IREIT Global

 

Short Summary:IREIT is a Singapore real estate investment trust (“REIT”) established with the investment strategy of principally investing, directly or indirectly, in a portfolio of income-producing real estate in Europe which is used primarily for office purposes, as well as real estate-related assets. With an initial portfolio of four properties in Germany (the “IPO Portfolio”), IREIT is expected to have an initial primary focus on Germany and the United Kingdom.

The Deal:
Offering Price: S$0.88
The Offering: 167,733,000 Shares (Include 11,360,000 Offering Shares to Singapore Public)

Cornerstone Investors:

240,243,000 (57.3%) Mr Tong Jinquan and Summit SPV.

79,675,000 (19.0%) Mr Lim Chap Huat.

 

Forecast Dividend Yield:

2014: 3.78%

2015: 8.00%

2016: 8.00%

*Based on issue price of $0.88, 419,337,000 units after IPO.

 

 

Dividend Policy:

Distributions from IREIT to Unitholders will be computed based on 100.0% of IREIT’s Annual Distributable Income for the period from the Listing Date to the end of Projection Year 2016. Thereafter, IREIT will distribute at least 90.0% of its Annual Distributable Income on a semi-annual basis. The first distribution, which will be in respect of the period from the Listing Date to 31 December 2014 (“First Distribution”), will be paid by the Manager on or before 31 March 2015.

 

Strength

- First SGX-ST listed office REIT with an investment mandate solely focused on Europe, with an initial four portfolio of properties in Germany

- The four properties are strategically located key German cities (Bonn, Darmstadt, Munster, Munich)

- Recently built or refurbished high quality assets with freehold land titles

- Strong tenants anchored by a wholly-owned subsidiary of Deutsche Telekom with long-term leases and potential rental uplift

- Stable and growing distributions

- Platform for robust growth through active acquisition strategy

 

Weakness

- IREIT is reliant on the three properties leased to GMG for a substantial portion of its Net Property Income.

- IREIT is subject to the risk of non-renewal and non-replacement of leases, and the loss of anchor tenants or a significant number of tenants of any of the Properties, or a downturn in the businesses of anchor tenants or a significant number of tenants, could have an adverse effect on the business, financial condition and results of operations of IREIT.

- The potential increase in rental income pursuant to rent adjustment clauses for certain of the leases may not eventuate if the CPI does not cross the relevant prescribed hurdles, or the rental income may be adjusted downward if the CPI crosses the lower prescribed hurdle.

- Gearing of 30.58%

 

 

Looks like Singapore is becoming a market for more interesting IPOs. First with the Japanese Golf Trust with prospect that's not really good (my analysis here), resulting in the share tanking during the first day of trading. And now, we have an IPO with properties in Germany. This time though, I feel this IPO is worth the shot for an investment. Germany has always been the crown jewel of Europe. Its industry are mature and the properties on offer are all relatively new and looks refreshing, hence justifying the increase in rental gradually. The only point I do not like is the rental increase / decrease peg to Germany CPI. Luckily, right now, Europe is gradually coming out of its downturn and I don't really foresee something bad to happen to the economy in the next 1 year. On a bright side, Euro should be recovering with the economy becoming better, so that's a plus as well for the IPO. However, I hope the tit-for-tat political issue on-going with Russia over Ukraine will not drag on further as this will ultimately have an impact on the Europe economy in the long run. Overall, I feel this IPO is good and I will be participating in the public trench.

 

Some useful information:

[05 Aug 2014], [9.00 a.m.] : Opening date and time for the Public Offer.

[11 Aug 2014], [12,00 p.m.] : Closing date and time for the Public Offer.

[12 Aug 2014]: Balloting of applications under the Public Offer, if necessary.

[13 Aug 2014], [2,00 p.m.]: Commence trading on a “ready” basis.

 

Rating for investment: 7.5/10

Disclaimer: You may use the above information as a guide, but please invest based on your own judgment.