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Sirius Real Estate Limited
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== Operations == === How did the idea of the company come about? === In 2002, the idea of Sirius Real Estate came to ccc, the now founders of the company, when they developed a strong desire to maximise/improve the profits of the businesses in which he was involved (i.e. ccc). Researching into how to do that, they realised that one of the best ways is via the provision of workspaces, in particular well-designed workspaces. He also realised that there are many company owners and agents that feel the same way as him, with profit maximisation one of the fundamental assumptions of economic (and business) theory. In his quest to maximise the profits of his business and the businesses of others, Sirius Real Estate was born. === Mission === The mission of the company is to create and manage workspaces that empower small and medium-sized businesses to grow, evolve and thrive. === Portfolio === Sirius operates a portfolio of assets across Germany and the UK. In Germany, its focus is on the seven largest cities: Berlin, Hamburg, Düsseldorf, Köln, Frankfurt, Stuttgart and München, with a secondary focus on a selection of key border towns such as Aachen, Saarbrücken, Mahlsdorf and Frieburg. In the UK, where it operates under the BizSpace brand, its sites are in convenient, regional locations. The company looks for mixed-use properties, primarily light industrial units, business parks or office buildings outside city centres, or on the edge of towns, in neighbourhoods which have a high density of commercial and industrial activity and good transport links. By revitalising, providing and actively-managing the optimum spaces for its tenants, Sirius helps them expand, move and multiply. The book value is €2,032.30 million and the net operating income (NOI) is €137.9 million, equating to a net yield (or the cap rate) of 6.8%. {| class="wikitable" |+Investment properties - owned assets !Geographical region !Annualised rent roll (€m) !Book value (€m) !Net operating income (€m) !Capital €value/ sqm !Gross yield<ref>Gross yield is the return on investment before taking into account expenses such as property management, maintenance, insurance, taxes, and other operating costs. It is calculated as the annual rental income divided by the property's purchase price or current market value. For example, if a rental property generates $12,000 per year in rental income and its purchase price is $100,000, the gross yield would be 12,000 / 100,000 = 0.12 or 12%.</ref> !Net yield<ref>Net yield takes into account all operating expenses associated with the property. It is calculated as the annual rental income minus all expenses divided by the property's purchase price or market value. For example, if a rental property generates $12,000 per year in rental income, and the expenses associated with the property total $4,000 per year, the net yield would be (12,000 - 4,000) / 100,000 = 0.08 or 8%.</ref> !Vacant space sqm !Rate per sqm € !Occupancy % !Proportion of total |- |Germany |115.2 |1,653.9 |105.0 |910 |7.0% |6.3% |283,711 |6.53 |83.8% | |- |United Kingdom |46.5 |378.4 |32.9 |90 |12.3% |8.7% |547,033 |12.64 |87.0% | |- |Total |161.7 |2,032.30 |137.9 | | |6.8% |830,744 | | | |} {| class="wikitable" |+ ! !Proportion of current income |- |Traditional Mixed-Use Industrial Business Parks |57% |- |Modern Mixed-Used Business Parks |26% |- |Out of Town Office Buildings |17% |} {| class="wikitable" |+Germany portfolio !Usage type !Usage split (%) |- |Office |34% |- |Storage |32% |- |Production |21% |- |Smartspace |6% |- |Other |7% |} In terms of annualised rent roll (i.e. revenue)? {| class="wikitable" |+Germany portfolio ! !Number of properties (#) !Total square metres (000) !Occupancy (%) !Rate (psm €) !Annualised Rent (€m) !% of Portfolio By Rent !Book Value (€m) !Gross yield (%) |- |Frankfurt |16 |370.3 |84.1% |6.93 |25.9 |22.5% |366.0 |7.1% |- |Berlin |4 |103.6 |96.7% |8.12 |9.8 |8.5% |166.7 |5.9% |- |Stuttgart |9 |331.1 |89.8% |5.17 |18.4 |16.0% |248.5 |7.4% |- |Cologne |7 |127.2 |87.5% |8.33 |11.1 |9.7% |158.1 |7.0% |- |Munich |3 |123.8 |83.9% |8.42 |10.5 |9.1% |202.8 |5.2% |- |Düsseldorf |15 |351.7 |76.7% |5.79 |18.7 |16.3% |250.9 |7.5% |- |Hamburg |4 |91.4 |83.9% |5.24 |4.8 |4.2% |64.1 |7.5% |- |Other |10 |254.4 |78.2% |6.67 |15.9 |13.7% |196.8 |8.1% |- |Total |68 |1,753.5 |83.8% |6.53 |115.2 |100.0% |1,653.9 |7.0% |} {| class="wikitable" |+United Kingdom portfolio ! !Proportion of current income |- |Industrial Assets |37% |- |Office Buildings |51% |- |Mixed Use Assets |12% |} {| class="wikitable" |+United Kingdom portfolio annualised rent roll (£) !Property type !Proportion |- |Office |60% |- |Workshop |36% |- |Storage |1% |- |Other |3% |} {| class="wikitable" |+Annualised Rental Income !Type of Tenant !No. of tenants @ Sep 22 !Occupied sqft ‘000’s !Annualised rent roll £m !Rate psft £ !Proportion of total in terms of annualised rental income (%) |- |Top 100 |100 |952 |11.5 |12.11 |25% |- |Next 900 |900 |1,638 |19.8 |12.11 |43% |- |Rest |2,251 |1,087 |15.1 |13.91 |32% |- |Total |3,251 |3,677 |46.4 |12.64 |100% |} Sirius’ portfolio includes industrial, manufacturing, urban logistics/production, storage and out of town office space that caters to multiple usages and a vast range of sizes and tenant types. The diversity of the company’s tenant base ranges from large stable and long-term anchor tenants through to the flexible SME and private customers who are the engine room of any economy. Germany In Germany, the group’s large anchor tenants are typically multinational corporations occupying production, storage and related office space. These tenants contribute around 40% of the German rental income. The flexible tenant base is predominantly those who are renting the Smartspace branded offices, self-storage and workbox spaces and generally comprises much smaller tenants on a more flexible basis. These flexible spaces are currently contributing about 7% of the German rental income. The other half of the German rental income comes from the SME sector which occupies both smaller and larger space on a conventional basis. Managing the SME tenant base is the bread and butter of what Sirius does and which it can do far more effectively than its competitors because of its in-house sales and marketing platform that the company has developed over the last 15 years. This, along with the ability to convert, fill up and manage the Smartspace areas, which are usually transformed from areas where Sirius’ competitors leave as structural vacancy, is a key differentiator of Sirius. That skillset allows Sirius to run a value-add strategy which works well in both strong and weak markets and allows the company to make much higher returns for its equity providers at a much lower risk. The table below illustrates the diverse nature of tenant mix within the German portfolio at the end of the reporting period: {| class="wikitable" |+Tenant breakdown – Germany ! !No. of tenants as at 30 September 2022 !Occupied sqm !% of occupied sqm !Annualised rent income (€m) !% of total annualised rent income % !Rate per sqm (€) |- |Top 50 anchor tenants<ref>Mainly large national/international private and public tenants.</ref> |50 |673,988 |46% |45.5 |40% |5.63 |- |Smartspace SME tenants<ref>Mainly small and medium-sized private and public tenants.</ref> |2,855 |68,322 |5% |7.9 |7% |9.64 |- |Other SME tenants<ref>Mainly small and medium-sized private and retail tenants.</ref> |2,897 |727,497 |49% |61.8 |53% |7.07 |- |Total |5,802 |1,469,806 |100% |115.2 |100% |6.53 |} Workspace Offices The office space within the German portfolio comprises office areas and buildings on industrial business parks, office buildings attached to warehouses and standalone office buildings in more traditional office areas. Within these office types, Sirius offers a wide range of conventional and flexible office offerings on either long or short-term leases. Some business centres offer service packages such as furniture, IT and conferencing as well as co-working areas and virtual offices. Offices and co-working and office space are securable in Sirius business parks. * Conventional offices * Smartspace office * Officepods * Virtual office * 39.2% of Group annualised rent roll * 33.7% of total sqm * €7.76: average rate per sqm Storage For businesses and private households, the wide range of storage space on offer in the Sirius estate provides many options on varying scales. Warehouse, storerooms and self-storage options are available in Sirius business parks. * Classical storage spaces * Smartspace storage * Flexistorage * 23.2% of Group annualised rent roll * 32.4% of total sqm * €4.57: average rate per sqm Production, warehouses and workshops Large production areas form the base of many Sirius’ business parks; however, these are complimented by smaller workshop areas, which give clients optionality as they start their businesses and as their business needs change. Additionally, the modern business parks often have large warehouse spaces which can be used for many different purposes. * Large-scale production spaces * Warehouse spaces * Smartspace workbox * 17.6% of Group annualised rent roll * 20.9% of total sqm * €4.72: average rate per sqm Traditional business parks Traditional business parks typically comprise multiple mixed-use buildings and contain in excess of 30,000 sqm of workspace. The company's traditional business parks offer conventional large-scale industrial, storage and office facilities as well as flexible serviced office, self-storage and workbox options which are created from the more difficult areas of the sites. These business parks are home to large blue-chip industrial tenants such as GKN, Bopp & Reuther and Borsig as well as a significant number of SME and individual tenants that together create thriving business communities. * Multi-tenanted » Long-term leases * Production, storage and office space * Large multinational companies Modern business parks Modern business parks typically contain a combination of warehouse and office buildings