REAL estate investment trust (Reit) IReit Global : UD1U +1.18% on Thursday (Aug 3) posted a distribution per unit (DPU) of 0.93 euro cent for the six months ended Jun 30, following a preferential offering in July enlarging its unit base.

 

Its first-half DPU is 23.8 per cent lower than its restated DPU for the corresponding year-ago period, which stands at 1.22 euro cents after taking into account the new preferential offering units. The offering raised gross proceeds of around S$75.9 million to fund the acquisition of 17 retail properties in France and issued around 186 million new units. 

 

IReit Global&rsquo s distributable income fell by 24.3 per cent year on year (yoy) to 12.4 million euros (S$18.2 million), from 16.4 million euros. This was attributed to higher finance costs and tax expenses.

 

The Reit manager said the lack of car park and rental income due to the vacancy at Darmstadt Campus in Bonn, Germany, and one-off rent-free period in Bonn Campus, Munster Campus and Sant Cugat Green, impacted distributable income by 3.4 million euros and 1.4 million euros respectively. 

 

Its gross revenue decrease of 5.5 per cent to 28.4 million euros from 30.1 million euros was also due to these reasons, although it was partially offset by the increase in consumer price index indexation. 

 

Net property income also slipped 10.1 per cent to 22 million euros from 24.4 million, due to higher property operating expenses. 

 

The manager noted that high inflation rates, tighter lending conditions and uncertain macroeconomic conditions continue to impact the European real estate market and capitalisation rates, resulting in a broad-based decline in the independent valuations of IReit Global&rsquo s properties. 

 

The Reit&rsquo s portfolio valuation therefore dipped 2.9 per cent to 922.7 million euros, as at Jun 30, from 950.5 million euros as at Dec 31, 2022. 

 

Overall occupancy also declined to 88.7 per cent, from 95 per cent a year earlier, as the Darmstadt Campus had been vacant since December 2022. 

 

Louis d&rsquo Estienne d&rsquo Orves, chief executive of IReit Global&rsquo s manager, noted that the departure of the large single tenant at Darmstadt Campus at end-November 2022 &ldquo highlighted the importance of active asset management and diversification&rdquo in its portfolio. 

 

Despite this, the Reit will maintain a &ldquo healthy&rdquo aggregate leverage of 34.2 per cent after the acquisition of the 17 retail properties in France. 

 

The manager noted that it was well below the regulatory limit of 50 per cent, providing &ldquo ample debt headroom&rdquo for future growth opportunities. 

 

IREIT Global has raised some $75.9 million in gross proceeds from its preferential offering. The offering, which was closed on July 11, was subscribed by 134.7% with valid acceptances and excess applications totalling 250.7 million preferential offering units received.

 

There were only 186.099 million units available under the offering.

 

The proceeds will be used to mainly fund the acquisition of a portfolio of 17 retail properties located across France. IREIT announced that it agreed to acquire the properties for EUR76.8 ($112.2 million) on June 1.

 

The preferential offering units will be made to the REIT&rsquo s existing unitholders at a preferential offering ratio of 161 units for every 1,000 existing units. The units will be issued at 40.8 cents apiece, which represents a discount of around 9.6% to the volume weighted average price (VWAP) of 45.15 cents per unit on June 19, when the preferential offering was launched.

 

Tikehau Capital and City Developments Limited (CDL), the REIT&rsquo s joint sponsors, and the REIT manager have each accepted, subscribed and paid in full for its total provisional allotment of the units corresponding to their direct interests in IREIT.

 

&ldquo The strong support we have received for the preferential offering and the faith that our unitholders and our joint sponsors, Tikehau Capital and City Developments Limited, have placed in us and our portfolio are truly humbling. As we forge ahead on our path towards enhancing IREIT&rsquo s portfolio diversification, we will continue to leverage on the expertise of our joint sponsors, as well as identify yield-accretive acquisition opportunities that will strengthen our portfolio performance, for the benefit of all our stakeholders,&rdquo says Louis d&rsquo Estienne d&rsquo Orves, CEO of the manager.

Post-acquisition, IREIT will maintain a healthy aggregate leverage of 33.3%, which is well below the aggregate leverage limit of 50%. The REIT&rsquo s DPU is expected to increase to 2.31 Euro cents while its net asset value (NAV) will stand at 50 Euro cents.

 

According to IREIT, the preferential offering units are expected to be listed and quoted on the Mainboard of the SGX-ST with effect from 9am on July 19.

 

RHB Bank Berhad, acting through its Singapore branch, is the sole lead manager and underwriter for the preferential offering.

 

IREIT Global has raised some $75.9 million in gross proceeds from its preferential offering. The offering, which was closed on July 11, was subscribed by 134.7% with valid acceptances and excess applications totalling 250.7 million preferential offering units received.

