Sirius Real Estate Ltd Half Year Presentation 2013
Who are we We are a leading provider of branded mixed-use flexible workspace in Germany 2
Financial Highlights Substantial increase in recurring profit before tax to 6.9m (2012: 3.9m) due mainly to: o Total income of 23.6m (2012: 23.9m) despite disposal of non-core properties o Surrender premium of 1.7m received from a tenant for early termination of lease contract o Cost recovery and overheads improved by 0.9m from prior half-year o Interest reduction of 2.4m from pay down of debt through disposals New lettings of 59,674 sqm at a higher average rental rate of 5.08 psm (2012: 55,135 sqm at 5.26 psm)* representing a 4% increase in the annualised contractual rent Annualised rent roll of core portfolio as at Sept 2013 of 38.9m (2012: 38.3m)* Occupancy remained stable at 75% (2012: 75%)* Average portfolio rate psm increased to 4.44 (2012: 4.36 psm)* Adjusted earnings per share up to 2.04c (2012: 0.96c) 1.9% increase in valuation in the period NAV per share has increased despite the dilution from the equity raise 2.04c adjusted earnings per share 6.9m recurring profit before tax 4.44 average rate psm 3 * Restated figures
Disposals & Refinancing Highlights Disposals Disposed of a further 48,175 sqm (79,967 sqm in total) of non-core assets for 16.8m in the period A further 4.9 m of disposals are notarised, to be completed or completed post year end Since disposal program began a total of 34.2m of disposals have been completed at 8.2% discount to DTZ valuation Refinancing Successfully reduced borrowing facility with ABN Amro Bank from 49.2m to 31.3m New 52.0m K-Bonds facility completed in the period Berlinhyp facility of 208m reduced to 149m through K-Bonds, and amortisation of 8m. Extended to Mar 14 with good progress made on a long-term solution Total bank borrowings reduced by 26.1m in period to 260.3m (Mar 13: 286.4m) 39.0m Total completed or notarised disposals 26.1m reduction in total borrowings 31.3m borrowing facility with ABN Amro Bank 4
Lettings Update Occupancy remained stable at 75% (2012: 75%)* New lettings in period of 59,674 sqm at 5.08 psm (Sept 2012: 55,135 sqm at 5.26 psm)* representing a 4% increase in the annualised contractual rent 72,338 sqm of move outs in period at 4.46 psm (Sept 2012: 53,586 sqm at 4.17 psm)* New enquiries per month increased to an average of around 1,100 59,674 sqm let in the period 4% increase in the annualised contractual rent on new lettings 1,100 fresh enquiries per month * Restated Figures 5
Enquiry & Viewing Stats enquiries 1,151 1,018 1,316 1,127 1,084 1,075 998 1,090 1,135 1,115 1,055 enquiries average per month 1,000 500 600 400 200 837 1,120 1,090 995 1,010 1,048 1,036 1,030 965 980 899 894 2011/12 2012/13 732 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept viewings 631 570 542 539 467 537 516 503 507 466 447 385 464 522 493 487 465 475 434 453 403 399 400 2011/12 326 2012/13 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept 12 months to Sept 12 12 months to Sept 13 994 1,074 Increase +8% viewings average per month 12 months to Sept 12 12 months to Sept 13 447 505 Increase +13% 6
New Deals Analysis 130 80 30 new deals 152 131 127 126 116 121 111 111 120 99 128 90 93 115 87 95 90 89 93 89 84 92 2011/12 78 68 2012/13 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept new deals average per month 12 months to Sept 12 12 months to Sept 13 93 116 Increase 25% 7
