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Sirius Real Estate to list on AltX on Friday: Andrew Coombs – CEO, Sirius Property Fund

‘We are a specialist in German real estate.’

SIKI MGABADELI: Sirius Real Estate lists on the JSE’s AltX on Friday, becoming the first fast-track listing on the JSE. They’ve already successfully raised £40m through a private placement in South Africa and in the United Kingdom.
   Andrew Coombs is CEO and joins us now. Andrew, thanks so much for you time today.

ANDREW COOMBS: Thank you, Siki.

SIKI MGABADELI: Just take us back to the rationale for the listing on the AltX.

ANDREW COOMBS: Well, prior to listing on the AltX, Sirius had 38% of its shareholder register made up of South African money. We’ve been recruiting shareholders in South Africa for two years now and we always wanted to dual list on the Johannesburg Stock Exchange. But until September of this year we were unsure of the process and in particular some of the regulations.
   But I am pleased to tell you that the new legislation that was introduced in September this year gave us the confidence that we would be able to dual list on the JSE via the AltX platform and do so with a degree of certainty, a degree of speed. And that is exactly what we will be completing first thing tomorrow morning.

SIKI MGABADELI: And that’s the fast-track listing. What did that entail, exactly?

ANDREW COOMBS: Well, it entails getting a very good sponsor, and for us that was in the shape of PSG, who’ve done a particularly good job in guiding us through the process because, obviously with no template to work off, with us being the very first people to use this new legislation and use the fast-track process, it was very important indeed for us to have a local sponsor who could help guide us through the process.
   It also involved a number of different presentations to people across South Africa, both existing and new shareholders, and of course presentations to both the JSE and the AltX committee so they could see exactly what the Sirius business was all about, and exactly what the potential is in terms of investor opportunity in South Africa going forward.

SIKI MGABADELI: South African investors have a number of opportunities to invest in offshore property funds. What sets Sirius apart?

ANDREW COOMBS: Well, that’s a really good question in particular, given the number of listings that have taken place in the property sector this year.
   Of course, there are other opportunities for South African investors to trade in property stocks on the JSE that get involved in Germany. But I believe Sirius is the first specialist. Sirius is the first opportunity to invest in a company that does nothing, but nothing, by nothing but Germany. We are a specialist in German real estate. We have no aspirations in the future to do anything other than Germany. So whilst there are others who get involved in Germany, we are the first offering that is pure German.
   And the great thing about Sirius is Sirius is an insource model. So we have internalised management. We have a platform of 160 people in Germany; we do as much as we can ourselves – without contracting – in house. What that means is we have more control, we have more speed, we have more certainty and we can return much better margins as a business and therefore much better returns to our shareholders. So in that respect where the JSE is concerned, we think we are pretty unique.

SIKI MGABADELI: So you don’t think that being exposed to just one market puts you at some sort of risk? Germany’s economy, with the whole eurozone itself, has not been shooting the lights out in recent times.

ANDREW COOMBS: No, you are right. It hasn’t. There is a lot of speculation in terms of what will happen in the future. However, Sirius has a track record of trading in Germany even in the downturn. And if you look at the last downturn, we were successful in increasing our occupancy. We were successful in increasing our pricing by in excess of 2.1% year on year. And we believe that should a downturn come, we are well positioned with our products to continue to grow our business.
   However, if you look at the opportunities that there are in Germany at the moment, for example the portfolio that we are completing fairly shortly – yields in excess of 8% net operating income. And we are financing at lending rates of less than 3%. And I’m not sure that you will find many other places in the world whereby you can effectively buy something that will yield you more than 8% and borrow money at less than 3%, giving you yield spread of five full percentage points.
   So I think the opportunities in Germany now and over the coming years are particularly good. I think that obviously there will inevitably be a downturn at some point in the future but, when that occurs, that’s something that Sirius has been through before, and proved that even in those times Sirius can still grow and make good returns for shareholders.

SIKI MGABADELI: So tell us about your property portfolio then and where your properties are actually located in Germany.

ANDREW COOMBS: Sirius now with this recent acquisition will own 35 business parks across Germany, consisting of somewhere in the region of 20 buildings. Within those buildings there are 1.1m square metres of net lettable space with over 2 000 tenants, the top 50 of whom give us 60% of our revenue of stability. And those are companies like GKN, Siemens, Daimler Mercedes, Honeywell, MAN – well-recognised global brands.

SIKI MGABADELI: Well, good luck for the listing tomorrow, Andrew Coombs.
   David, what’s your view on listed property?

DAVID SHAPIRO: I like listed property. I think we’ve done very well out of it, and particularly what’s making it more attractive is that the long rates are not moving anywhere. If anything, long rates are coming down and that will guide where listed properties trade because listed properties are a hybrid between a bond and equity, simply because they increase their yield every year. So it’s somewhere in between. But I think at these levels I’m still buying them for clients, particularly those who are conscious of returns. You are getting very good returns with the promise of those returns increasing. But I do stick to the better quality, those that I’ve tracked for quite a long time.

SIKI MGABADELI: The known factors.

DAVID SHAPIRO: But all credit to the industry. It’s a well-run industry in South Africa.

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