 

There were only 186.099 million units available under the offering.

 

The proceeds will be used to mainly fund the acquisition of a portfolio of 17 retail properties located across France. IREIT announced that it agreed to acquire the properties for EUR76.8 ($112.2 million) on June 1.

 

The preferential offering units will be made to the REIT&rsquo s existing unitholders at a preferential offering ratio of 161 units for every 1,000 existing units. The units will be issued at 40.8 cents apiece, which represents a discount of around 9.6% to the volume weighted average price (VWAP) of 45.15 cents per unit on June 19, when the preferential offering was launched.

 

Tikehau Capital and City Developments Limited (CDL), the REIT&rsquo s joint sponsors, and the REIT manager have each accepted, subscribed and paid in full for its total provisional allotment of the units corresponding to their direct interests in IREIT.

 

&ldquo The strong support we have received for the preferential offering and the faith that our unitholders and our joint sponsors, Tikehau Capital and City Developments Limited, have placed in us and our portfolio are truly humbling. As we forge ahead on our path towards enhancing IREIT&rsquo s portfolio diversification, we will continue to leverage on the expertise of our joint sponsors, as well as identify yield-accretive acquisition opportunities that will strengthen our portfolio performance, for the benefit of all our stakeholders,&rdquo says Louis d&rsquo Estienne d&rsquo Orves, CEO of the manager.

Post-acquisition, IREIT will maintain a healthy aggregate leverage of 33.3%, which is well below the aggregate leverage limit of 50%. The REIT&rsquo s DPU is expected to increase to 2.31 Euro cents while its net asset value (NAV) will stand at 50 Euro cents.

 

According to IREIT, the preferential offering units are expected to be listed and quoted on the Mainboard of the SGX-ST with effect from 9am on July 19.

 

RHB Bank Berhad, acting through its Singapore branch, is the sole lead manager and underwriter for the preferential offering.

 

IREIT Global is seeking to raise gross proceeds of around $75.9 million via a preferential offering.

 

The proceeds will be used to mainly fund the acquisition of the 17 retail properties located across France. IREIT announced the acquisition of the properties on June 1. The acquisition will cost the REIT a total of EUR90.9 million ($133.1 million) including fees and taxes.

 

Through its preferential offering, the REIT will offer up to 186.10 million units to its existing unitholders at a preferential offering ratio of 161 preferential offering units for every 1,000 existing units. The preferential offering units will be offered at an issue price of 40.8 cents apiece, representing a discount of 9.6% to the volume weighted average price (VWAP) of 45.15 cents per unit on June 19.

 

The REIT&rsquo s joint sponsors, Tikehau Capital and City Developments Limited C09 0.14% (CDL), have irrevocably undertaken to subscribe each of their pro-rata allotment in full. CDL&rsquo s wholly-owned subsidiary, City Strategic Equity Pte. Ltd. (CSEPL), has also further undertaken to subscribe for excess units in the preferential offering such that its total subscriptions will amount to a maximum of $40.0 million.

 

Overall, the REIT&rsquo s joint sponsors and manager have pledged to subscribe up to a maximum of approximately $62.1 million or 81.8% of the preferential offering. CSEPL will rank last in the allocation of excess unit applications in the preferential offering.

 

RHB Bank Berhad (Singapore) has been appointed as the sole lead manager and underwriter for the preferential offering.

 

&ldquo Our preferential offering presents an opportunity for our unitholders to further participate in IREIT&rsquo s growth. The preferential offering is expected to increase market capitalisation by approximately 14.4% to $601.9 million, enhancing the probability of inclusion in key equity indices. This offers benefits of a wider and more diversified investor base, higher trading liquidity, increased analyst coverage and potential positive re-rating,&rdquo says Louis d&rsquo Estienne d&rsquo Orves, CEO of the manager.

 

&ldquo Our joint sponsors, Tikehau Capital and City Developments, continue to play a pivotal role in our portfolio diversification strategy implemented since 2019 by supporting our preferential offering, further enhancing IREIT&rsquo s portfolio and income resiliency for the benefit of all our unitholders,&rdquo he adds.

IREIT Global : 8U7U 0% is planning to acquire a portfolio of 17 retail properties in France for about 76.8 million euros (S$112.2 million) through its wholly-owned subsidiary.

 

To partially fund the deal, the Europe-focused real estate investment trust (Reit) plans to launch a preferential offering to be announced at a later date, said its manager, IReit Global Group, on Thursday (Jun 1).

 

The total acquisition cost, including fees and expenses, is about 90.9 million euros.

 

The transaction will also be financed through external bank borrowings and borrowings from Tikehau Capital, which owns IReit Global Group.

 

The Reit secured a 15-year lease with a German federal government body for approximately 25 per cent of Darmstadt Campus in Frankfurt in April this year.

