Saturday, 2 June 2018

First Reit Q1FY18 Overdue due dilligence

First REIT has been my largest allocation and recently saw a few articles highlight on the growing receivable which make me feel need to dig deeper due to my experience with RHT where Fortis has been delaying the payment.

First REIT generally has been a stable reit however with the recent news on the liquidity of the Sponsor (Lippo Karawaci) this also could end up like RHT case as the Indonesia assets account more than 95% of the total assets.

I emailed the investor relationship to ask about the growing receivable and it is indeed there has been a delay in collecting the rental in advance however it is not overdue like RHT case. The REIT manage is pro-actively managing the situation. With this, I will need to pay more attention if it will improve the rental collection rather than my past taking for granted on First REIT.

In general, I am ok with First Reit performance except the growing receivable and it has been quite sometime I want to reduce my allocation to the First Reit to balance out my reit allocation and finally this Thursday I sold out 47,200 shares. I will likely to reduce this further by another 50,000 shares.

Friday, 18 May 2018


There are few key item I need to keep in mind from the result

Munster South Building,

One of vacant floor since April 2017 has not yet being lease back. I got the reply from the investor relationship that there has been on-going enquiry and also negotiation on this vacant floor however nothing is materialised yet.

Berlin Campus,

IREIT is expected to be notified by Deutsche Rentenversicherung Bund pertaining to the lease break option around the middle of 2018. The office space that is subject to the lease break option represents approximately 6.1% of IREIT’s total gross rental income as at 31 March 2018.

The reply I got from IREIT is if this materialised then the loss of income will be only effective in mid 2019 and the expect to be notify some where in mid 2018, 1 year before the lease break effective.

Last amortisation schedule of  €1.275 million in May 2018,

IREIT will make the last partial loan repayment of €1.275 million in May 2018 in accordance with the loan amortisation schedule for the short-term loan facility provided by HSH Nordbank AG. As previously announced, the maturity date of the remaining principal of €18.5 million has been extended by two years from July 2018 to August 2020, without amortisation until the maturity date'

The current hedge implemented is at 1.63 which if we use the current result we should get similar dividend for FY18.
- Note at the time of writing the current exchange rate is at ~1.58, this will mean to translate lower distribution to the shareholder

For the lease,

FY19, 14.5% GRI to expire to take note.

For the Loan,

FY19, IREIT will need to refinance 50% of the current loan

In Summary

  1. FY18 result will be likely stable
    1. Potentially boost by amount save from amortisation of loan
    2. The current distribution is at 90%
  2. FY19 will be impacted by
    1. 14.5% lease expiry (including Berlin lease break)
    2. Loan refinancing
    3. EUR exchange rate
    4. Potentially supported by the amount saved from amortisation of loan

To note
The Manager is entitled to receive a performance fee of 25.0% of the difference in DPU of IREIT in a financial year with the DPU in the preceding financial year multiplied by the weighted average number of Units in issue for such financial year

Popular Posts