Renewals Analysis - 2013/14 - H2 79,817 sqm up for renewal 329k annual income up for renewal 655 tenants up for renewal Up for Renewal (Sqm, Income & No. Tenants) H2 2013/14 Thousands 180 160 140 120 100 80 60 40 20 No. Tenants 300 250 200 150 100 50 0 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Sqm 8,681 17,202 7,183 36,926 2,343 7,481 Monthly Income 39,758 55,148 20,818 169,579 13,447 30,167 No. Tenants 39 151 65 273 56 71 0 8
Annual Rent Millions - Core Portfolio Analysis Rental Analysis 26 Assets 38.9m 1,888 2.9 yrs 416 sqm 922k sqm rent roll as at Sept 13 (Sept 12: 38.3m) total number of tenants at Sept 13 average lease length remaining average space let per tenant total core portfolio sqm Core portfolio - Lease Expiry by Annual Rent to 1st Break Clause Sept 13 14 12 10 8 6 12.8 4 7.7 6.9 8.2 2 0 <1 Yr 1-2 Yrs 2-3 Yrs 3-4 Yrs 4-5 Yrs > 5 Yrs 2.6 1.6 9
Disposals 34.2m total completed deals to date 39.0m total completed or notarised deals to date 92% of DTZ valuation to sales price on completed deals Completed Disposals in Period DTZ Value of completed Disposals in Period 16.8m 19.3m Increase/Decrease in Sales Price vs Valuation -13.0% Completed Disposals prior Period DTZ Value of completed Disposals prior Period 17.3m 17.9m Increase/Decrease in Sales Price vs Valuation -3.0% Total Completed Disposals to date DTZ Value of completed disposals to date 34.2m 37.2m Increase/Decrease in Sales Price vs Valuation -8.2% Valuation figures are taken 6 months prior to completion Dusseldorf land notarised for 4.2m with a DTZ value of 5.7m; Cottbus and 2 other land packages also notarised for 674k with a DTZ value of 640k 10
Completed Disposals/Map Disposals Summary Sale Price m Bremen Brinkmann Land 1.1 Munich HMS 6.8 Berlin Wittenau 2.3 Bonn-Siemenstr. Car Park Land (6,100 sqm) 0.6 Bonn Köwi - Reifen.Com 1.5 Bonn Kowi - Remainder of site 2.4 Bonn Köwi - Car Glass 0.9 Troisdorf 1.8 Leinfelden-Echterdingen 5.3 Merseburg McDonalds 1.1 Regensburg 6.4 Rostock II 1.0 Karlsruhe 3.2 TOTAL 34.2m 11
Cost Saving Initiatives Since Mar 10 the cost reduction programme has reduced annualised costs by 8.0 million through: Improved service charge cost recovery ( 3.4m): o o o o Optimisation of facility management and utilities costs Effective metering and allocation of utilities Continued allocation and use of monitoring matrixes for technical facility management costs Improved tenant leases Overhead costs reduction ( 4.6m): o Reduced central overhead costs o Internalisation non-recoverable costs m Mar 10 Mar 14 (forecast) Improvement prepayments 20.3 29.5 9.2 balancing 2.9 1.0 (1.9) costs (34.1) (38.0) (3.9) not recovered 10.9 7.5 3.4 overheads 16.2 11.6 4.6 TOTAL 27.1 19.1 8.0 The Company s non-recoverable cost base is now 8.0m lower than in Mar 10 12
Case Study - Gartenfeld Details Acquisition Sep-13 Rental Income Analysis Acquisition Sep-13 Purchase Price/Valuation 5,670,000 15,980,000 Sqm Occupied: Total SqM 29,686 30,929 Original Tenants 11,544 1,624 Occupancy 39% 79% New Tenants 22,808 Rate per SqM 3.17 5.18 TOTAL 11,544 24,432 Capex 0 4,895,665 Rental Income: Rental Income 439,328 1,520,043 Original Tenants 439,328 63,446 Irrecoverable SC & Maintenance - 460,000-209,898 New Tenants 1,456,596 NOI - 20,672 1,310,145 TOTAL 439,328 1,520,043 Space Split SqM Rental Income Rate Anchor Tenants 2,921 210,446 6.00 Conventional Leases 18,304 983,009 4.48 Products 3,208 326,588 8.48 Vacant - Products 381 Vacant 6,116 TOTAL 30,929 1,520,043 5.18 Products SqM Investment Cost per SqM ERV (Incl SC) Rate per SqM ROI (Incl SC) Smartspace Office 1,650 257,633 156 226,492 11.44 88% Smartspace Workbox 1,022 368,632 361 113,167 9.23 31% Conferencing 917 115,783 126 130,000 11.82 112% TOTAL 3,589 742,047 207 469,659 10.91 63% 13
