16/06/2008
Able to obtain bank debt at ‘pre-credit crunch’ levels, German commercial property developer Dawnay, Day Sirius (DDS) trades at an unfair discount to net assets.
The company, which raised €270m (£213m) at float in May last year to develop existing office space into ‘flexible workspace’ parks for small and medium-sized enterprises, bought 29 properties during the 11 months to March, which have been valued at €376m. Even though not all the properties were under the Sirius roof for the full period, a €10.1m post-tax profit was produced and the board proposes a final dividend of 1.5c.
Further sites have been added since the year-end to take the total number up to 38, with a 6.5% average rental yield and an occupancy rate of 74%. ‘We now have the bulk of our portfolio in place,’ says Kevin Oppenheim, the fund’s asset manager, ‘but the nature of the business is that it does take time.’
Work is under way at 19 of the parks to develop them to their ‘maximum potential’, adding local management, a restaurant and a health club, with the aim of hoisting occupancy rates to above 90% and rental yields to over 10%. The aim, once they are up to scratch, is to sell the property to ‘recycle the capital’, while continuing to manage the site.
Current bank debt stands at €177m, acquired at interest rates averaging 5.5%. ‘The pricing of our debt is at pre-credit crunch levels,’ explains Oppenheim, ‘because we have a spread of risk through multiple clients in multiple regions.’
Named after the ‘dog star’ Sirius, the company has not enjoyed the best share price performance, having seemingly been tarred by wider economic and property concerns. But the German economy has been healthy, and the present price offers an unfair discount to the current net asset value of €0.96 per share.
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