TICKER SYMBOL: UD1U.SI
MARKET CAP: S$437 million (Updated 9 July 2015)
MARKET PRICE / SHARE: S$0.71 (Updated 9 July 2015)
IREIT Global (IREIT) is the first SG-REIT investing in Europe office real estate. IREIT was listed in Aug 2014 and is supported by Shanghai Summit Pte Ltd – owned by Mr Tong Jinquan, a 20-year property veteran. In addition, Mr Lim Chap Huat, co-founder of Soilbuild Group, has also taken stakes in IREIT Global.
IREIT’s portfolio comprises of four main office properties located in Germany, i.e. Bonn, Darmstad, Munster and Munich area, with NLA of around 122,000 sqm. These properties are the Bonn Campus, Darmstatdt Campus, Munster Campus and Concor Park respectively, with the three campuses being fully rented to GMG, a wholly-owned subsidiary of Deutsche Telekom. Concor Park consists of key tenants such as STMicro-electronics, Allianz, Ebase and Yamaichi. As at Mar 2015, IREIT has a total asset size of EUR304 million with its investment portfolio valued at EUR291million with a total of 13 tenants. Capital structure of the REIT is sound with total debt / investment properties at 32% and a high interest cover of 13x.
One of the key features of the REIT is that it allows investors to participate in office properties in Germany, supported by the backing of financially strong tenants such as Deutsche Telekom (77%). and STMicro-electronics (7.1%). According to Independent Market Research Consultant, Germany has the largest real estate investment market in the Eurozone at EUR600 billion in 2012. Similar to the Singapore property market, investors tend to view the German property market as a safe haven due to its nature of stability, liquidity and steady growth potential.
IREIT concentration risk is high as it is heavily reliant on three properties being leased to GMG which consists a substantial portion of the REIT’s net property income (NPI). A sudden withdrawal or failure from GMG to service the rental income would adversely impact IREIT’s profits. Since Deutsche Telekom is the sole tenant of the Deutsche Telekom Properties, IREIT’s financial profile and operations has a direct correlation to Deutsche Telekom’s business operations.
In addition, a sudden loss of key tenants could result in very “lumpy” vacancy issues and it usually takes time to look for potential office tenants, especially during a major downturn. Currently, all four properties are fully occupied with the aggregate portfolio‘s weighted average lease expiry (WALE) at 6.2 years.
Source: Capital IQ
Source: Capital IQ
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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.