across a site which is 20,000 sqm or more. The quality and look of the modern business parks are usually of a higher standard (than traditional business parks) and whilst they are easier to manage, due to a higher proportion of office space, the value-add potential that can be extracted from the assets within the Sirius business model is usually still very good. * Multi-tenanted * Long and short-term leases * Warehouse, storage and office space * SMEs and individual customers Office buildings The pure office buildings that Sirius buys are usually well located on the periphery of major economic centres and offer both conventional and flexible office space to SMEs and larger corporates seeking a cost effective alternative to city centre locations. The company's office buildings provide high-quality space that can be quickly adapted to meet the changing needs and working practices of its tenants. * Single and multi-tenanted * Office space * SMEs * Long and short-term leases UK BizSpace’s top 100 tenants are larger corporate customers representing 25% of its annualised income, whilst the remaining 75% are made up of SME and micro-SME tenants. {| class="wikitable" |+Tenant breakdown – UK ! !No. of tenants as at 30 September 2022 !Occupied sq feet !% of occupied sq feet !Annualised rent income (€m) !% of total annualised rent income % !Rate per sqm (€) |- |Top 100 |100 |952,157 |25% |11.5 |25% |12.11 |- |Next 900 |900 |1,638.244 |43% |19.8 |43% |12.11 |- |Rest |2,251 |1,087,502 |32% |15.1 |32% |13.91 |- |Total |3,251 |3,677,923 |100% |46.4 |100% |12.64 |} Workspace BizSpace is a leading provider of regional workspace across the UK, offering light industrial, workshop, studio and out of town office units to a wide range of businesses offering a blend of flexible agreements and longer-term leases. Industrial BizSpace’s industrial workshops are a combination of self-contained units which have roller shutter doors and converted manufacturing complexes which have been subdivided to cater for SMEs. This product is unfurnished and sold on a sq ft basis. Mixed use BizSpace’s mixed sites have a combination of workshop space and office space on site. These sites are typically converted mills or factories which have been modernised and repositioned to provide flexible workspace accommodation. The sites all have a part-time or full-time manager on site, but the customer proposition is centred around value for money. All units are sold unfurnished on a sq ft basis with the customer having the flexibility to choose between a lease or a licence. Office BizSpace’s office assets are dedicated to SMEs and microbusinesses that seek maximum flexibility. The units are generally unfurnished and sold on a sq ft basis with customers benefiting from a dedicated on-site manager. Customers have the ability to take advantage of additional services such as the provision of internet services and furniture. In addition, BizSpace provides a full serviced office offering at a smaller number of locations which enable customers to benefit from a wider range of services at an all-inclusive, fixed price per desk. Smartspace The company’s Smartspace product is attractive to a wide range of customers. From Sirius’ perspective, the Smartspace brand and product range are created through its highly effective capex programme into sub-optimal space which is otherwise extremely difficult to let and usually left vacant by other operators. The transformation of the space deals with the problems of the site and massively improves the quality and feel of the entire business park. From the customer perspective, Smartspace offers them a range of affordable serviced offices, self-storage units and workboxes on a flexible basis that can be tailored to their needs. The annualised rental income now being generated from Smartspace, excluding the element that covers service charge costs, is now €7.9 million. The occupancy of Smartspace is at 72%, and the rate is €9.64 per sqm. A summary of Smartspace products and their contribution to the group is set out below: {| class="wikitable" |+ !Smartspace product type !Total sqm !Occupied sqm !Occupancy % !Annualised rent roll (excl. service charge €000) !% of total Smartspace annualised rent roll !Rate per sqm (excl. service charge) € |- |First Choice Office |5,117 |3,037 |59% |825 |10% |22.63 |- |SMSP Office |31,789 |24,029 |76% |2,895 |37% |10.04 |- |SMSP Workbox |5,974 |5,524 |92% |431 |5% |6.51 |- |SMSP Storage |48,772 |34,332 |70% |3,316 |42% |8.05 |- |SMSP Containers | - | - | - |290 |4% | - |- |SMSP sub-total |91,652 |66,922 |73% |7,757 |98% |9.66 |- |SMSP Flexilager |3,686 |1,400 |38% |145 |2% |8.62 |- |SMSP total |95,338 |68,322 |72% |7,902 |100% |9.64 |} Sirius specialises in the ownership, development and operations of business parks throughout Germany, and more recently through its acquisition of BizSpace, the UK. What makes Sirius different is its best-in-class operating platform and intensive asset management programme. Combining the Sirius property portfolio with its unique operating platform gives it