Sirius Real Estate Limited ($SRE)

Good morning, everybody, and welcome to today's presentation of Sirius Real Estate's full year results for the period ending March 31, 2026. My name is Andrew Coombs. I am the Group Chief Executive Officer of Sirius. And I'm joined -- I'm joined this morning by Chris Bowman, who is the Group Chief Financial Officer of Sirius Real Estate. Together, we will take you through this morning's presentation. As you all know, Sirius is an on balance sheet best-in-class owner and operator of mixed-use light industrial business parks on the edge of key towns in Germany and the U.K. Please remember that Sirius has for the last 4.5 years operated in both the German and the U.K. markets, under the brand of Sirius in Germany and for the last 4.5 years under the brand of BizSpace within the U.K. The group currently operates over EUR 3 billion of property, 90% of which is wholly owned. This consists of over 160 sites and nearly 2,000 commercial buildings. We have 76 sites in the U.K. 8 sites in Germany and 7 sites within the Titanium joint venture. If we turn to Page 6, we can look at the highlights for the period. The Sirius Group is a rigorous, well-run and growing organization. We have proved the resilience and the reliability of the business model during Brexit, during COVID, during the list trust budget, the Ukraine war and the gas crisis in Germany, and most recently, through a period of rising interest rates in Europe and the U.K. During which time, we have successfully protected valuations despite yield expansion. And in that time, we have continuously grown our revenues, increased our dividend payments. And as I have said, we have made sure that the value of our properties goes up, not down. In the period to March 31, 2026, we once again grew the group like-for-like rent roll by more than 6%. And as a result of acquisitions in the period, we have grown total rent roll by more than 11%. So I'm pleased to report to you another year of business as usual for Sirius, despite the macroeconomic headwinds and political uncertainty of recent months. We have increased our FFO to more than EUR 133 million which has resulted in a 4.5% increase in FFO per share. And I'm pleased to tell you that we will be paying a dividend of $0.0322 for the second half of the year. This brings the total dividend for the period to $0.064, which is 4.1% up on the previous year. But where does that leave us in terms of the ambition of this company going forward? Because everything I talked to you about is in the past. Let's spend a couple of slides looking forward. As you know, we have an immediate ambition to get to EUR 150 million of FFO. And I say immediate, because we should now be less than 1 year away from achieving that GBP 150 million FFO ambition. And that's why 6 months ago, we started to roll out our plans to extend our achievement in future years to beyond GBP 150 million and on to the new ambition of EUR 175 million of FFO. Now I know you're all going to ask me when. Well, these are ambitious goals, and they focus the team at Sirius and BizSpace on how. If we were to commit to when they wouldn't be ambitions, they'd be targets. The importance of the ambition is it focuses our thoughts and our activities on the how. And as you can see, aside from our core business of owning multi-let out-of-town industrial parks, 2 very important pieces of the how are now coming into the picture, namely defense and self-storage. And if you turn to Page 8, we can spend a little bit of time talking about our self-storage ambitions. Sirius has been operating its Smart self-storage products in Germany for over 15 years now. Today, we are live in over 30 locations in Germany, serving just over 4,000 customers. In the U.K., we're doing something similar in just 4 locations. As you know, we hired Tom Lampard last year. Tom is a former Director of Lok'nStore and more recently, Shurgard. He has a great deal of experience in overseeing the planning, the building and the opening of new self-storage stores. I'm delighted to tell you that we have already started to build our first dedicated self-storage store in Berlin, and we will soon begin the conversion of a small number of sites in the U.K. into dedicated self-storage stores. And we can see a path to more than doubling our revenues from self-storage. And of course, these stores in every single case will be even more high yielding than our traditional core sites. Let's now turn to Page 9 and look at defense. So back in June of last year, in fact, almost to the day, we appointed Angus FA as a strategic adviser to Sirius. His remit being to advise the company on the defense sector. At the time, we sought to understand what was happening because we believed and we still do believe defense capabilities are underpinned by industrial capacity, and that capacity is normally housed in industrial properties. Therefore, if you own industrial property in scale, defense will become unavoidable. And we wanted to understand what sort of effect this might have on the asset class as a whole. By September, it had become clear that this opportunity was one that Sirius should be participating in. And we purchased just over EUR 60 million of assets in Munich and in Bedford, assets that contain tenants from the defense sector. Then in February of this year, we raised capital and purchased a further EUR 140 million of defense-related assets in Germany. As you can see from this slide, this leaves us with a portfolio of just over EUR 200 million at nearly 9% gross yield. And our ambition is to continue going in order to build somewhere around EUR 500 million of defense-related property portfolio, at which point we will seek third-party capital to form a joint venture focused on the defense sector. We are at least 1 year away from that, maybe 2. But our goal is clear here. Our ambition is to go it alone to GBP 0.5 billion and then to go further than that with the help of third-party joint venture capital. That is our ambition. So GBP 150 million of FFO in our sites. We will not be stopping there. We're already planning the journey to 175. Within that plan, we will be scaling up our presence in self-storage. And where defense is concerned, we've acquired GBP 200 million in 12 months, and we plan to build to GBP 500 million in the future. Perhaps I can now hand over to Chris to take you through the income statement.

