Committed occupancy is marginally higher due to new leases committed within the Spanish portfolio

 

[Singapore] IReit Global reported 88.7 per cent occupancy rate at the end of Q1 2025, up from 88.5 per cent at the end of Q4 2024, in a business update on Tuesday (Apr 29).

 

The committed occupancy was marginally higher due to new leases committed within the Spanish portfolio. The weighted average lease expiry stood at 5.7 years at the end of Q1 2025 from 5.9 years at the end of Q4 2024, supported by new leases and no expiring leases during the quarter.

 

Aggregate leverage held steady at 37.7 per cent as at Mar 31, 2025, from 37.6 per cent as at Dec 31, 2024. This was due to the voluntary partial loan repayment of five million euros (S$7.5 million) in relation to the Spanish portfolio, offset by lower cash balance from the distribution payment and loan repayment.

 

The European real estate market has improved but the recent geopolitical developments and tempered investor interest may slow recovery in 2025. However, the recently announced 500 billion euro investment programme on infrastructure and defence is expected to support the region&rsquo s economy.

 

The manager of IReit will continue its leasing efforts to increase occupancy rates, especially at the Darmstadt Campus in Germany and the Spanish portfolio.

 

The repositioning of the Berlin campus is expected to have a significant impact on IReit&rsquo s distribution to unitholders due to the absence of income. The manager aims to start construction work in Q2 2025, targeting a completion by Q4 2027.

 

IREIT Global&rsquo s key German market &mdash where around 60% of its portfolio is located &mdash is starting to show signs of economic recovery from the new government&rsquo s massive fiscal stimulus package, which should stimulate demand for office property, says RHB Bank Singapore analyst Vijay Natarajan.

 

This is positive for IREIT&rsquo s planned Berlin Campus redevelopment, which is &ldquo gaining good traction&rdquo , says Natarajan. &ldquo IREIT could divest a partial stake in the project to reduce funding requirements and unlock value. IREIT remains a potential privatisation candidate with a sharp dislocation in its trading price, at a 60% discount to book value.&rdquo

 

In an April 7 note, Natarajan is banking on a German real estate recovery, keeping &ldquo buy&rdquo on IREIT with a 34-cent target price. The target price includes a 2% ESG premium, based on RHB&rsquo s proprietary methodology. 

 

Looking back five years, RHB&rsquo s target price on IREIT has gradually sunk from 83 cents in April 2020.

 

Berlin campus redevelopment

 

IREIT is redeveloping a Berlin campus into a mixed-use asset. This is making steady progress, says Natarajan, with the signing of two hospitality operators taking up around 24% of net lettable area (NLA) on 20-year master leases at nearly double the previous rental income. 

 

The remaining mixed-use space will comprise of office space (70% of NLA) and a retail podium (5%). 

 

The office space is receiving good leasing enquiries with interest from two large prospective tenants that could result in full committed occupancy, says Natarajan. &ldquo This is on the back of continued flight-to-quality and its strategic location in Central Berlin, [at] 500m from the main railway station and a 20-minute drive to the airport.&rdquo

 

The total projected capex is EUR165 million to EUR180 million, including the earlier announced EUR82 million capex for two hospitality leases. 

 

Capex will be funded in stages with a corresponding increase in asset value expected, thereby reducing gearing pressure. IREIT will also explore monetisation of a partial stake post securing leases, which could reduce funding needs and unlock value. 

 

The proposed redevelopment is subject to unitholders&rsquo approvals at its EGM on April 24. &ldquo We recommend that unitholders vote in favour of the transaction,&rdquo writes Natarajan. 

 

Portfolio, operational updates

 

Leasing interest is slowly picking up across IREIT&rsquo s other assets with the signing of four long-term leases totalling some 5,350 sqm at its Darmstadt campus, bringing committed occupancy to 45%. 

 

This is expected to rise to 60%-70% by end FY2025.  

 

The Munster campus saw two major leases for 6,110 sqm of office space in FY2024. In Spain, seven lettings were signed for 19,100 sqm.

 

IREIT&rsquo s gearing stands at 37.6%, providing debt headroom, says Natarajan. It is currently in negotiations to refinance its German and Spanish portfolio borrowings of some EUR270 million, which is expected to result in higher overall financing costs, partly mitigated by debt hedges (97%) via interest rate swaps and caps that will only start to progressively roll off from next year.

