IREIT GLOBAL Review 3Q16

IREIT Manager Fees

REIT Manager performance fees is based on a performance fee of 25.0% of the difference in DPU of financial year with the DPU in the preceding financial year multiplied by the weighted average number of Units in issue for such financial year.

Lease Expiry Profile

We will need to take a look at Münster South which the current lease will expired in 31 Mar 17, GMG Generalmietgesellschaft mbH, has exercised its lease extension option, and will continue to occupy 5 of the 6 floors for another 2.5 years upon expiry of the current lease.

The Manager is in the process of repositioning the Münster South building as a multi-tenanted property, and is concurrently in discussions with third parties to lease the vacant space.

This situation has shown us even with strong tenant, it is not always the tenant will extend and lease the whole building. Münster Campus lease extension will be in 2.5 years term.

The next lease expiry we will need to watch is from 2018 onward especially for Munster campus where the North building will expired in 2022 as it will be on 2.5 years term and concord will have 34% expired in 2018.

Average WALE is 6.2 years

1. 1.2% income due in 2017
2. 4.4% income due in 2018
3. 8.5% income due in 2019
4. 85.9% income beyond 2020  

IREIT Manager Changes

We will need to observe how the new IREIT manager will perform as it will open up the REIT to include Industrial and Retail Property as part of the assets.

The current IREIT Manager will be taken over by Tikehau Investment.

Gearing and Debt Profile

IREIT is currently geared around 42% with the following debt profile which should not be a concern at the moment till 2019

1. 23.8m due in 2017
2. 97.3m due in 2019
3. 77.5m due in 2020

Effective Interest currently is 2% with Interest Cover Ratio of 8.3 times which is pretty high cover.

Dividend Yield

There is no much track record of this REIT as it was only launch is Q3 2014 and with the changes of IREIT Manager, the past record might be no longer really relevant on how the new IREIT Manager will grow this REIT.

Currently yield around 8.5% which should be stable enough if

1. Europe Interest Rate remain low which as of current there is no pressure to hike the rate
2. Currency of EUR against SGD to remain stable
3. Able to lease out the vacant floor for Münster South however even it is not manage to lease out all, it should be temporary issues till the manager lease it out.

Risk

Few of the Risk I can think of

1. Tenant Concentration, even it is support by the strong tenant the case of Münster South has shown us there is always a risk when the key tenant lease expiry does not guarantee the tenant will extent the lease the whole building.
2. Currency Risk
3. Interest Rate
4. Jinquan Tong is currently hold more than 50% of the shares and this can be good or bad to the minority shareholder interest
5. Munster Campus will be one of the weakest property after the main lease expire in 2017 for South Building and 2022 for North Building as the lease term will be in 2.5 years