Strength in German economy gives Sirius Real Estate a boost

Exposure to the German economy has helped JSE-listed Sirius Real Estate outperform, according to the company CEO Andrew Coombs.

The property fund that invests in Germany only, is on track to be a €1bn fund by 2019, with new German companies taking up offices at its sites.

Sirius, which invested in flexible offices for mostly small and medium enterprises and self-storage assets, was benefiting from a strong German economy and high demand for its products, said CEO Andrew Coombs on Wednesday.

Its share price has risen about 26% in the year to date. It grew its dividend 32% in its 2016 March financial year.

"We are meeting our targets for Sirius as we aim to be a €1bn real-estate company," said Coombs. "We achieved a total return of 15.3% for shareholders, in the financial year to March."

Investors were attracted to the fact that Sirius’s management team had made and kept its promises since listing and that its business model was easy to understand, said Ron Klipin, a portfolio manager at Cratos Wealth. "Their business model is a sound concept, taking big-box smokestack-style warehouses and factories and turning them into flexible warehouse entities. [The company] creates flexible offices, which they manage very well," he said.

About seven years ago, former British marine Coombs and Australian-born Alistair Marks took charge of Sirius, which was then an ailing London AIM-listed company.

The two had turned the company around, said Clucas Gray portfolio manager Brendon Hubbard. Sirius had achieved various strong metrics.

A strong German economy had moved up the price per square metre for Sirius’s offices by 5.1% in the past year in an almost zero-inflation environment, said Hubbard.

"Their capital expenditure programme has been achieving a 40% return on investment," Hubbard said.

"Sirius has a 65% payout ratio that implies the earnings yield is 6.9% in euro."