Andrew Coombs, CEO, Sirius Real Estate
Germany’s light industrial sector is attracting more banks and long-term institutional capital interested in the opportunities it offers, Andrew Coombs, CEO, Sirius Real Estate told Real Estate Day.
‘We have seen a change as the asset class has become much better understood,’ he said. ‘This new attitude is reflected in the institutional money coming in from people like Swiss Life, Helaba Bank and, most recently, the joint venture that Sirius has signed up with AXA Insurance company. This is long-term institutional money investing directly in this asset class in Germany’.
Sirius, which has a dual listing in London and Johannesburg, is ultra-specialised: it only operates in Germany and it buys underperforming light industrial business parks on the edges of the top 7 cities to revitalise and reposition them.
‘We specialise in buying parks that are typically 30 years old or more, then we typically reinvent some of the occupancy,’ he said. ‘We revitalise the park, introduce new tenants, stabilise the income and turn it into what we call mature core product’.
The strategy is very hands-on and requires local knowledge and boots on the ground. ‘It is very much an operational business,’ Coombs said. ‘We have 250 people in sixty different locations in Germany. We internalise as many as the functions as possible, but the great news is that once you do that you have much better speed to market, you have clear line of sight directly into the marketplace and that enables you to make much better decisions when it comes to acquiring property’.
The company has an opportunistic approach, going for properties with tenants that are about to leave or have high vacancy rates to then ‘apply the Sirius platform on top’. In terms of locations, the focus is the area around Germany’s top seven cities. For the joint venture, ‘we are looking to buy properties that are a bit more light touch, with more stabilised income, but our platform will still manage them’, he said.
One example of their approach is the recent acquisition of a site in Bochum for around €25 mln, he said: ‘We bought it for around 9% yield in a market that’s trading typically at about 6% and the reason is the anchor tenant, Pilkington Glass, is due to move out in May,’ Coombs said. ‘However, before we even completed we were able to refill the majority of the space about to be vacated at higher rates that Pilkington are currently paying’.