 

IREIT&rsquo s near-term DPU will take a hit, says Natarajan, but healthy recovery is anticipated from FY2027. &ldquo We expect FY2025 DPU to fall 31% on the back of the Berlin campus vacancy and associated operational and funding costs,&rdquo he writes.

 

IREIT Global : UD1U -1.85% posted a distribution per unit (DPU) of 0.94 euro cent for the second half of financial year 2024 ended December, unchanged from the year-ago period.

 

The DPU will be paid out on Mar 27, announced Ireit Global Group, the Europe-focused real estate investment trust&rsquo s (Reit) manager, on Wednesday (Feb 26).

 

Income to be distributed dipped 0.9 per cent to 12.7 million euros (S$17.8 million).

 

Revenue increased 6.6 per cent to 38.9 million euros, while net property income declined 5 per cent to 26.5 million euros.

 

The higher revenue was primarily due to the acquisition of the B& M portfolio in France in September 2023, recognition of dilapidation cost payable by the main tenant at Berlin Campus, higher rental income from Darmstadt Campus and higher rental rates at Berlin Campus with effect from July 2024.

 

For FY2024, DPU was 1.9 euro cents, 1.6 per cent higher than the year-ago period.

 

Income to be distributed rose 1.5 per cent to 25.6 million euros, in the absence of rent-free periods that were granted to tenants in FY2023. Higher interest income, lower administrative costs and other trust expenses also contributed to the increase.

 

Revenue was up 16.3 per cent to 75.6 million euros, and net property income rose 7.2 per cent to 53.5 million euros.

 

Aggregate leverage ratio was 37.6 per cent as at end-December, slightly lower than 37.9 per cent as at Dec 31, 2023.

 

Chief executive of IRThe move is part of IReit Global' s efforts to diversity the tenant base and reduce the risk of Berlin Campus, its largest asset. 

IReit Global inks lease contract with Premier Inn to reposition Berlin Campus into mixed-use space

 

Weighted average lease expiry stood at 5.9 years as at Dec 31, compared to 5.8 years the preceding quarter.

 

Interest coverage ratio was 7.6 times for FY2024, compared to FY2023&rsquo s seven times.

 

The manager is in discussions with banks to refinance existing borrowings for the Reit&rsquo s German and Spanish portfolios by the first half of 2025. Once completed, Ireit Global will have no debt maturing until July 2027, although financing costs are expected to increase in tandem amid the high interest-rate environment.

 

The trust also plans to renovate Berlin Campus &ndash converting it from a single-let property into a mixed-use, multi-let asset &ndash to enhance the property&rsquo s long-term value.

 

The total projected capital expenditure is estimated to be 165 million to 180 million euros.

 

During the repositioning period, the absence of income from Berlin Campus is expected to have a significant impact on Ireit Global&rsquo s distributions to unitholders.

 

The manager intends to seek unitholders&rsquo approval for the proposed repositioning project at an extraordinary general meeting to be convened.

New deal with Stayery is said to place Reit well on track regarding its plans to reposition office property in Berlin into multi-let and mixed-use asset

 

EUROPE-focused real estate investment trust IReit Global : 8U7U 0% has signed a 20-year agreement with hospitality operator Stayery, which will be leasing about 10,600 square metres (sq m) of gross floor area at its office property in Berlin.

 

Taking up about 12 per cent of the net lettable space, Stayery will be operating about 255 guest rooms at the property, known as Berlin Campus, said the Reit in a bourse filing on Thursday (Dec 19).

 

The inking of this long-term lease agreement comes less than a month after the Reit announced that it had signed another contract with UK hotel chain Premier Inn for 10,348 sq m or 12 per cent of Berlin Campus&rsquo net lettable space.

 

Similar to the deal with Premier Inn, the lease agreement with Stayery will last 20 years with no break option. Rents will be stepped up in the first three years, before it gets indexed against the inflation rate from the fourth year.

 

The tenant is expected to start operating by the first half of 2027 and pay an initial annual rent of around 2.7 million euros (S$3.8 million). This will grow to about three million euros at the end of the three-year step-up period.

 

With the addition of this second new lease, a total gross floor area of 20,948 sq m, representing 24 per cent of net lettable area, has now been committed at Berlin Campus.