Thank you, Andrew. Good morning, everybody. I'll just spend the next few pages going through the highlights of the income statement and the balance sheet, and then come back later as well and just talk about some of the capital allocation decisions that were made during the -- so as you've already heard Andrew speak about the FFO, very pleased to have another year of very healthy growth of FFO, 8.4% up year-on-year. to finish the year at EUR 133.5 million. That focus on FFO, funds from operations, the cash profits of the business after tax and after financing expenses runs through the entire business. We are not a jam tomorrow real estate business. We're about capturing cash income today. So rental income level, you can see we were up 11.4% year-on-year to GBP 239.8 million of rental income. I can tell you, we actually finished the year with rent roll well in excess of EUR 250 million. So there is growth baked into our portfolio for the year ahead. Looking further down, just to highlight, we've obviously still have the JV with what is now BNP previously called AXA with EUR 350 million of assets in Germany. That has been very healthy returns for us. We have EUR 75 million of capital invested in that JV. And as you can see, we've made GBP 8 million return. There was a performance fee in the prior year. That's why it's slightly down. But in terms of ongoing returns there, they continue to be very healthy double-digit returns on our equity. Service charger recoverables, this is obviously focus of the business. This is part of our DNA of doing better than the competition in terms of recovering our property expenses. As we've had a very active year of acquisitions, then we tend to see slightly higher recoverables as we inherit other people's recovery strategies. That will return to more normal levels. We expect to typically recover of property expenses off mid-80s of occupancy. Coming further down, you can see corporate costs and overheads. Very pleased to say that we've kept that to a 3% increase despite a portfolio, which has obviously increased over double digits. So you're seeing operational leverage there. We are getting more efficient. We are doing more with less. We are bringing, obviously, technology into the business, but also the platform able to scale. That has driven an 11.6% EBITDA increased to GBP 158.3 million. And you obviously see the benefits of the operational leverage offsetting that initial increase in the service charge recoverables. Finance expense continues to be the biggest headwind that the business faces. We are on a journey of going from very, very cheap cost of debt into what I call more normal levels. So I would guide to around 4% incremental cost of debt. We'll come -- I'll talk about that a little bit more later, but you can see net finance expense of GBP 23 million, of which there was a GBP 36 million interest cost with a GBP 13 million income. I would guide you to the year ahead, the income will be very low single digits, the interest cost will be marginally higher in the year ahead. At tax, you can see we've brought our current tax charge write-down 1.8 million from GBP 6.8 million in the prior year. We've had some very successful tax structuring during the year, merging loss-making entities -- entities that have losses in them with our profit-making entities at a property level that's allowed us to release some of the losses in a very efficient manner. I think going forward, you should expect that tax charge to return to mid-single digits level, but a very healthy performance this year. And that all feeds into the FFO, as I've said, GBP 133.5 million. Adjusting items, I talked about in the first half, there is an unrealized foreign exchange translation in the refinance fees associated with our activity, particularly on the and the bond market, those together, some of those are one-offs, which will roll back out, in particular, the FX. I would then just highlight the surplus on the revaluation. So GBP 110 million increase in our investment properties. That's a reflection of that focus on driving rental income yields have essentially been stable. Andrew will come on and talk about those a little bit more later, but they are essentially stable. We get capitalized and the benefit, particularly in Germany of the upside in rental income. That then feeds through the NAV, which I'll talk about in a second. But net-net, you get down to a profit before tax up 5% at GBP 211 million. Just putting that into a waterfall, I think when we drive that FFO, that then allows us to grow our dividend. So for the 25th consecutive period, we are very pleased to be announcing an increasing dividend. As Andrew said, $0.322 in the second half gets us $0.064 overall for the year. The waterfall down from NOI, GBP 207 million, take off the costs and the finance expenses for FFO together with those adjusting items of FX and finance fees, again, all going in the right direction to drive dividend growth. Flipping on to the balance sheet, fairly self-explanatory, obviously, highly, highly active year for acquisitions of property in terms of what actually hit the balance sheet in the year. It was roughly EUR 400 million of assets that actually fell in, in terms of completions during the year. together with that valuation uplift of GBP 110 million. You saw an increase in investment properties of just over EUR 500 million. cash balance, therefore, has shifted slightly down from GBP 604 million to GBP 410 million at the year-end, reflecting that move into assets. We also did a bond tap during the year for GBP 105 million and we did an equity raise for GBP 88 million. So piece of those 3 items together, they flowed into the GBP 400 million of completions of assets during the year. I'd just highlight as well, there's quite a big shift on the tax line. You can see that deferred tax dropped from GBP 110 million down to GBP 86 million. I flagged this at the first half, you see the full effect now of the German government's fiscal stimulus measures have included reducing the corporate tax rate in Germany, which goes from 15% down to 10% and over the course of 5 years from 2028. So that's a real live example of the fiscal stimulus in action. What does that mean? That means that our embedded profits on our portfolio there is essentially a lower potential tax liability associated with those. So that allows that deferred tax release. But that is obviously direct evidence of the effect of that stimulus which hasn't actually even come yet, and so it's not actually affecting the economy, but from a sort of deferred tax perspective, we've got visibility on it. That drives down -- we've got the 3 different NAVs. There, the basic reported NAV is up 7%. That includes the effect of that deferred tax release. The adjusted NAV, which is the one that we focus on that strips out the deferred tax and then the EPA as well. So each of them up 7%, 5% and 4%, respectively. I will hand back to Andrew now just to go through country-by-country KPIs.

