Sirius Real Estate, the UK and Germany-focused investment firm, has more than €100m (£84.6m) of acquisitions lined up following its latest fund raise – and chief executive Andrew Coombs is ready to start spending, just as soon as he is confident there are no nasty surprises for the markets from new US president Donald Trump.
“We have just over €100m of acquisitions that are ready to go, literally in the next couple of weeks,” Coombs told EG in an interview after the company’s €350m bond issuance. “The only reason we haven’t pushed the button on them yet is because we want to see what the first week or two of a Trump government looks like.”
Clarity is coming quickly, Coombs added, speaking the day after Donald Trump’s inauguration.
“Many people said to me, ‘Really Andrew? Do you think you’re really going to know in the first couple of weeks?’ Absolutely,” he said. “One hundred executive orders signed in the last 24 hours. Very clear about the tariffs on Canada, very clear about tariffs in at least one other jurisdiction, very clear about the attitude towards Mexico. Already we’re getting clarity on what a Trump government looks like and the effect it has on the world.
“What we need to make sure of is that that effect doesn’t immediately reduce the value of acquisitions we might be about to make. As soon as we can tick that box and realise there’s no short-term knee-jerk reaction, we are ready to execute on €100m between now and the end of March.”
Track record
Sirius’ latest bond carries a coupon of 4% and is expected to be rated BBB by Fitch. The deal will increase Sirius’ weighted average debt maturity from 3.5 years to 4.2 years, with its total average cost of debt rising from 2.1% to 2.6%.
The issuance was a hefty six times oversubscribed initially. “It was originally for the amount of €300m; we then upsized it to €350m and stripped back to just over five times oversubscribed,” Coombs said. “We think that over-subscription is a really good indication of bondholders’ appetite to lend to an organisation like Sirius.
“We’ve now been in the bond markets for nearly four years. This is our third bond, and because of that demand and our track record in the bond markets, we were able to get this away at 4%. Given UK lending at marginal rates is probably over 6%, being a UK-listed company operating in Germany and the UK and able to access seven-year, unsecured debt at 4% we think is a significant advantage in comparison to [being] UK-listed operating only in the UK.”
Chief financial officer Chris Bowman said separately as the deal closed: “The strength of Sirius’ investment case and capital markets access demonstrates investor confidence in our ability to generate strong income returns and our longer-term growth strategy.”
Firepower
Sirius’ upcoming acquisitions will use up about two-thirds of the “firepower” on the balance sheet, Coombs said, after which the company can tap more lending, keeping its loan-to-value ratio below 35%, to line up another €200m.
“It’s a really exciting time for Sirius,” Coombs said. “We’ve got the equity that we need and we are about to deploy it. Once that’s deployed, the next phase will be a small increase in lending, but all of that adds up to about €350m of firepower, which will make a substantial difference to the bottom line revenues of the company without having to issue any more equity at this stage.”
About half of the deals the team is eyeing are in the UK. “Those are mostly assets that have been owned by high-net-worth individuals and families who are running for the door before they get caught in the change in tax laws at the end of this financial year,” Coombs said. “We are very much benefiting from the flight of ownership that is occurring in the UK.”
In Germany, the company’s original market, the targets and deal drivers are different. “It’s more manufacturing companies which two years ago made the decision that they’re going to relocate or consolidate factories, and what they’re doing is exiting space that they previously manufactured in,” Coombs said. “We’re the beneficiary of that because we can come in, take that space, repurpose it – that’s business as usual for Sirius.”
Image from Sirius
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