a range of advantages in the market which enable the delivery of strong and consistent returns for shareholders. Sirius harnesses its in-house asset and property management platform through a stringent acquisitions process. That is followed by an intensive capital investment and asset management plan that focuses on transforming vacant and sub-optimal space into high-quality conventional and flexible workspace. Its platform The Sirius operating platform offers a number of benefits including direct sourcing of new asset acquisition opportunities, reduced reliance on commercial agents and local brokers, higher cost recovery, greater lead generation and more efficient new tenant acquisition, and increased optionality in terms of space configuration, as well as enhanced control, focus and speed in developing space. Key drivers Capital efficiency Sirius intends to grow the portfolio with accretive acquisitions which have been funded historically through new equity, refinancings or disposals of mature or non-core assets. Favourable market environments The German economy is the largest in Europe and its Mittelstand (SME) market is particularly deep, meaning demand for both the group’s conventional space and flexible workspace continues to be high. The UK commercial real estate market is characterised by growing demand and shortening supply, driven by complex long-term tailwinds including nearshoring of supply chains and shifting consumer demand. People The company is internally managed and relies on its employees and their experience, skill and judgement in identifying, selecting and negotiating the acquisition and disposal of suitable properties, as well as the development and property management of the portfolio when owned. Strong management capabilities Sirius has a highly experienced senior management team with a strong track record of in the German and UK property markets, through both good and difficult economic conditions. The team is able to leverage its strong market connectivity and track record of acquiring assets to access a large number of potential investment opportunities. === Strategy === Sirius specialises in the ownership, development and operations of business parks throughout Germany and the UK which have either attractive yields, value-add potential, or both. What makes Sirius different is its best-in-class operating platform and intensive asset management programme. Combining the Sirius property portfolio together with its unique operating platform gives it a range of advantages in the market which enable the delivery of strong and consistent returns for shareholders. The company's core strategy is the acquisition of business parks in Germany and the UK that have either attractive yields, value-add potential, or both. Sirius transforms these business parks into higher-quality assets through investment and intensive asset management. Once sites are mature and net income and values have been optimised, Sirius may then refinance the sites to release capital for investment in new sites or consider the disposal of sites in order to recycle equity into assets which present greater opportunity to deploy the Sirius team’s asset management skills. There are five key value drivers: # Active Portfolio Management – increasing rental and capital value through active portfolio management. # Transforming and converting vacant space - subdividing and improving existing space so that it can be marketed directly to occupiers using the different Sirius products. # Occupancy and rental growth – transforming assets by delivering improvements to tenant mix, occupancy levels and rents. # Improvement of service charge recovery – delivering best-in-class cost recovery by utilising advanced measurement and cost allocation techniques. # Growth through acquisition and asset recycling – optimising value and recycling equity into assets which present greater opportunity for active asset management. === Board & Management === ==== Non-executive Chairman ==== Danny Kitchen brings more than 25 years of property and finance experience in both the listed and private markets. After 14 years in corporate finance and M&A with the Investment Bank of Ireland, he was appointed in 1994 as chief finance officer of Green Property PLC, an Irish listed property company. In 2003 he left to join Heron International as group finance director and deputy chief executive. He is currently non- executive chairman of Hibernia REIT plc and was non-executive chairman of Applegreen PLC. Danny was appointed chairman of Irish Nationwide Building Society between 2008 and 2011 and was a Director of the Irish Takeover Panel until 5 June 2020. ==== Chief Executive Officer ==== Andrew Coombs joined the Sirius Facilities Group in January 2010. Prior to joining Sirius, Andrew worked for the Regus Group as UK sales director and before that as director and general manager for MWB Business Exchange Plc. Prior to working in the property sector, Andrew held a number of general management roles. Andrew’s responsibilities to Sirius Real Estate include