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Sirius smiles despite pandemic

‘Sirius is not like a conventional property company … we get much closer to our tenants than a traditional property business would do’: CEO Andrew Coombs.

SIMON BROWN: I’m chatting now with Andrew Coombs. He is the CEO of Sirius Real Estate. Results for year-end March. We saw like-for-like book value up 11.5%, net loan-to-value 31.4%, Heps up 25.3%. The total dividend for the year up 6.4%.

Andrew, I appreciate the time. Looking at your results – and this was during the hardest part of the lockdown, from the 1st of April – it’s almost difficult to see the impact of the pandemic. This talks partly to Sirius, but it also talks partly to the German state, the German economy, and the healthcare system.

ANDREW COOMBS: It’s certainly true that Germany is exceptionally resilient, but it has a very, very good medical system. There were a number of things that have really helped, not least its structured 16 … states and the way that’s been used to distribute … to businesses. So there’s absolutely no doubt that Germany has same core … in terms of its GDP and so forth. And it’s been able to just deploy that capital now through the pandemic to help things. 

I would like to think that Sirius’s business model and platform have also helped, but there is no doubt if that model and platform could be in an economy other than Germany, then the results probably wouldn’t be as favourable as the are.

SIMON BROWN: A good point. And it is different. We would think of another real estate business, but Sirius is very, very different. You’re carefully located, oftentimes on the edges of towns or in industrial nodes. You’ve got some anchor tenants but your focus is actually on SMEs, getting those leads in, and then converting them. I’m looking at a presentation where, if I look at your inquiries, your viewings, and your new deals for the current financial year versus the previous, as a rule, they are up, and that does speak to that business model of attracting the interest of potential customers and converting.

ANDREW COOMBS: Yes. Sirius is not like a conventional property company. Of course, we think about our balance sheet, our properties, but we get much closer to our tenants than a traditional property business would do. We have maybe 300 employees, 60 different locations; over half of them are based on the same premises that our tenants are based on. And, unlike a lot of property companies, as well as concentrating in the corporate sector, we aim to regulate with our customers. We get very close to them. 

We design propositions that are based around the customer world in the property, and that has helped us enormously with our customers through this pandemic. In particular, it’s helped us collect the payments and the rents from those customers, which meant we were communicating with them from the beginning of the crisis, rather than many landlords who only really spoke to their customers after they’d run out of money and were delivering news to landlords that they simply couldn’t pay their bills.

SIMON BROWN: And that communication, as you point out is face to face, not an anonymous email suddenly arriving. You’ve got some 50-odd large tenants there, just over half of your space. But in terms of numbers, it’s SMEs. Yes, in South Africa I think we think SME, we think startup, we think high failure rate. The German economy is frankly built on SMEs. This might be a small micro-enterprise, but it might also have a 50-year track record.

ANDREW COOMBS: Absolutely. We’ve got tenants who started these micro SMEs with us 10 years ago, who are now companies that are employing 400 or 500 people. We have seen SMEs that have joined us and remain static. We have sometimes seen people who have fallen into difficulties. In the vast majority of cases, we’ve provided an environment that’s enabled the SMEs to grow. And both the SME and Sirius have benefited from that.

SIMON BROWN: And you brand the business – part of it is Sirius. I was looking at your website, it’s in German, but Google translates for me. It’s a well-known brand within the broader German economy.

ANDREW COOMBS: Sirius is the overriding brand. We have products that sit within Sirius, but Sirius is the overriding brand. The business parks are branded outside as Sirius. And we have staff on those parks who are associated with that Sirius brand.

Prior to the pandemic, we had a situation whereby over 15 000 people in Germany per day were setting foot on Sirius business parks in Germany, being exposed to that brand. So Sirius is something that Germans know, they associate it with the outside of town, and throughout the pandemic, I’m glad to say that our reputation with our tenants has only grown in stature.

SIMON BROWN: And the German economy itself – Germany is in many senses the heart of the European economy, especially post-Brexit. I think we can say that fairly confidently. You make a comment in the results that the idea to shorten supply chains, and frankly more production happening sort of onshore within the borders of Germany, after what we’ve seen post-pandemic or during the pandemic, is going to help the German manufacturing economy and obviously play directly into your own business model.

ANDREW COOMBS: We think it will. The number of people now like heavy manufacturing talking to us about factory space, storage space, the need to bring component parts to Germany earlier on in the manufacturing process – everything from Covid to Brexit, to the problems in the Suez Canal, the fact that right now there is a serious shortage of containers to put things in, in order to ship them, means that people, rather than relying on a just-in-time intercontinental supply chain, have become absolutely focused on how do I get this within Europe, how do I base this within Europe, how do I get as much of this and in Germany as quickly as possible? Because what everybody’s saying is today it’s Covid, but tomorrow it will be something else – and we’ve got to be prepared for it. And that means having it here in Germany, close to the place where the component parts are put together.

SIMON BROWN: We’ll leave that there. That’s Andrew Coombs. He’s the CEO of Sirius Real Estate. Really, really impressive year-end results to March. Andrew, I appreciate the time.

Listen to Tuesday’s full MoneywebNOW podcast here.

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