So in terms of Germany, the strongest market in the period. As you can see, annualized rent roll up by nearly 18%, and obviously partly driven by the acquisitions and partly driven by the 7.3% like-for-like organic growth. Occupancy increased and so did rate. You can see that the move-ins, reflecting the new business sales volume was 12% up on the previous year. But we need to be careful. It's not all good news. We're closely managing the rate in terms of the move-outs. You can see people are moving out at roughly the same level they're moving in at. We normally like to have a decent $0.50 or so up on the move-in rate versus the move-out rate. Sorry, we've got that. What I mean is March '25 to March '26 instead of driving in sort of driving down the move-out rate, it's moved up by $0.03. So a marginal difference. But nonetheless, these areas are narrowing rather than getting further apart. And then if you look at the move outs, you see that actually the move-outs are 34 million square meters higher, whereas the move-ins are only 26,000 square meters higher. What's missing here is the expansions, the customers who stay but buy more. But suffice it to say, whilst it's the strongest of the 2 markets, we're still having to work very, very hard to use the platform to keep everything in balance. Sometimes you can see that just pure new business alone will overcome what's moving out. We're having to use both new business and also expansions to be able to make sure we get that extra 1% in occupancy, and we continue to drive the rate upwards. If we go across the page and look at the waterfall effect. As you can see, we're losing nearly GBP 21 million, but we're gaining GBP 24.3 million in terms of the move-ins. And then really, it's the like-for-like uplift that get us that good healthy growth from EUR 140 million to EUR 150 million. We then have acquisitions on top. And you can see that's how we grow the rent roll by nearly 18% within the year. And then if you look at the acquisitions here on Page 15. On the left, you can see Dresden, so silicon Saxony, effectively, where all of the offshore chip manufacturer from years gone by has been moved back into Germany. This is a particularly strong market. You can also see [indiscernible] is near to a strategic NATO air base close to the Dutch border. This is not one of our defense plays, but we love the location of this asset. And the fact that it is located where it is has only added to the reason as to why we bought this high-yielding 10.2% gross yielding asset. And then [indiscernible] which we think has got a lot of opportunity based on the low price, the high vacancy and the fact that it's so well located in an area like [indiscernible]. But if you have a look at the capital rate per square meter of less than EUR 250 per square meter, that clearly is part of the strength of this asset. Then you go across the page again and you come into the defense-related staff field [indiscernible] is where the company makes the night viewing devices and the laser technology for the German Army. [indiscernible] is 60% rine metal, so electronics for armored fighting vehicles, and folder that was announced last week is where the body armor for the [indiscernible] we are. So effectively, the antiballistic and Kavala plates are made for the German Army. And of course, with the 2 new divisions, including the 45th division in Lithuania, the need for this kit is expanding quite rapidly. So all of this is growing government-backed very, very sticky defense income, hence, why we bought it. Chris, over to you.

Okay. So just coming back to capital allocation and how we put our -- particularly our CapEx budgets to work. So just on Slide 17, you can see part of a core pillar of the Sirius growth strategy is how we transfer what are our value-add sites and transform those into our mature sites. And today, roughly 64% of our portfolio in Germany is value add. That is EUR 1.4 billion of book value, and it has just under 300 -- sorry, it has 270,000 square meters of vacant space, which we can put relatively modest amounts of capital into to transform into higher quality, more lettable at higher rates space to drive occupancy, rate and ultimately, value. So just to give you an idea of how much that actually leverages in terms of value. If you look at the capital value per square meter on average of our value add, that sits at EUR 928 per square meter, whereas we see the 36% of our portfolio, which we consider mature, that currently sits at EUR 1,357 per square meter. So the opportunity to drive up what is 46% upside in value is huge there from a valuation perspective, but also what it does is there's an opportunity there to go from EUR 7.61 square meter rate up to EUR 8.3 square meter and to reduce what is 100 basis points of service charge leakage between 7.9% and 6.9% gross and net yield to reduce that down to just 30 basis points. So Net-net, the benefits are not just the value, not just the top line rental income, but also to reduce leakage as well as service charge and to the benefit then also of the entire site when we put capital to work of improving the quality of an entire site, which isn't even captured in here, which is then the benefit to the knock-on benefit to the other space on site as well. So where -- just moving over the page, I'll give you some examples of where we've put our CapEx to work in year-to-date. So total CapEx invested GBP 48.8 million. that's roughly split 2/3, 1/3 between Germany and the U.K. Really, the value-add CapEx is where we move the assets from value-add to mature. In Germany, EUR 15.6 million. You can see some examples there on the right-hand side, some of the pictures there, taking space and doing as I say, very modest spend, so low-risk spend. This is often redoing floors. This is redecoration, some reconfiguration of space, dividing up space, into smaller units, for instance, which may be more lettable at a higher rate and at greater scale. Andrew has touched on self-storage. That's obviously been a core part of how we take vacancy put self-storage units into that vacancy and again, drive income. You can see the example there at Goppingen. That's first floor space at Goppingen, which had been empty for years when we bought that site. That site sits right next door to an existing independent self-storage provider. That sell storage provider is full. So the opportunity -- the market opportunity was already proven by our essentially competitor next door. So again, low risk. I'll touch on new builds in a second, renewals, small numbers, but continues to be very, very high returns for us. Works and DSG within U.K. and Germany, there's roughly EUR 5 million of spend in each. That has been, in Germany, a focus on PV systems where we get a direct double-digit cash return on that spend. In the U.K., that's been a focus on the EPC certification process and continuing on the journey of cautiously going on the EPC journey given the lack of regulatory clarity that we have from the U.K. government on that. Just flipping over the page. What does all that mean on a 3-year basis on the value-add CapEx. We have been spent -- we have spent over the last 3 years, EUR 29.2 million on value-add CapEx. On average, we've achieved a return on that investment of 38%. So -- and that is still on the journey. So some of that space will have only just been very recently refurbished. You can see that the occupancy at 80%, there is still further to go. So I expect that ROI to actually trend towards over 40%. Renewals, small -- relatively small numbers, but very, very profitable for us over 50% ROI. And this will continue to be really, really good use of spend to generate really high ROIs and drive occupancy, income and rate across the portfolio. Moving on to new builds. I started talking about new builds, I think, probably this time last year. I said at that point that we would carefully allocate capital to new build projects. These projects compete for capital against acquisitions of new sites. So this is putting in development into our existing sites on either service land or space, which at the moment is [indiscernible] for one of a better word, it's actually [indiscernible] and I'll talk about that in a second. On the left-hand side is what we've done. So at Garden felt many of you have been to our site in Berlin, just outside Berlin Garden felt. We've built those 3 new production holes, warehouses, all 3 of those spaces have rented immediately. You can see we've achieved rates of over EUR 13 a square meter against budgeting, we were purchasing just under EUR 11 million. I'll give you an example of local emergency services has taken one of those halls in its entirety on a long-term lease. It is expensive to build in Germany. So development will only make sense where the returns are available. So the yield on cost on that site was 9%. And we still are able to generate a 21% IRR because the site is valued below 6% already. And this has continued to improve the quality of the site overall. On the right-hand side, what do we have in the pipeline? We have 20 million of projects in progress One of those on the bottom left of the right-hand side, you can see in progress the build of our self-storage, stand-alone self-storage site at [indiscernible] felt in Berlin. On the bottom right, we bought a site in Hamburg earlier this year. There is a new build opportunity there, which we are just starting on as well. The right-hand side, essentially box that you can see there is an existing tenant is expanding into that space. So this is not speculative development we have the tenant already signed up. On the top left, a self-storage type product, garages as well has been very successful in the German market. We are building 72 garages at our existing Hanover site on surplus land. And then on the top right in our Dresden micropolisite by the airport there's an opportunity to fully refurbish an existing what was the officer's mess of that site. It's an old Air Force site, and we are investing around EUR 5 million into that side as well. And all of this, we are targeting IRRs of around 20%. That's obviously highly, highly attractive compared to the acquisitions opportunities as well. but it's also an area which will be complementary to acquisitions. So as I say, it will not work everywhere in Germany, but where it works, the opportunities are great. And I'll hand back to Andrew to talk about the U.K.

Okay. So whilst we are still very positive about the U.K. market comparative to Germany, U.K. is the market that was less strong throughout the period we're talking about. And whilst you can see that we increased the annualized rent roll by even more than the 18% we did in Germany, we were working off a lower base in the U.K. And we were more dependent on acquisitions for that increase in the rent roll. We did increase the like-for-like rent roll by 4.6%, and we did that through increasing rates and also occupancy. But if you look at the move outs at the bottom of this page. What you can see is that this was more a story of managing churn than it was a story of increasing new business sales. And you can see that in as much as the '25 move-outs versus the '26 move-outs were actually 50,000 square meters less. You can see that the new business in the U.K. was challenged particularly in the fourth quarter of the last calendar year when the politicians in the U.K. dealt with the budget in the way they dealt with it. that hit our U.K. business and our tenant demand, particularly hard. That cost us sales in that period. Fortunately, although new business sales were down by 22,000 square meters year-on-year, we were able to more than make up for that in terms of managing the churn within our business. We are still faced with the challenge that people are moving out at GBP 18.5 per square foot, and we are attracting new people in at GBP 2 less. That is very much a story of regional offices. And it's a story whereby we're able to maintain occupancy in regional offices in the U.K., but we are having to work much harder on price in order to do that. So again, you see the strength of the platform here in the U.K. with the assistance of the centralized platform in Berlin. You can see that the power of that platform mitigates the risk and that we are able to bring this all together to give total growth of nearly 20% like-for-like growth of nearly 5%. But we have had to work much harder this year, in particular, because of Q4 at the end of last year than we have at any time in the last 4.5 years. And if you see that reflected on the waterfall, what you can see is that the like-for-like move-outs and move-ins we lose just under GBP 1 million, and we need the uplifts to be able to make it back to that 64.1 million, and you then see the effect of Vantage and acquisitions, which gives you that nearly 20% growth. We go across the page and look at some of the acquisitions. I've talked about Bedford which is the defense-related acquisition. This is where they make component parts for the injector seats for fighter jets. It's also right next to where the planned development of Universal Studios is going to be. So both from a defense perspective and also from a local property perspective, it would be quite difficult to go run in Bedford in the next couple of years. [indiscernible] is the 171-acre site just south of Birmingham. And the key point about this is that 80% of that 171 acres is undeveloped. So there is huge development possibility for [indiscernible]. And then we have [indiscernible] on the right-hand side, which again has significant development and re-leasing opportunity. We have very strong inquiries from a very large supermarket to develop the front of this site. We have over 3,000 homes going up next door. They're currently being built, and we've already relet a couple of the units here at significantly higher prices than we had in the business plan. Plus we have the opportunity to develop some of the buildings at the back on the right-hand side of the site, and create effectively a new product similar to the stuff that Chris has already shown you in Berlin Garten [indiscernible]. So lots and lots of opportunity in this site. Chris?

Yes. On to Slide 24. I'm just going to -- I'm really just going to highlight one thing really on here. So you can see that there's EUR 513 million in total of acquisition activity that we've either completed or notarized in the period. So hugely active period for us. I'd just highlight that, that brings with it GBP 36 million of NOI. Now only half of that NOI hit the P&L in FY '26. So the full year effect still to come for the year ahead, the year we're now in, we essentially have baked in growth to come from all of that acquisition activity. as well as obviously tackling service charge leakage, tackling occupancy, tackling development opportunity, CapEx spend, et cetera, and upside. Now we've acquired all of that -- all of those assets at an average of 8.2% gross yield, 7.6% net yield. That is higher yields than our existing portfolio stands on. So we're acquiring overall better pricing than we already have our portfolio at and with opportunity in it as well for upside as well as obviously that baked in growth to come through on the PL. I'd just highlight, we continue to look for recycling opportunities, function at being the most significant still to come. So that will complete during this summer for EUR 30 million. And in the meantime, we continue to look at opportunities as well for recycling of assets.

So in summary, FFO has grown by 8.4% to GBP 133.5 million, at per share level is growing by 4.5%. And we should be on track in the next 12 months to get to our ambition of GBP 150 million. We've been able to increase like-for-like rent roll across the group at 6.4%. And as Chris has just explained, we have acquired over EUR 500 million of new property, only half of the P&L effect having hit this year, the full effect being in the poster next year. We have a clear strategic focus on our core German and U.K. businesses, together with increasing focus on revenues from defense and self-storage sectors. We've grown our dividend for the 25th consecutive time. We've grown it by 4.1% year-on-year. And in terms of the balance sheet, we have over EUR 700 million of undrawn facilities and cash sitting on the balance sheet. In terms of the outlook, as I've said before, the U.K. suffered a weak Q4 of last calendar year, Q3 of the last financial year due to the economic effect of the political instability around the budget of November last year. However, the U.K. ended the financial year with strong momentum, and I'm pleased to tell you that momentum has continued into April and May. The year finished strongly in both Germany and the U.K., and we have seen continued strong trading in both those countries despite what we're seeing in Iran. And that's not to say that we won't see an effect from Iran. We are cautious, but up until now, we have seen no negative effect in terms of what's happening in Iran. Germany like-for-like growth continues to demonstrate the strength of the German operating platform, and the group continues to assess further opportunities in both Germany and the U.K. Future growth, we think, is going to be propelled by the current operational momentum. So that GBP 500 million plus of property, the momentum of that, the full momentum of that has still not hit the P&L in terms of the full year effect, and we will see that in this current year to March 27. So thank you very much indeed for your time and attention. Chris and I will now try and answer any questions you may have. Thank you very much indeed.

It's Tom Musson from Berenberg. Just a question on the long-term ambitions in the self-storage market. It seems like you're formalizing a bit this morning. I know you shared your road to EUR 15 million in revenue. But you're ultimately thinking that you want storage now to become a much more meaningful proportion of the total asset mix. Just wonder how you see that playing out longer term? And you mentioned yields there being higher than the core portfolio. Can you help quantify that?

