 |
Background and Strategy
Track Record of M&A
Sirius has a strong track record in mergers and acquisitions. Between December 2014 and March 2024, the company acquired 58 assets worth €879.1 million. These acquisitions had a blended net initial yield of 6.3%, an aggregate rent roll of €68.9 million, and average occupancy levels of 71.5%.
As of March 31, 2024, these assets were valued at €1,280.9 million, reflecting a 46% valuation uplift. Sirius also improved the net yield to 7.3%, increased rent rolls by 49%, and enhanced occupancy by 13.2%.
During the same period, Sirius disposed of 14 core assets for €357.3 million, having originally paid €213.5 million. This represents a 67% uplift on disposal.
Recent Acquisitions
In November 2023, Sirius raised £147 million to fund acquisitions. By March 31, 2024, the company had invested these proceeds in assets in Germany and the UK. These acquisitions included:
- Germany: Cologne, Göppingen, and Klipphausen, totaling €53.6 million, with average yields of 9.4% (net) and 10.2% (gross).
- UK: Barnsley & Liverpool, North London Portfolio, and Vantage Point Business Park, totaling £90.0 million, with average yields of 9.1% (net) and 9.6% (gross).
In June 2024, Sirius acquired two more UK assets in Banbury and Wembley for just over £31 million, with yields of 9.0% (net) and 9.3% (gross).
Acquisition Criteria
Sirius targets mixed-use properties, primarily light industrial units, business parks, or office buildings. The focus is on locations with high commercial and industrial activity and good transport links. German assets typically have values between €10 million and €50 million, with higher vacancy rates and under-rented opportunities. UK assets are usually multi-let industrial, studios, and workspaces valued between £5 million and £30 million.
Pipeline and Market Conditions
Acquisition Pipeline
Sirius has identified an indicative near-term pipeline of acquisitions worth approximately £58.1 million. This includes:
- Germany: Two assets requiring approximately €32.9 million.
- UK: Three assets requiring approximately £30.2 million.
The pipeline assets have yields ranging from 0.5% to 9.4% and occupancy rates between 21% and 100%. The vendors are a mix of private sellers, private equity, and corporate sellers.
Sirius has also identified an additional high-quality pipeline of over €100 million for future acquisitions in Germany and the UK.
Market Conditions
The German real estate market is characterized by a resilient economy, a strong SME market, and high replacement costs for light-industrial buildings. In the UK, the market conditions are favorable, with strong rental growth potential, government regional investment commitment, and a structural undersupply of multi-let assets.
Use of Proceeds
Sirius intends to use the net proceeds of the capital raising to execute its acquisition pipeline. The allocation of funds will depend on factors such as due diligence, debt finance availability, and agreement completion. The company will retain the proceeds on its balance sheet until they are deployed in acquisitions.
Financial Benefits
The capital raising will support Sirius’ long-term goal of growing funds from operations to €150 million per annum. It is expected to be accretive to net asset value in the medium term. Sirius aims to maintain a net loan-to-value below its 40% target level and continue its progressive dividend policy.
Current Trading and Outlook
Sirius is trading in line with management expectations since March 31, 2024. The company continues to explore growth opportunities in both Germany and the UK, including recycling mature assets and reinvesting in value-add opportunities.
CEO Commentary
Andrew Coombs, CEO of Sirius Real Estate, commented on the capital raising: “Having successfully invested the €165 million of capital we raised last November into well-timed acquisitions, we have continued to build a pipeline of similar opportunities. The proceeds of this additional capital raise will allow us to progress these transactions and expand our portfolio at an opportune time in the market cycle.”
Conclusion
Sirius Real Estate’s £150 million capital raising aims to support its ongoing acquisition strategy in Germany and the UK. With a strong track record and favorable market conditions, the company is well-positioned to continue its growth trajectory.