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Sirius Real Estate strikes Germany deal as it targets €1bn in defence investments

FTSE 250 group to acquire site mostly let to Rheinmetall for almost €100mn

Sirius Real Estate is acquiring a business park in Germany for close to €100mn, as part of a plan to increase its bet on the booming defence sector to about €1bn over the next 18 months.

The FTSE 250 company is buying a Kiel property that is mostly let to Rheinmetall, the German defence group, and others across the defence, infrastructure, testing and automation sectors, for €93.6mn. It is buying the site from Union Investment, one of Germany’s largest asset managers.

The acquisition comes as some real estate companies seek to capitalise on a sector that has mushroomed in recent years as European states bolster their defence spending.

The industry “has dire needs for property”, said Andrew Coombs, Sirius’s chief executive, adding it “makes more sense to sell the real estate to us” so companies can continue investing in their operations.

Including the Kiel property, Sirius has spent more than €170mn over the past year on defence-related acquisitions in the UK and Germany and planned to boost that figure to €1bn over the next 12 to 18 months, Coombs said.

Rheinmetall researches and develops electrical systems for land vehicles at the Kiel site while the tenant at the UK business park in Bedford makes parts for ejector seats in military jets.

Coombs said Sirius, which has a market capitalisation of £1.4bn and also owns offices and industrial developments, was on the hunt for sites specialising in manufacturing and research, except for explosive materials or bombs. “If it goes ‘bang’ it’s not us,” he said.

He is focused on the UK and Germany as well as companies whose factories can’t easily be located elsewhere, due to the experience of the local workforce or being located near similar businesses.

Rheinmetall has been investing heavily across technologies and geographies in its quest to emulate big US defence contractors, the FT has reported.

Its order backlog — an important measure of future income for defence contractors — reached a new high of almost €64bn, it was recently reported, and the company said that sales were forecast to increase at least 40 per cent this year to about €14bn.

Anticipating a rise in demand from defence companies, Sirius last year appointed a retired major general in the British Army as a strategic adviser. Its £77mn fundraising in February was four times oversubscribed, Coombs said. He added that institutional investors such as pension groups had become more comfortable investing in Sirius.

In light of the wars with Russia and Iran, “the climate has shifted, people want to defend our way of life”, he said. “There’s a return of Germany as the backbone of European defence.”

In recent weeks, he said he had fielded calls from US private equity groups asking how to become involved in the sector, while demand has been rising among potential tenants.

Coombs called on the UK to invest more in defence, such as issuing “defence innovation bonds”, which would be similar to those issued during the second world war.

Talks with Chinese owner Jingye continue while losses mount

The UK government is on the verge of fully nationalising British Steel, almost a year on from using emergency legislation to take control of the business, three people close to the situation said.

Last year a special measures bill granted the government emergency powers to take control of the business and safeguard jobs amid fears that Chinese owner Jingye was running down the site after halting coke imports.

But British Steel is heavily lossmaking and the government spent £377mn between April and the end of January to keep it afloat. The National Audit Office has warned that this could hit £615mn by June and £1.5bn by 2028 if current spending continues.

Jingye still has economic control of British Steel, meaning the government is legally unable to sell all or part of the business or make decisions about its strategy. One person familiar with the situation said that nationalisation was a “necessary step” for British Steel’s future.

The government is now considering how to use legislation to take legal control of the business. The person familiar with the situation said the government’s recent move to designate steel as a “strategic national asset” could pave the way for the government to use national security laws to force through nationalisation.

Jingye rejected a £100mn offer for British Steel from the government last month and had originally demanded more than £1bn in compensation.

A senior UK government official said negotiations with Jingye were still active and taking place in good faith: “There is clearly a defined timeline, they cannot go on forever.” British Steel declined to comment.

A government spokesperson said: “We have been clear that safeguarding UK steelmaking is our priority. We continue to engage with the owner to find a solution that protects workers, production and the national interest, and we will not comment further while discussions are ongoing.”

Gareth Stace, director-general at industry group UK Steel, said the industry would “strongly welcome” the full nationalisation of British Steel. “This would provide vital certainty for the workforce, the company’s customers and the wider supply chain at a critical moment.”

British Steel’s Scunthorpe site is home to Britain’s last two operating blast furnaces and produces 95 per cent of the steel used on UK rail tracks. The government favours a shift to greener electric arc furnaces but this transition would cost thousands of jobs.

Britain’s other major steelmaker, Tata Steel, has announced plans to shift to electric arc furnaces at its Port Talbot site in Wales but at the cost of £1.25bn and thousands of jobs. The government has already provided a £500mn grant to Tata Steel to fund the transition as part of a wider £2.5bn package of support for the UK steel sector.

Against a volatile backdrop of US tariffs and the UK’s high energy costs, the government this month announced its much delayed steel strategy, focused on reworking trade quotas designed to protect steelmakers from a glut of Chinese imports.

Michael Flacks, a Manchester-born turnaround investor, has expressed an interest in acquiring British Steel and combining it with other European steel operations. Bankers have also been sounding out interest from other strategic partners, but people close to the situation said that it was a moot point until the government had the legal ability to actually sell the business.

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