Case Study Gartenfeld Pictures Smartspace Office & Conferencing Workbox Newbuild Branding/lb 2 Before After 14
Case Study - Maintal Details Acquisition Sep-13 Rental Income Analysis Acquisition Sep-13 Purchase Price/Valuation 18,762,000 22,270,000 Sqm Occupied: Total SqM 34,910 38,018 Original Tenants 24,772 18,232 Occupancy 71% 87% New Tenants 14,976 Rate per SqM 5.21 5.09 TOTAL 24,772 33,208 Capex 0 5,068,830 Rental Income: Rental Income 1,549,524 2,029,739 Original Tenants 1,549,524 1,272,149 Irrecoverable SC & Maintenance - 166,151-145,892 New Tenants 757,589 NOI 1,383,373 1,883,847 TOTAL 1,549,524 2,029,739 Space Split SqM Rental Income Rate Anchor Tenants 18,232 1,272,149 5.81 Conventional Leases 13,222 506,826 3.19 New Builds 1,754 250,763 11.91 Vacant - New Builds 1,354 Vacant 3,456 TOTAL 38,018 2,029,739 5.09 New Builds SqM Investment Cost per SqM ERV Rate per SqM ROI Carglass 421 526,397 1,250 61,800 12.23 12% BMW Showroom 1,333 1,343,498 1,008 173,580 10.85 13% Zk Glasbau 1,354 920,255 680 105,620 6.50 11% TOTAL 3,108 2,790,149 898 341,000 9.14 12% 15
Case Study Maintal Pictures Before Newbuild Office Refurbishment Other Refurbishment Branding/lb 2 After 16
Case Study Munich Rupert Mayer Str. Details Acquisition Sep-13 Rental Income Analysis Acquisition Purchase Price/Valuation 57,496,694 53,100,000 Sqm Occupied Total SqM 71,914 71,831 Original Tenants 71,914 11,608 Occupancy 100% 88% New Tenants 51,382 Rate per SqM 5.62 6.95 TOTAL 71,914 62,990 Capex 0 991,546 Rental Income: Rental Income 4,848,488 5,252,460 Original Tenants 4,848,488 987,783 Irrecoverable SC & Maintenance - 704,037-298,309 New Tenants 4,264,677 NOI 4,144,451 4,954,151 TOTAL 4,848,488 5,252,460 Sep-13 Space Split SqM Rental Income Rate Anchor Tenants 31,980 2,809,266 7.32 Conventional Leases 22,827 1,715,629 6.26 Products 8,184 727,564 7.41 Vacant - Products 1,819 Vacant 7,023 TOTAL 71,831 5,252,460 6.95 Products SqM Investment Cost per SqM ERV (Incl SC) Rate per SqM ROI (Incl SC) Smartspace Office 2,948 325,642 110 453,852 12.83 139% Conferencing 635 42,540 67 95,368 12.52 224% Flexilager 3,654 110,646 30 371,734 8.48 336% lb 2 2,765 71,375 26 265,563 8.00 372% TOTAL 10,002 550,203 55 1,186,516 9.89 216% 17
Case Study Munich Rupert Mayer Str. Pictures Smartspace Office & Conferencing Refurbishment Flexilager Branding/lb 2 Before After 18
Financials Recurring Adjusted Profit Before Tax 6 months to 6 months to Sept 13 Sept 12 Movement m m m Rental income 23.3 23.5 (0.2) Service charge irrecoverable costs (4.1) (4.4) 0.3 Non-recoverable maintenance (0.5) (0.5) (0.0) Net rental Income 18.7 18.6 0.1 Management fees (0.1) (0.1) (0.0) Corporate costs and overheads (5.0) (5.6) 0.6 Recurring EBITDA 13.6 12.9 0.7 Net financial expense (6.1) (8.5) 2.4 Depreciation (0.6) (0.5) (0.1) Recurring profit before tax 6.9 3.9 3.0 Non-recurring costs (0.9) (0.2) (0.7) Deficit on revaluation of investment properties 5.2 (7.9) 13.1 (Loss)/Gain on disposal of investment properties (0.3) (0.7) 0.4 Change in fair value if derivative financial instruments 0.1 (0.6) 0.7 Profit before tax 11.0 (5.5) 16.5 19
