From Company's Prospectus
1. Business Description
First European-focused REIT; initial focus on Germany & UK. IREIT is a Singapore real estate investment trust 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. IREIT is expected to have an initial primary focus on Germany and the United Kingdom.
IPO portfolio comprise four office properties in Germany. The IPO Portfolio will comprise four office properties in Germany, strategically located in Bonn, Darmstadt, Münster and Munich, with an aggregate net lettable area (“Net Lettable Area” or “NLA”) of 121,506 sq m (1,307,878 sq ft).
From Company's Prospectus
Bonn Campus, which is wholly-leased to GMG Generalmietgesellschaft mbH (“GMG”), a
wholly-owned subsidiary of Deutsche Telekom AG (“Deutsche Telekom”), and which
comprises four linked modern office buildings of two, four or six storeys. The property is
located in proximity to a key motorway of Bonn and is located in one of the prime office areas
of Bonn, where the headquarters for Deutsche Telekom are located
Darmstadt Campus, which is wholly-leased to GMG and comprises six connected office
buildings with seven and five storey sections, and a multi-storey car park, located at the main
cluster of technology companies. The property is part of one of the largest clusters of
Deutsche Telekom offices outside of Bonn and is located adjacent to a number of other
offices occupied by Deutsche Telekom, including the cellular division of Deutsche Telekom,
T-Mobile Deutschland GmbH (“T-Mobile”)
Münster Campus, which is wholly-leased to GMG, houses offices occupied by Deutsche
Telekom and comprises two six-storey modern office buildings and a six-storey external car
park structure. The buildings are located in a main business park housing leading financial
institutions and global technology firms
Concor Park, which is a multi-tenanted property comprising three linked, recently fully
refurbished five-storey office buildings with a separate car park and is located in the Munich
suburb of Aschheim-Dornach. The property is adjacent to urban and inter-urban rail stations
serving Munich and the surrounding area. The tenants include Allianz Handwerker Services
GmbH (“Allianz”), European Bank for Fund Services GmbH (“Ebase”), ST Microelectronics
GmbH (“ST Microelectronics”) and other leading companies
Below summarize the properties key terms:
From Company's Prospectus
Mr Itzhak Sella is the ultimate sponsor of the REIT; Mr Tong Jinquan is the Strategic Partner. Mr Itzhak Sella is the ultimate sponsor of the REIT while Mr Tong Jinquan is its strategic partner.
However after the IPO, Mr Tong will be the biggest shareholders of IREIT:
From Company's Prospectus
This 2 characters might be unfamiliar for fellow investors, below provide a quick summary on them:
Itzhak Sella - Refer to his Linkedin Profile (Link: https://www.linkedin.com/pub/itzhak-sella/3/b68/60a)
Tong Jinquan - Refer to Forbes (Link: http://www.forbes.com/profile/tong-jinquan/)
2. Financial Highlights
IPO price of S$0.88, represents 12.8% premium over NAV. The actual NAV is S$0.78. Thus by subscribing at IPO price you are effectively paying 12.8% premium.
From Company's Prospectus
Annualized 7.6% yield based on projection. Based on the IPO projection, the annualized yield is 7.6% for FY14.
3. Investment Highlights
Favourable dynamics of Germany’s real estate market. According to the Independent Market Research Consultant, the German property market is seeing increased demand as a global safe haven with growing participation from nondomestic investors attracted by the stability, liquidity and the steady growth potential of the German real estate market as well as the return of some German institutional and private investors and lenders choosing to focus on their own country rather than riskier foreign
markets.
In addition, the broad German office market is expected to respond favourably to the improving economic backdrop with stronger business sentiment boosting both take-up and investment volumes. According to the Independent Market Research Consultant, Germany is currently in a position in the rental cycle where landlords are expected to benefit from an increase in the growth of rental rates.
From Company's Prospectus
100% occupancy with Free hold status. The IPO portfolio is currently 100% occupied and the free hold status of the property represent one of the biggest highlight.
Strong tenants anchored by a wholly-owned subsidiary of Deutsche Telekom with long-term leases. Deutsche Telekom Properties via GMG is one their biggest tenant. Deutsche Telekom, as the holding company of GMG, has entered into a profit and loss transfer agreement with GMG2, providing IREIT an avenue for a claim against Deutsche Telekom, should the assets of GMG be insufficient to cover the claims of IREIT. This ensure low credit risk for the REIT.
In addition, Concor Park is a multi-tenanted property with large, international and reputable corporate
tenants including Allianz, ST Microelectronics and Ebase, and has a WALE of 5.9 years.
4. Investment Risks
Chinese + Israeli -- Marriage from Heaven OR Disaster in the making???? I fear misalignment of interest here. On one hand, you have an Israeli sponsor. On the other, you have a majority shareholder being Chinese. I question the communication between the 2 and who will be the actual one making the strategic plan for IREIT.
As a minority shareholders, we are always at the mercy of the boardroom fight, that is simply out of our control. Thus, this potential strategy misalignment is one of my biggest worry.
Rental escalation based on CPI increase???? Based on the IPO projection, there will be a rental escalation triggered by CPI changes. (see projected table below) I am personally pretty susceptible on this. I am no economist expect back I am not so sure if the CPI increment is enough to achieve the stipulated trigger. Currently the base CPI is projected at 1.2%.
Weak market sentiment - Gaza+Ebola+Iraq & many more. Market has been trading poorly recently and there is a lot of geo-political risks that exist around us. In addition, there is still this Ebola disease which may significantly shift the overall market sentiment.
5. Conclusion
As much as I see value in the European property sector, I will stay caution on the IPO. I will not go ALL-IN on this one and might just buy some at IPO level and see how it perform before I add-on my position.
No comments:
Post a Comment