 

Assuming that the campus is fully vacant, IReit&rsquo s manager estimates distribution per unit (DPU) accretion to unitholders to come in at around 2 per cent based on audited FY2022 financials, before the preferential offering.

 

However, DPU accretion is estimated to be flat after the preferential offering of new units and the acquisition.

 

Assuming that the acquisition and issuance of preferential offering units were completed on Dec 31, 2022, the Reit&rsquo s aggregate leverage will increase to 33.3 per cent from 32 per cent.

 

The new portfolio is also expected to generate a net property income yield of 7.9 per cent.

 

The properties have a total gross lettable area of 61,756 square metres, an overall occupancy rate of 100 per cent, and a weighted average lease expiry by gross rental income of about 6.8 years as at Mar 31.

 

Among the new properties, 13 have a freehold land tenure, while the remaining four are leasehold.

 

The new properties are fully leased to a wholly-owned subsidiary of multinational variety store chain, B& M European Value Retail.

 

Upon completion of the acquisition, the properties will become part of IReit&rsquo s retail parks (out-of-town) asset class of shops or facilities that are situated away from the centre of a town or city.

 

Louis d&rsquo Estienne d&rsquo Orves, chief executive officer of the Reit&rsquo s manager, said: &ldquo In this macroeconomic environment marked by high inflation, the proposed acquisition is in line with our strategy of strengthening our exposure to index-linked assets in established European markets, supported by a strong blue-chip tenant.&rdquo

 

He also expects the continued success of the Reit&rsquo s retail parks properties due to their &ldquo attractive yields for investors&rdquo and &ldquo lower rental costs for tenants&rdquo , compared with other asset classes.

IREIT Global on Tuesday (Apr 25) reported 87 per cent occupancy rates for Q1 2023, down slightly from 88.3 per cent in Q4 2022. This was mainly due to lower occupancy at Spanish properties Il-lumina and Sant Cugat Green.

 

Rents were up 3.4 per cent in the quarter compared to the year prior, and was a result of step-up rents and indexing to the consumer price index.

 

Weighted average lease expiry was 4.8 years in Q1 2023. The aggregate leverage for the quarter stood at 32.3 per cent compared to 32 per cent in Q1 2022.

 

The real estate investment trust (Reit) said that weighted average interest rates are at 1.9 per cent per annum, with 96.6 per cent of bank borrowing hedged. There are also no near-term refinancing requirements, and all borrowings will mature from 2026 onwards.

 

Looking ahead, IReit Global said the office market in Europe is slowing down, with office investments falling 21 per cent year on year in 2022. It added that high financing costs, new workplace practices and energy regulations will dampen demand in 2023. An uncertain economic outlook and high operating costs will also result in higher vacancy and muted leasing activity.

 

Analysts at RHB Group Research and DBS Group Research are mixed on IREIT Global UD1U 1.01% , following the release of its FY2022 results which missed expectations.

 

RHB analyst Vijay Natarajan has downgraded IREIT to &ldquo neutral&rdquo from &ldquo buy&rdquo , trimming his target price to 55 cents from 63 cents previously.

 

Natarajan notes that IREIT&rsquo s 2HFY2022 DPU fell 15% y-o-y on higher operating expenses, increase in administrative expenses as well as payment of management fees, which were fully in cash. As a result, the trust&rsquo s FY2022 DPU fell short, accounting for 94% of its forecast.

 

DBS analysts Dale Lai and Derek Tan kept their &ldquo buy&rdquo call and target price of 60 cents despite IREIT&rsquo s FY2022 DPU being 3.2% below their projections. They add that although the DPU came in slightly below their estimates, they believe that there is earnings growth going forward.

 

&ldquo IREIT&rsquo s leases are stable and expected to rise gradually, as they are mostly pegged to CPI. We believe IREIT is positioned to benefit from rental escalations that are well spread out over the next few years and has the potential to optimise occupancy rates at several properties,&rdquo the analysts say.

 

Natarajan highlights that IREIT&rsquo s leasing progress is slow at its Darmstadt Campus, with no leases signed so far after being vacated by Deutsche Telekom (DT) at the end of November 2022 although the trust is in discussion with several tenants from both the public and private sector with the intention to multi-let the asset. The lack of leasing progress is due to a combination of weak economic outlook and higher supply in the locality, with DT vacating few other premises, he notes.

 

&ldquo The lease on the Berlin campus &mdash which is fully occupied by Deutsche Rentenversicherung Bund (DRB) &mdash will expire mid next year. Management is working closely with the tenant to understand its needs, while exploring all options such as to extend or bring in new tenants if DRB decides to vacate.

 

&ldquo As the asset is significantly under-rented, there is potential upside if it re-lets, yet this may result in a sharp drop in short-term income during backfilling period as well as a need to pump in higher capex,&rdquo says Natarajan.

