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.