Financials Statement of Financial Position Non-current assets As at Sept 13 As at Mar 13 Movement m m m Investment Properties 416.3 410.5 5.8 Plant and equipment 2.0 2.5 (0.5) Goodwill 3.7 3.7 0.0 422.0 416.7 5.3 Current asset Trade and other receivables 9.4 10.0 (0.6) K-Bonds I Junior Debt 2.0-2.0 Cash and cash equivalents 16.3 16.7 (0.4) Investment property held for resale 12.3 27.7 (15.4) 40.0 54.4 (14.4) Total assets 462.0 471.1 (9.1) Current liabilities Trade and other payables (18.5) (27.8) (9.3) Interest bearing bank loans (191.4) (258.2) 66.8 (209.9) (286.0) 76.1 Non-current liabilities Interest bearing bank loans (80.8) (31.3) (49.5) Derivative financial instruments (0.1) (0.2) 0.1 Deferred tax liabilities (3.2) (2.6) (0.6) (84.1) (34.1) (50.0) Total liabilities (294.0) (320.1) 26.1 Net assets 168.0 151.0 17.0 NAV per share 48.02c 47.55c Adjusted NAV per share 48.96c 48.44c 20
Banking Bank borrowings as at 1 Oct 13: 260.3m* (LTV 60.7% on latest DTZ valuation) Weighted average interest rate of this debt: 4.0% (Mar 13: 3.9%) Successfully reduced borrowing facility with ABN Amro Bank from 49.2m to 31.3m Berlinhyp facility of 208m reduced to 149m through 52m K-Bonds, and amortisation of 8m Discussions on long-term refinancing of BerlinHyp facility progressing well DTZ Value at Sept 13 m Loan at Sept 13 m NOI m Secured Long Term Macquarie 50.9 27.6 3.7 Baader 76.2 52.0 6.1 Total Secured 127.1 79.6 9.8 Refinancing BerlinHyp 244.7 149.4 18.5 RBS 48.5 31.3 3.1 Total in Discussion 293.2 180.7 21.6 TOTAL 420.3 260.3* 31.4 * Excluding Capital Loan costs 21
Bank Loan Covenants DTZ Bank Valuation Sept 12 Net Rent Current Loan Annual Interest LTV ICR ABN Current Covenant Current Covenant Consolidated 52,110,000 3,972,628 31,313,316 1,947,055 60% 80% 2.04 1.30 DTZ Valuation Sept 13 Net Rent Current Loan Annual Interest + Amortisation LTV DSCR BerlinHyp Current Covenant Current Covenant New facility 244,670,000 27,158,917 149,390,850 10,077,633 61% 64% 2.69 1.30 Savills valuation Jan13 Net Rent Current Loan Annual Interest + Amortisation LTV ICR DSCR Macquarie Current Covenant Current Covenant Current Covenant 4-year loan 49,970,000 3,432,396 27,560,082 2,844,261 55% 70% 1.85 1.75 1.12 1.05 Bank valuation Sept 13 Net Rent Current Loan Annual Interest LTV ICR Baader Current Covenant Current Covenant 7-10 year bond 81,800,000 6,750,048 52,000,000 2,220,000 64% - 3.45 2.50 22
Property Valuations Portfolio book value of 428.6m at 30 Sept 13 (31 Mar 13: 438.1m) Revaluation Reduction as follows: Valuation Rental Income Gross Yield Capital Value psm Core Assets 410.2m 38.9m 9.5% 445 Non-Core Assets for disposal * 18.4m 1.9m 10.3% 184 TOTAL 428.6m 40.8m 9.5% 419 428.6m portfolio book value 9.5% gross yield on core portfolio millions % change Carrying value at 31 Mar 13 438.1 Capex +1.7 0.4% Disposals -16.5-3.8% Revaluation +7.5 1.7% Impairments -2.3-0.5% Carrying value at 30 Sept 13 428.6 * includes 12.3m classified as assets held for sale and 6.1m classified within investment properties 23
Conclusion Asset management initiatives continue to produce consistently good results leading to further profit and EPS increases Non-core disposal programme progressing with 39.0m of completed or notarised deals to date; 34.2m completed to date at 8.2% discount to DTZ valuation 1.9% increase in valuation in the period Banking long term refinancing for all facilities in final stages Significant opportunities to further invest in vacant space with return on investment in excess of 20% Since Mar 10 the cost reduction programme has reduced annualised costs by 8 million 24