 

DBS has revised its projections to account for some organic growth in rent, while also assuming about 70% of the space at Darmstadt Campus would be backfilled during the course of the year.

 

On the capital management front, Lai and Tan believe that IREIT would continue to enjoy stable financing costs &mdash this is as substantially all loans have been hedged to fixed rates through interest rate swaps and interest rate caps, they add. Additionally, there are no loans due to mature until FY2026, they highlight.

 

On a valuation basis, DBS continues to like IREIT given its relatively attractive forward yield of about 7%.

 

Meanwhile, RHB has lowered its FY2023-FY2024 DPU estimates by 4% and 6% to factor in a lower occupancy.

 

RHB Research downgraded its call on IReit Global : UD1U +0.97% to &ldquo neutral&rdquo from &ldquo buy&rdquo , lowering its target price to S$0.55 from S$0.63, on expectations of lower distribution per unit (DPU) in the near term due to declining occupancy.

 

This came after the real estate investment trust&rsquo s (Reit) results for H2 of FY2022 and the full year missed RHB&rsquo s estimates due to higher costs, and lower occupancy mainly because of a vacant Darmstadt Campus after its sole tenant moved out in end-November 2022.

 

In a report on Tuesday (Feb 28), analyst Vijay Natarajan noted that backfilling of the Darmstadt Campus was &ldquo rather slow&rdquo , attributing the lack of leasing progress to a weak economic outlook and higher supply in the locality.

 

He also highlighted concerns over the Reit&rsquo s Berlin Campus, whose sole tenant&rsquo s lease is due to expire in mid-2024.

 

&ldquo It is uncertain at this juncture if the tenant will continue to stay,&rdquo said the analyst.

 

&ldquo As the asset is significantly under-rented there is potential upside if it re-lets, yet this may result in a sharp drop in short-term income during backfilling period as well as a need to pump in higher capital expenditure.&rdquo

 

To factor in expected lower occupancy in the near term, RHB cut its FY2023 DPU forecast by 4 per cent and FY2024 forecast by 6 per cent.

 

Nonetheless, Natarajan said he continues to like the Reit for its strong balance sheet, as its gearing remains the lowest among its Singapore Reit peers at about 32 per cent. This would provide debt headroom to &ldquo pounce on good opportunities&rdquo .

 

In his view, IReit Global&rsquo s fully hedged debt profile until end-2026 means it will be minimally impacted by rate increases.

 

The analyst added that IReit&rsquo s portfolio leases are &ldquo pegged to step-up rents and CPI (consumer price index) indexation&rdquo . Therefore, there may be an upside for the Reit from current high inflation levels in its key markets.

THE manager of Europe-focused IReit Global : 8U7U 0% reported a distribution per unit (DPU) of 1.28 euro cents for the six months ended Dec 31, 2022, down 14.7 per cent from 1.50 euro cents for the same period in 2021.

 

This was due mainly to greater property operating expenses related to higher portfolio vacancy, increased tax costs, and management fees being 100 per cent paid in cash (up from 50 per cent in cash in FY2021), the real estate investment trust&rsquo s (Reit) manager said on Thursday (Feb 23).

 

Gross revenue rose 10.7 per cent to 31.6 million euros in the period, while net property income (NPI) grew 5.2 per cent to 24.4 million euros.

 

The Reit manager said that the increase in revenue in H2 2022 was due to contributions from its acquisition of 27 Decathlon retail properties across France in April 2021, and from the Reit&rsquo s Parc Cugat property in Spain.

 

For the full year ended Dec 31, 2022, DPU fell 8.2 per cent to 2.69 euro cents, while gross revenue gained 18.2 per cent to 61.7 million euros. NPI for FY2022, meanwhile, registered a 14.9 per cent increase to 48.8 million euros.

 

IReit&rsquo s weighted average lease expiry improved to five years as at Dec 31, 2022, from 3.8 years in 2021. This was the result of a six-year lease extension for its Bonn Campus, along with a 12-year lease for a data centre space at its Sant Cugat Green property in Spain, the manager said.

 

Portfolio occupancy, however, was down to 88.3 per cent as at Dec 31, 2022, from 95.7 per cent in 2021. This was due mainly to the Reit&rsquo s Darmstadt Campus in Germany being vacant since December, after the departure of its sole tenant, Deutsche Telekom.

 

The vacancy contributed partially to IReit&rsquo s portfolio value dipping 2.5 per cent from 2021, to 950.5 million euros in 2022. This &ldquo may have some impact&rdquo on future distributions, the Reit manager said.

 

&ldquo We will continue to proactively engage our existing tenants to retain them, as well as focus on filling up the vacant spaces at IReit&rsquo s portfolio assets in 2023,&rdquo said chief executive Louis d&rsquo Estienne d&rsquo Orves.