JOHANNESBURG – Sirius Real Estate Ltd, a wholly Germany-focused property fund, traded in a tightly bound range on Friday morning, after listing on the JSE’s Alternative Exchange (AltX).
By 12:28, just more than 1 million shares had traded, out of a total issued share capital of 632,257,832. Having listed at R6 a share, the day’s low was a moderate R5.95, before edging back up to R6. At that price, Sirius has a market capitalisation of approximately R3.8 billion.
With a portfolio the company says is independently valued at R6.4 billion, Sirius is solely a specialist in German property, specifically 30 mixed-use business parks. The company is incorporated in the Channel Island of Guernsey.
“We have no aspirations in the future to do anything other than Germany. So whilst there are others [property funds] who get involved in Germany, we are the first offering that is pure German,” Sirius CEO, Andrew Coombs, told Moneyweb’s Market Update on Thursday.
In a private placement with PSG Capital as book runner, Sirius raised €40 million (R555 million). This capital will support the acquisition of five additional business parks at a cost of €75.6 million (R1 billion) with a total lettable area of 111 476m2.
The acquisition portfolio has a current net initial yield of 8.1%, while Sirius is financing at lending rates of less than 3%, according to Coombs. The acquisition has a vacancy of 17.1% and is expected to generate a current recurring rental income of €6.8 million (R94.4 million).
“The quality of their assets is okay,” said head of property at Investec Asset Management, Peter Clark. He said that although Sirius benefitted from a wide spread between the cost of funding and the yield on its acquisitions, there was very little growth thereafter.
“If they can buy an asset at a yield of 7% and fund it with a blend of debt and equity at 4-5%, they are getting a 2-3% positive carry from day one. But the rentals are not growing very much at all,” Clark explained.
He said a number of offshore property funds had come capital searching in the South African market and Sirius was “jumping on the bandwagon somewhat”. But it was nice to have access to the German real estate market directly from the JSE, Clark said.
This is a secondary listing for Sirius, which has a primary listing on the alternative investment market of the London Stock Exchange (LSE). It is the JSE’s first fast-track listing, after the exchange amended requirements in September to make it easier for companies already listed on certain international exchanges to obtain a secondary listing on the local bourse.
These exchanges include the Australia Stock Exchange, the LSE, the New York Stock Exchange (NYSE), NYSE Euronext and the Toronto Stock Exchange.
“Companies listed on the above exchanges and making use of the fast track listing process do not need to produce a prelisting statement and, instead, will only release a prelisting announcement,” according to a statement from the JSE.
Clark maintains a positive outlook for the listed property sector in 2015, saying that distribution growth of around 8% looks “achievable”.