Yes. Look, we like storage. We always have. And we think that we are different from the traditional self-storage providers. What we've seen in the self-storage market over many, many years now is -- and it's gathered more pace recently is typically lots and lots of people, particularly businesses, they start with a self-storage box and then they move to a bigger self-storage box. And then sometimes they move to 2 self-storage boxes. And what we're seeing with the introduction of industrial outside storage containers, is what people have started to do is when there's not a big enough box and they need more than one, they move away from self-storage and into containers. Now the traditional self-storage operators for whatever reason have decided not to address this. We think there's an opportunity because somebody is a business comes to us, and they've got a workshop and they use a self-storage box and it gets bigger. And then they need something bigger than a box, typically more than 6 square meters. They have a container. And then maybe they need a couple of containers. And all of a sudden, they're not in containers anymore. They're in a 500 or 600 square meter storage hall, which is an ideal customer for us. And what we've done is we've stuck with them all the way through their journey when they started off, and they needed that storage box. We provided that in a basement. Then when they need it to be bigger, we could do that. And when they need to go outside and use a container, we did that. And then when they need to migrate from a container to a proper storage hall, then we did that, too. So we can address that journey in a way that we don't think anybody else in the market actually can. In addition, what we've learned from Tom working with us is that the hardest thing for self-storage company to do is to find the plot to build on. Well, we already own those [indiscernible]. We have 150,000 square meters of nonincome-producing land. In Berlin [indiscernible] what we're talking about, it's opposite a site where 5,000 new homes are currently being being built. In Childcraft, we've got 3,000 new residencies being built next door. We have a site in Potsdam. There's lots and lots of key sites we already own whereby the most difficult thing for self-storage companies to get the land, we've got it already. So we think that there's a real opportunity that we can exploit here. We think we can address a much broader range of the customer journey than anybody else in the market is able to do. And we think we can scale this quite quickly. And of course, the beauty of that is that because it's more high yielding than the core of what we do, this is naturally accretive. All we've got to do is hurry up and get on and do it. So yes, you will see it becoming a more important part of the mix at Sirius. And we'd like to think that it probably gets valued at a higher income multiple than maybe some of our more traditional services that we provide.

Okay. Maybe a second one just on your intention. You mentioned to seek a JV partner, bringing third-party capital on your defense assets. Do you have any idea today what sort of form you might want that JV to take in terms of economic ownership, economic split would the Titanium JV be considered for that? Or are you thinking this is with new third-party capital?

So look, it's very, very early. It's going to take us at least another year or 18 months to build the portfolio to the extent that we see component. It's important that you get to a certain level before you seek the partner because the type of partner you could get today is different from the type of partner that you would get when you're EUR 0.5 billion looking at getting beyond $1 billion. So it is really important to establish scale before you go and start to discuss JV with partners. And of course, part of that discussion would be their ambition as well as ours, and that would help drive out the proportionality of ownership. But one thing is clear to us. Sirius is never going to be a predominantly defense-related property company. We don't want that. It needs to be a proportion. It needs to be a minority proportion, not a majority proportion. However, the dilemma is that the opportunity in industrial property that defense presents, is far bigger than anything Sirius could digest with its own capital. So it needs to go and seek the partnership. And we don't need to decide on proportions yet. We don't need to make some of the key decisions you're alluding to at this point. But what is important is that we have a vision, we have a strategy, we set it out. And what is important is people understand that this will always be a minority, not the whole of what we do and that because of the size and scale of the opportunity, we think we're going to need to partner with third-party capital.

It's Matt Saperia from Peel Hunt. I have two questions. First one on capital recycling, views on sort of the quantum over the year edge. Is it going to be likely be more from them we've seen over the last couple of years? And then, I guess, perhaps somewhat of a follow on, Chris, the -- you've got the bond maturing imminently. Can you just talk us through thoughts not necessarily on that one, but the future refinancing over the next sort of 12 or 18 months?

So look, we're big believers in recycling. We recycle every year. We recycled in the year we're talking about here, we will recycle in the year that we're in. We're not going to put ourselves under pressure to sell specific amounts because that's how you get to really bad decisions in property. When you turn up and you either have to buy or you have to sell, that's where the person either buying or selling is able to sense that, and you're driven into corners that you never really should paint yourself into. But suffice it to say, Chris has talked about [indiscernible], there will be other recycling, both in the U.K. and in Germany. And we certainly would look at the cash we've got on our balance sheet, further recycling. Chris is going to talk about bonds, these are all sources of capital for the coming year and recycling will definitely be part of that. In the past, we've typically recycled GBP 30 million to GBP 50 million a year. I would think we're probably recycling more than that in this next 12 months.