formulating and agreeing the strategy for delivering shareholder value. He is also responsible for running Sirius Facilities GmbH, together with the group of other operating companies owned by Sirius in Germany, and it is through these operating companies that the strategy is ultimately executed. ==== Chief Investment Officer & Interim CFO ==== Alistair Marks joined the then external asset manager of Sirius in 2007 from MWB Business Exchange Plc just before the IPO on AIM and has remained with the Group following the management internalisation in January 2012. Prior to MWB Business Exchange, Alistair held financial roles with BBA Group Plc and Pfizer Ltd and qualified as a Chartered Accountant with BDO in Australia. Alistair is responsible for the Company’s banking relationships including restructuring, sourcing and negotiating all terms within the Group’s debt facilities. Alistair will focus on the Group’s investment activity, covering acquisitions, disposals and capex investment programmes, utilising his significant experience in the industrial, office and business parks sector, as well as deep operational experience and expertise to identify and execute on a wide range of opportunities that unlock value for the Group. ==== Independent Non-Executive Director ==== James Peggie is a director and co-founder of the Principle Capital Group and prior to that was head of legal and corporate affairs at the Active Value group. He is a qualified solicitor and, before working at Active Value, he worked in the corporate finance division of an international law firm. James graduated from the University of Oxford in 1992 and in 1994 from The College of Law. James has a wealth of experience as a director of various publicly listed and private companies, including Liberty plc from 2006 to 2010. ==== Independent Non-executive Director ==== Mark Cherry is a Chartered Surveyor having qualified in 1983 and brings a wealth of Real Estate knowledge in the investment and asset management markets. Mark was a main board director of Green Property PLC for 10 years, dealing with the UK market and left on the sale of the UK portfolio in 2003. Subsequently he held a board level role at Teesland plc, a Fund and Asset manager specialising in small industrial estates with offices throughout Europe, including three in Germany. Mark was asked to join Lloyds Banking Group as the head of asset management within the real estate “bad bank”, where he was responsible for setting up a number of initiatives to optimise recovery proceeds from defaulted loans. He is currently employed by Invesco Asset Management Limited as their advisor to the Real Estate lending team. He holds no further non-executive directorship positions. ==== Senior Independent Director ==== Caroline is a Chartered Accountant and was an audit partner at Deloitte LLP from April 2000 to May 2018, having qualified with its predecessor firm Touche Ross & Co. In addition to providing audit and advisory services in the financial services sector, Caroline ran the FTSE 250 Deloitte NextGen CFO programme. Caroline is a non-executive director of Moneysupermarket.com Group PLC and Revolut Limited, at both of which she chairs the audit committees. Caroline will become the Chair of the Company’s Audit Committee at the close of the Annual General Meeting to be held on 31 July 2020. ==== Independent Non-executive Director ==== Kelly is a Chartered Accountant, having qualified in New Zealand in 2001 at PriceWaterhouseCoopers, and has worked in real estate in the UK since 2004. She is currently Head of Investment for British Land Co PLC, the FTSE100 REIT, where she has worked for more than nine years, including roles in strategy and corporate finance. Kelly previously held roles in corporate finance at the Grosvenor Group and as a financial analyst at Burberry Group PLC. ==== Independent Non-executive Director ==== Joanne Kenrick has had a commercial marketing career spanning over 30 years and has extensive listed, private and charitable board experience. For five years until 2015 she was the marketing and digital director for Homebase, prior to which she was chief executive officer of Start, where she established and oversaw HRH the Prince of Wales’s public facing initiative for a more sustainable future. Joanne’s former roles include marketing and customer proposition director for B&Q and marketing director at Camelot Group plc. She was previously a non-executive director of Principality Building Society for six years, during which time she was also a member of the audit and conduct risk committees. Joanne has a degree in law and started her career at Mars Confectionery and PepsiCo. Joanne Kenrick is currently a non-executive Director and remuneration committee chair for both Welsh Water and Coventry Building Society, as well as being deputy chair and the senior independent director for the latter; and chair of Switching Services Participant Committee and of PayM for Pay.uk. She is also chair of trustees of the charity Make Some Noise.
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