‘We knew this was coming’: Sirius CEO on preparing for inflation

For an eighth consecutive year, FTSE 250 business park investor Sirius Real Estate has delivered a double-digit total shareholder return, this time at 20%. Chief executive Andrew Coombs (pictured) intends to ensure that track record continues – and isn’t about to let macroeconomic challenges get in the way. “I don’t want to be arrogant about this, because inflation is unpleasant for lots of people. But we have known that inflation was going to come for many years, and Sirius has been planning for it for quite a long time,” Coombs said. “In fact, I’m surprised it’s taken this long to get here.” For Coombs, this degree of planning means that inflation is not necessarily to be feared – in fact, the chief executive added, with the right set-up there is even a period in which a company like Sirius “can actually increase returns as inflation starts to come in”. He points to the REIT’s efforts to lock in borrowing costs. “We moved very quickly last year to lock in 75% of our debt at a 1.4% interest rate fixed for 4.3 years remaining,” he said. “So we’ve got that runway of time that says our cost of debt remains at what I would call pre-inflationary levels while inflation kicks in.” And as Coombs noted, Sirius “didn’t stop there”, locking in energy pricing 15 months ago until the end of next year. “We’ve got more than 90% of gas and electricity locked in until December 2023,” he said. “Locking in 15 months ago means we are locked in at a quite low number.” The result is that, while many companies are “screaming about inflation” as Coombs put it, the Sirius chief executive is at ease with the situation the REIT faces. “We’re not in the business of trying to profiteer off the back of rising prices,” he added. “But we do have, where costs are concerned, quite a significant advantage because of that debt and because of those utilities.” The company has also been analysing relationships in its supply chain, for example locking in facilities management costs as far ahead as possible. “It’s all been about how we secure certainty over our costs until December 2023,” Coombs said. “By the time we get [there], I’m not suggesting that inflation will be over, but I think things will be more stable and you’ll be able to sit down and have conversations with people around things [having] settled at X percent, and the direction of travel being either consistent or downward.  “We would be surprised if, by December 2023, we were at 8% inflation and heading towards 16%.” To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews