Is IREIT Global Worth Investing In?

Listed on 13 August 2014, IREIT Global (SGX:UD1U) is a SGX-REIT which invests in a portfolio of five office assets in Germany. As of 14 September 2019, IREIT Global is worth S$ 475.0 million in market capitalisation. In this article, I’ll cover on its portfolio, latest financial results and valuation figures. Therefore, here are 11 main things to know about IREIT Global before you invest. 

• Berlin Campus
  It comprises of two fully connected 8- and 13-storey buildings, which is designed to the requirements of Deutsche Rentenversicherung Bund or DRV, its anchor tenant since 1994. DRV is currently the largest statutory pension insurance fund in Europe and is contributing as much as 34.2% of the REIT’s gross rental income (GRI). Inclusive of retail tenants based on the ground floor of the building, Berlin Campus is 100% occupied as of 30 June 2019. Since being acquired on 6 August 2015, Berlin Campus has generated €10.8 million in revenues per annum from 2016 to 2018 and is valued at €195.1 million as of 30 June 2019.
  
  
  
• Bonn Campus
  It consists of four 2-, 4- and 6-storey blocks, which is currently leased to GMG Generalmietgesellschaft mbH (GMG), its sole tenant. GMG is fully owned by Deutsche Telekom, a leading telecommunication company of the world presently. Bonn Campus has generated €6-7 million per year in revenue since its listing and is valued at €107.8 million as of 30 June 2019.
  
  
  
• Darmstadt Campus
  It consists of two 5- and 7-storey blocks, which is currently tenanted by GMG, its sole tenant. Darmstadt Campus has generated €5.9 million in revenue a year and is valued at €86.4 million as of 30 June 2019.
  
  
  
• Munster Campus
  It consists of two independent office buildings which is currently leased to GMG, its sole tenant. Munster Campus generated €3.5-4.0 million in revenue a year and is valued at €49.5 million as of 30 June 2019.
  
  
  
• Concor Park
  It is a 5-storey building which is leased to 12 tenants. To name a few, its key tenants include ST Microelectronics, Allianz and ebase GmbH which forms a part of the FNZ Group, an international fintech firm. Since IREIT Global was listing, Concor Park generated €4.0-4.5 million in revenue a year and is valued at €70.5 million as of 30 June 2019.  

• Financial Results
  Upon its acquisition of Berlin Campus in Q3 2015, IREIT Global made as much as €8.5-9.0 million in revenues a quarter. From it, it generated as much as €6.0-7.0 million in income available for distributions a quarter and thus, delivering stable distributions to its unitholders. The REIT had distributed 100% of its income available for distributions until Q4 2016. Subsequently, it had reduced its distribution levels to 90% beginning in Q1 2017, hence, causing a slight fall in distribution per unit (DPU) in Q1 2017 from Q4 2016.
  

Source: IREIT Global’s Quarterly Reports

• Balance Sheet Strength
  As of 30 June 2019, IREIT Global has gross borrowings outstanding of € 200.8 million and total assets of €554.9 million. As such, the aggregate leverage of IREIT Global stands at 36.2% presently. Its effective interest rate is 1.5% per year and its current weighted average debt to maturity stands at 6.6 years. IREIT Global had used interest rate swaps to hedge interest rates of 100% of its new loan facilities, hence, protecting itself against any adverse changes in interest rates in the future.
  
  
  
• Lease Profile
  As of 30 June 2019, IREIT Global derives income from five main tenants where its weighted average lease expiry (WALE) is 4.6 years. More than 95% of its leases would not expire until financial year (FY) 2022. Here, I will provide a breakdown of the tenants and their contribution in terms of their gross rental income (GRI) as of 30 June 2019.
  
  

No.	Key Tenants	GRI Contribution (%)
1	GMG – Deutsche Telekom	52.3%
2	Deutsche Rentenversicherung Bund	34.2%
3	ST Microelectronics	4.2%
4	Allianz Handwerker Services GmbH	3.7%
5	eBase	3.3%
6	Others	2.3%
7	IREIT Global	100.0%

Source: Citi-REITAS-SGX C-Suite S-REITS and Sponsors Forum 2019

• Strategic Investors and Sponsors
  On 30 April 2019, City Development has acquired a 50% interests in the REIT manager and 12.4% stakes in IREIT Global. Thus, it has emerged as a substantial unitholder of IREIT Global. Presently, the main unitholders of IREIT Global are as follows:
  
  

No.	Unitholders	Unitholdings (%)
1	Tong Jinquan (Both Direct & Indirect)	34.67%
2	Tikehau Investment Management Asia Pacific Pte Ltd	16.44%
3	City Developments Ltd (CDL) (Indirect)	12.40%

Source: News Announcements of IREIT Global as of 14 September 2019


Tong Jinquan
Mr. Tong is appointed as a Non-Executive Director of IREIT Global. He is the Chairman of the Summit Group, a China-based conglomerate which is mainly involved in real estate development and investments. Also, he is a substantial unitholder of ESR-REIT, a SGX-REIT that primarily invests in industrial properties across Singapore. 


Tikehau
Founded in 2004, it is an asset management and investment group that has €23.4 billion in assets under management (AUM). €8.0 billion of it consists of real estate investments. In addition to its 16.44% interests in the REIT, it co-owns 50% of the IREIT Manager with CDL.

CDL
It is a well-known real estate conglomerate listed on the SGX with a big network spanning 103 locations in 29 nations worldwide that is valued at S$ 8.95 billion in market capitalisation presently.

• P/B Ratio
  As of 14 September 2019, IREIT Global is trading at S$ 0.75 a unit. Thus, its P/B Ratio is 1.00, based on its net asset value (NAV) of S$ 0.75 a unit as of 30 June 2019. It is slightly lower than its 4-year average of 1.08.
  
  
  
• Distribution Yield
  Over the last 12 months, IREIT Global has paid out 5.78 Singapore cents in distribution per unit (DPU). Thus, its distribution yield is 7.71% a year presently, marginally lower than its 4-year average of 7.97% a year. 

VIA’s Verdict 

Since its listing, IREIT Global has delivered stable financial results and DPU to its existing unitholders. This has caused its unit price to be relatively flat since year 2017 after a fall from S$ 0.90 in 2015 when it was first listed in 2014.

The question is: ‘Should you invest in IREIT Global at S$ 0.75 a unit today?’ 

That, I’ll leave you to decide. 

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