Here's a quick brief on IREIT Global!
- Successful refinanced bank borrowings.
- Interest costs reduced by 15%. Concurrent with the debt drawdown, interest rates swaps were entered into to hedge 100% of the interest of the new loan facilities, resulting in an all-in cost of debt averaging approximately 1.5% per annum over the loan tenure. Therefore including the costs of unwinding the existing borrowings, the all-in cost is approx 1.7% per annum.
- 91.4% of its leases will be due for renewal only in FY2022 and beyond.
- Current yield is around 7.62% (current policy is 90% distribution, remaining 10% will be used to reduce debt).
- Gearing ratio: 39.1%
Some risks to consider would be
- Change of management to Tikehau capital. This introduces some uncertainty in the new management's position on shareholders as they seem to be looking to acquire more properties. The current gearing level is approx 40%, further increasing the uncertainty.
- Lack of diversification for rental revenue. The largest tenant accounts for 52% of gross rental and top 5 tenants accounts for 97% rental income. Over-reliance on a few tenants is risky for the REIT.
- Potential depreciation of EUR against SGD. The distribution per unit payout will be affected if the EUR depreciates against SGD.
As a porfolio backed by a blue-chip tenant base and lease expiry in FY2022 and beyond, IREIT's properties are expected to continue to deliver stable performance for the year. To valuate IREIT Global, we can look at the PB ratio and distribution yield. IREIT Global has a PB ratio of 1.08 and a distribution yield of 7.65%; a higher PB ratio compared to the market average of 41 S-REITs (0.96) but a lower distribution yield as compared to the market average.