IREIT Global Review @ 2 March 2023

Basic Profile & Key Statistics

• Main Sector(s): Office & Retail
• Country(s) with Assets: Germany, Spain & France
• No. of Properties (exclude development/associate/fund): 37

Key Indicators

Performance Highlight

Gross revenue and NPI improved yoy mainly due to contribution from French Portfolio and Parc Cugat which were acquired in 3Q 2021, and also due to step-up rents and CPI indexation. However, income available for distribution has declined yoy mainly due to higher finance costs, 100% management fees payable in cash (vs 50% for 1H FY21), significantly higher administrative costs and other trust expenses, higher tax expenses and straight-line rent adjustment.

Rental Reversion

Rental Reversion is at positive 5.2%.

Distribution Breakdown

• Distributable Income Breakdown:
• 100% from Operation
• Distribution = 90% of Distributable Income

Related Parties Shareholding

• REIT Sponsor's Shareholding: Above median for more than 20%
• REIT Manager's Shareholding: Below median for more than 20%
• Directors of REIT Manager's Shareholding: Above median for more than 10%

Lease Profile

• Occupancy: Below median for more than 5%
• WALE: Above median for more than 10%
• Highest Lease Expiry within 5 Years: Above median for more than 10%; Falls in 2024
• Weighted Average Land Lease Expiry: 100% freehold properties

Debt Profile

• Gearing Ratio: Below median for more than 10%
• Cost of Debt: Below median for more than 20%
• Fixed Rate Debt %: 100%
• Unsecured Debt %: 0%
• WADM: Above median for more than 20%
• Highest Debt Maturity within 5 Years: Above median for more than 20%; Falls in 2026
• Interest Coverage Ratio: Above median for more than 20%

Diversification Profile

• Top Geographical Contribution: Below median for more than 20%
• Top Property Contribution: Above median for more than 20%
• Top 5 Properties' Contribution: Above median for more than 20%
• Top Tenant Contribution: Above median for more than 20%
• Top 10 Tenants' Contribution: Above median for more than 20%

Key Financial Metrics

• Property Yield: ± 10% from median
• Management Fees over Distribution: Below median for more than 10%; $9.01 distribution for every dollar paid 
• Distribution on Capital: ± 10% from median
• Distribution Margin: ± 10% from median

Trends

• Uptrend: NAV per Unit
• Flat: Interest Coverage Ratio
• Downtrend: DPU, Occupancy, Property Yield, Distribution on Capital, Distribution Margin

* DPU and NAV per Unit are in Euro

Relative Valuation

• P/NAV - Below average for 1y; Below -1SD for 3y & 5y
• Dividend Yield - Average for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	Low REIT Manager's Shareholding
Long WALE	Low Occupancy
100% Freehold Properties	Concentrated Lease Expiry
Low Gearing Ratio	0% Unsecured Debt
Low Cost of Debt	Concentrated Debt Maturity
100% Fixed Rate Debt	High Top Property & Top 5 Properties' Contributions
Long WADM	High Top Tenant & Top 10 Tenants' Contributions
High Interest Coverage Ratio	DPU Downtrend
Low Top Geographical Contribution	Occupancy Downtrend
Competitive Management Fees	Property Yield Downtrend
NAV per Unit Uptrend	Distribution on Capital Downtrend
	Distribution Margin Downtrend

The occupancy rate has decreased to 88.3%, primarily because Deutsche Telekom vacated the Darmstadt Campus at the end of November 2022. However, the manager has stated that they are currently in advanced discussions with a few potential tenants. Additionally, the IREIT has hedged all of its borrowing with interest rate swaps and caps, and there is no debt maturity until 2026, which helps to mitigate the impact of rising interest rates.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.