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Protective lease management keeps IREIT Global at 'buy'

Samantha Chiew
Samantha Chiew • 2 min read
Protective lease management keeps IREIT Global at 'buy'
IREIT Global's outlook is looking pretty good.
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SINGAPORE (May 22): It seems that IREIT Global is facing no major disruptions to its portfolio in 1Q20, despite less than 2% of its tenants requesting rent assistance. With this RHB Group analyst Vijay Natarajan is keeping his “buy” recommendation on IREIT Global with a target price of 83 cents.

On top of that, the REIT only has a minimal 3% of leases expiring over the next two years, which should provide some income stability. There were also no rent arrears in 1Q20 and 98% of April’s rent has also been collected. With blue chip tenants accounting for more than 80% of IREIT’s portfolio, there should be minimal rent collection risks.

The REIT’s portfolio occupancy for 1Q20 also remained steady at 94.7% with near-full occupancy maintained at its German assets. A key tenant – Deutsche Telekom unit GMG Generalmietgesellschaft mbH – has exercised its break option to return two out of six floors at the Münster Campus on Feb 28, 2021. The manager has already identified and secured a 9-year lease with another tenant for the entire 3,600sqm space, or 13% of the lettable area commencing Mar 2021.

“We understand the tech/finance sector-based tenant is looking at further expanding its space, indicating the desirable nature of the asset,” says Natarajan.

Meanwhile, the REIT has appointed a new CEO, Louis d'Estienne d'Orves. He joined Tikehau’s real estate team in Nov 2018. As Executive Director, his responsibilities included sourcing and executing deals across Europe in the office, retail, hotel, and residential sectors, and securing external debt financing and capital raising for co-investment opportunities and funds.

Some 86% of IREIT’s debt will expire in 2026 and is fully hedged at an all-in cost of about 15% per annum. On the EUR32 million bridging loan from a strategic investor expiring in May 2021, the manager has indicated it will use a combination of debt and equity to repay this – along with acquiring the 60% stake balance in the Spanish portfolio.

Currently, IREIT’s gearing stands at 38% with a healthy interest cover of 7.8 times.

As at 12.25pm, units in IREIT Global are trading at 66 cents or 0.8 times FY20 book, which Natarajan believes is relatively attractive. The counter has a dividend yield of 8.4%.

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