As for future refinancing, yes, we have a '26 bond, which matures 3 weeks today. So -- and that is essentially dealt with from the liquidity that's on balance sheet at the moment. So moving ahead, looking towards November 28, there's GBP 465 million bond outstanding. And that's the last of our, what I call, a kind of low-cost debt. So that's part of the journey back to what I think covers a normal cost of debt of around 4%, which is where we've been issuing most recently. We are entirely euro-denominated and I would expect that to continue to be the case given particularly the differential between your swap rates and gilts has widened even further in recent months. As for how to deal with the November 28, it is, as ever, this is not an existential risk for us. We've got great support from the bond markets, from the banking markets. So it's really a case of how not if. And core to this, I wouldn't underestimate the importance of the RCF that we put in place this year just gone. So we've now got a EUR 300 million undrawn RCF strategically, you should expect us to look to run with the majority of that RCF undrawn, that is flexibility on the balance sheet, and that will be core to getting through bond refinancing windows in the most efficient way possible. So that we -- I don't ever want us to have a back against the wall having to meet an auditor's requirement for going concern sign off and having to be active in the bond market when it might not be the right moment to be active in the bond market. The RCF gives us a great deal of flexibility on the balance sheet to pick our timing as to how and when we tackle refinancing. So having said all that, we are a listed company, FTSE 250 listed. We can't leave things at the last minute. So you will see us always have sufficient liquidity on the balance sheet to deal with short-term refinancing I would expect us to be active dealing with the 28 bond at the back end of '27 and then thereafter, at least partially, and then thereafter be opportunistic about access the bond markets for refinancings in the run-up to it as well with a combination of the RCF as well.

[indiscernible] Just coming back to your self-storage ambitions across the U.K. and Germany, is the opportunity more in residential or commercial self-storage.

So look, there's another thing we've noticed. Traditional self-storage operators don't seem to be particularly fund of businesses. And we know this, not just from what they say in their presentations. But from the market research we've done, on businesses, particularly businesses at competing storage sites, where you literally stand outside the site and you say to people, have you ever been in the other form of storage and quite a lot of them will tell you, yes, they've been with traditional self-storage. And I'll tell you why they've left. And it's a mixture of reasons, including the amount of space they need, but those reasons also include that those businesses feel that as well. Now we welcome people from residencies into our self-storage facilities in the U.K. and in Germany. And we also welcome businesses. And whether we ended up with a situation whereby the majority of our customers were business customers rather than domestic, we would be comfortable with that. Of course, we'd be comfortable with that because if you look at what we are, we are essentially a business-to-business provider with through self-storage in particular, a very, very small amount of B2C. And again, that's very different from your typical self-storage providers who are typically B2C providers, who kind of have some B2B and want to be really careful they don't get too much of it. So we are, again, different in that respect. And we are happy to invite both markets, but what we recognize is that we offer greater value in the whole of the customer journey where B2B is concerned than we do [indiscernible]. Does that answer your question, [indiscernible]? Are you trying to get it something else?

No, I think that answers my question. I guess it follows then that you wouldn't consider any M&A opportunities for existing operators.

Well, I mean, look, we're a bit small in the self-storage kind of space to be thinking about any of the large people. And I can tell you right now, we have considered M&A options with much smaller operators. But it is sometimes quite difficult. When people are running what typically is a lifestyle type business, the concept of aligning themselves to a much bigger organization is sometimes a bridge too far. So smaller operators, yes, of course, we would consider that. But there is a very different mindset for -- between sort of starting up an operation of 1 sites and becoming part of and being aligned to a much larger corporate entity. So we'll try and build, we'll try and acquire. We'll try and do lots and lots of things. but we'll only do things if people are willing to be 100% aligned with us. We won't entertain any sort of special agreement for people to run side companies that we can't. We're a publicly listed company. And we're probably just better off to get on and build it ourselves.

Matthew Norris from Gravis, a great set of results. Slide 19 CapEx investment programs. Can you flesh out what the next -- this slide looks at the past 3 years, what about the next 3 years? What should we expect in terms of CapEx investment programs? How should the return on that investment differ in the future to the past? And what's the difference between the returns you generate in Germany and the returns you generate in the U.K., please?

