CFA Society Singapore
SINGAPORE (May 26): IREIT Global’s manager has accepted a non-binding offer from Tikehau Capital, a pan-European asset management firm and investment group, to acquire 80% of the manager.
The offer from Tikehau Capital is non-binding, and is subject to certain conditions, including the receipt of regulatory approvals and due diligence to be conducted by Tikehau Capital, according to the announcement. Tikehau Capital has some 7.55 billion euros in assets under management of which 794 million euros are in real estate.
“Tikehau’s extensive pan-European network combined with strong local operational expertise and existing pipeline of real estate transactions in Europe is expected to contribute significantly to IREIT’s growth. The proposed acquisition would also enable Tikehau Capital to further consolidate its position in Asia from Singapore and to expand its pan European real-estate footprint,” says Tikehau Capital’s spokesman in a statement.
However, Religare Research wonders why Tikehau would want to own a majority stake in the manager without owning a controlling stake in IREIT Global itself. “It can be ousted anytime,’ according to Religare.
When contacted, Itzhak Sella, CEO of IREIT Global’s manager who also owns 16% of the manager, says, “Due diligence will take four to five weeks, and Monetary Authority Licensing a few months.” All REIT managers must hold a Capital Markets Services Licence by the MAS.
Chinese property tycoon Tong Jinquan holds 65% of IREIT Global’s manager, and some 49% of the units in IREIT Global while Lim Chap Huat, founder and owner of Soilbuild Group holds 19% of both manager and REIT. Tong also owns 31% of Viva Industrial Trust’s manager and 49.5% of units in VIT.
IREIT Global in turns holds 441.4 million euros of five freehold office campus type properties in Berlin, Bonn, Darmstadt, Münster and Munich, in Germany. For the three months to March 31, it announced a distribution per unit equivalent to 1.58 cents giving an annualised DPU of 8.8%. Units in IREIT Global are trading at a 16% premium to its net asset value stood of 41 euro cents or 62 cents. At 1.07pm, units of IREIT Global were trading at 72 cents.
Management fees for the three months to March 31 rose 46.7% y-o-y to 641,000 euros or an annualised 2.56 million euros ($3.9 million) largely due to an enlarged asset base which grew by 52% over the year. The REIT’s base fees are 10.0% of IREIT’s annual distributable income and performance fee is 25% of DPU growth.
About two years ago, Canadian REIT managers were internalised at around 10 times earnings. IREIT Global’s manager does not announce earnings.
Analysts are expecting Tong to divest of his 49% stake in IREIT Global. Assuming he sells both manager and REIT units, he could net more than $200 million.