Yes. So good question. So thank you. These numbers are purely for Germany. You should expect to see similar kind of returns going forward. And for instance, we are targeting doing at least 100,000 square meters of refurbishment each year for the next 3 years. So that's the opportunity within the value-add portfolio. We look to tackle that over a number of years. We sometimes get questions from shareholders saying, why not do more? Why not do it faster, et cetera. there is a risk-reward profile there. There is also the element that we want to be self-funding. So our CapEx spend comes from our FFO funds, both the dividend and reinvestment into the portfolio and the CapEx. So we want to maintain a, we want to be picking off the highest returning CapEx opportunities year-by-year, and they do move around from year to year. It depends what the market environment is at each micro location. But also we want to be self-funding as well. So -- but we are confident that we'll be able to achieve around the same returns. We target over 30% return on investment on our CapEx spend on the value add. And as you can see, that's what we've been achieving and more. As for the U.K., so the U.K. historically, when we acquired BizSpace were smaller sites, which just from the simple physical reality of those spaces, there just was not a significant amount of surplus space or structural vacancy within those sites. It's a typically more flex model historically in the U.K. You have to run a certain amount of vacancy to make a flex model work to achieve the higher returns on rate. And so there hasn't been historically significant amounts of opportunity. That is starting to change. So you're seeing that the spend in the U.K. on value-add CapEx was around GBP 8 million in the year just gone. That's been focused on the larger sites. So vantage point, for instance, we have been refurbishing holes at Vantage Point. We've successfully let One of the holes we took back from the range to an existing tenant on site, Big Doug, that CapEx spend allowed us to relet that space and at a 50% higher rate and essentially replaced 50% of the rents that we lost from the range with only 1/3 of the space being relet. So essentially, there's much more opportunity as well at a vantage point, for instance, we've put capital into one of the sites in the Northeast [indiscernible] and bus carriage, which we've put -- we've refurbished that space. We've subdivided that space and let at a significantly higher rate. we are achieving -- we're starting to achieve similar kind of returns in the U.K., but just from the size of the portfolio, it will continue to be a work in progress as well. But there is increasing amounts of opportunity in U.K. definitely.

It's James Carswell from Peel Hunt. Another question on self-storage. I'd be interested to hear a bit about, I guess, the synergies between your kind of existing core business and and self storage? I mean will it require much investment? Or has it required to date much investment in terms of new systems and new people? Or is it very much just the same operating platform and you almost kind of pointed in a slightly different direction.

So we've been in the self-storage market for over 10 years. Since bringing Tom on board a year ago, we have changed the system that we run self-storage off and we're 75% of the way through that integration. What's really important about that is that system gives us the ability to manage in excess of 25,000 customers. the previous system that we were on hadn't topped out yet, but it would have topped out way before we got to GBP 15 million. So that is essentially 75% of the way through, pretty close to being done. You do obviously have to invest to build a self-storage center. So that is where the investment is effectively coming. But what I would say to you is a lot of this is stuff we already have. So we already have the land. We already have the staff on site. We already now have Tom and the small team that he operates with. We now have the system that we need. Now that doesn't mean that we might not decide to buy some additional land or -- so -- but this is not a standing start at all we are servicing over 4,000 customers raising over GBP 6 million in revenue at 30 different locations in Germany and 4 in the U.K. And the change here is that we are saying, we are now building our own self-storage stores. The first one has already started at Berlin Garden felt. Now what is different in terms of the approach that we're taking compared to other providers? Do we just want to be a me too, absolutely not. We want to be something different. What's different about us? We are looking to attract businesses and consumers and where businesses are concerned, we're looking to attract them and take them all of the way through their storage journey, not just into a box and then off to a container. We want the lifetime value of that B2B customer. That's what is different about our self-storage offering.

It's Justin Bell from Deutsche Numis. Just a question on the investment market. You obviously walked away from one of your target assets due to price fairly recently and so looking to get up to GBP 500 million in defense. Are you seeing more competition in that market? And has that changed at all in the last couple of months? Or do you [indiscernible].

Sadly not. The reason that we walked away from the asset that you referred to, which is defense-related asset is because the owner revised their appraisal of what that defense asset is actually worth. It is amazing that given the fact that we draw that straight line between defense, industrialization and the home for industry being industrial property, it is extraordinary that we are not seeing more providers start to move into the defense space. But the fact is we are not coming across it. And the word I would use at the end of that sentence is yet because it's going to become unavoidable. And as and when it does come, we think the yields that you buy defense-related property on will contract quite considerably. Now that is not the investment case that we're buying on the investment case we're buying on is sticky, government-based long-let income into centers. That's why we're buying it. Valuation is merely just a benefit, shouldn't when it arrives. But if it does, then we're going to find probably the GBP 200 million of property that we already bought is actually already worth GBP 0.5 billion. I don't suspect it will arrive anytime soon. I suspect just like the physical stimulus, it will be a long and slow, drawn-out journey. But what we're interested in is the direction of travel. And as we see government spend more -- and as we see demand from defense companies increase, it is logical that they will pay more for the properties they sit inside and therefore, the value of those properties will increase. If the yield their value at changes, that's just an extra slice on top. But we're not seeing it at the moment.

Got a couple of questions from the Internet. The first -- sorry, the first, I think you've answered about the proportion of defense assets. And the second is, do you think the EUR 150 million FFO target you had is achievable for the current fiscal year already?

What do you think, Chris?

I think is...

I think, yes.

I think yes. I [indiscernible] want the analysts put [indiscernible], but yes.

Put it this way, we're not going to get to 149-point something and not find a way of getting all the way to the GBP 150 million.

Okay. What is the risk in the U.K. that the move-out versus moving rent gap starts impacting like-for-like rental growth so that the net effect is negative.

Look, I don't think we're going to allow it to become negative. But I think the risk is that it does continue to make the 5% that we look for as a minimum challenging as it has done this year. But I think we are capable with the platform that we have of making sure that it doesn't go negative. What we're really focused on is that 5% benchmark. Thank you very much, indeed.