 

&ldquo This places IReit well on track on its execution plans to reposition Berlin Campus into a multi-let and mixed-use asset with office, retail and hotel components,&rdquo read the filing.

 

New plans

IReit&rsquo s repositioning plans follow long-term main tenant, German pension insurance company Deutsche Rentenversicherung Bund (DRV), deciding not to extend its lease, which is due to expire at the end of this year.

 

DRV has been occupying Berlin Campus since 1995. Following DRV&rsquo s decision to not extend its lease, the Reit manager had said that it plans to proceed with its proposal to convert Berlin Campus into a functional mixed-used urban precinct after the tenant vacates the premises.

 

Peter Viens, chief executive officer of IReit&rsquo s manager, noted that the success in securing the new hospitality leases reflects the market appeal of how Berlin Campus has been repositioned.

 

&ldquo These leases will not only provide a perfect complementary fit, diversify our tenant mix, but also create a compelling unique selling point for other prospective tenants, thereby reinforcing the value proposition of our repositioning efforts,&rdquo he added.

 

The estimated capital expenditure for this tranche of refurbishment works is 40 million euros, of which 30 million euros relate directly to Stayery, while the rest is for the refurbishment and demolition works of the property&rsquo s roof, facade, lifts, and ground floor office lobby to support further letting activities and project delivery.

 

This brings the total cumulative capital expenditure for the repositioning of Berlin Campus to 82 million euros.

 

The lease agreement with Stayery came after IReit also inked other contracts for its other properties, bringing the total lettable area of new leases and lease renewals to 48,000 sq m in the year to date.

 

IReit Global inks lease contract with Premier Inn to reposition Berlin Campus into mixed-use space

The agreement is for a long lease period of 20 years with no break option

 

EUROPE-FOCUSED real estate investment trust (Reit) IReit Global : UD1U 0% has signed a lease contract with UK hotel chain Premier Inn for 10,348 square metres or 12 per cent of net lettable space in its Berlin Campus asset.

 

The Reit&rsquo s manager said on Thursday (Nov 28) that the lease agreement is for a long lease period of 20 years with no break option, and an annual rent of about 2.2 million euros (S$3.1 million) with built-in annual rental escalation.

 

The rental escalation is expected to boost the annual rent to around 2.6 million euros in the fourth year under the lease agreement, which is expected to start from the first half of 2027 upon the completion of refurbishment works. 

 

The lease will also benefit from an annual indexation following the rental escalation period.

 

This marks the first lease commitment as part of IReit Global&rsquo s 42 million euro project to refurbish and transform Berlin Campus into a multi-use asset with office, retail and hospitality components. 

 

Refurbishment works for the project are expected to commence in the second quarter of 2025, and will be funded by a mixture of cash and debt, said the manager. 

 

The manager&rsquo s new chief executive Peter Viens earlier said that the move is part of efforts to diversity the tenant base and reduce the risk of Berlin Campus, which is the Reit&rsquo s largest asset.

The trust&rsquo s DPU is expected to drop as its Berlin property undergoes repositioning

 

PETER Viens, the new chief executive officer of the manager of IReit Global : 8U7U 0%, plans to diversify the trust&rsquo s assets &ndash which he considers &ldquo too small&rdquo and lacking visibility &ndash to attract institutional investors.

 

The manager of the Europe-focused real estate investment trust (Reit) currently has 44 retail and nine office properties. All of its retail assets are in France, while the office assets are in Germany and Spain.

 

It intends to acquire assets in Western Europe and increase its exposure in retail and hospitality assets in the next three to five years, said Viens, who took the helm on Nov 5.

 

&ldquo You need to grow IReit so that it can enter Reit indices&hellip so that we can open the road to institutional investors getting in (on) the unit-holding of the Reit,&rdquo he said at the trust&rsquo s third-quarter business update briefing on Nov 13.

 

Viens, who was previously a fund manager at European real estate manager Sofidy, said that IReit Global&rsquo s manager is eyeing assets in the Netherlands and Italy. It is also looking at the United Kingdom, which has the biggest real estate market in Europe and is highly liquid.

 

Retail and hospitality assets will also provide &ldquo a mix of good resilience and good yield&rdquo , as well as longer lease commitments from tenants, he added.

 

Ultimately, investors stand to gain from the Reit&rsquo s diversification plan as it will make the counter more liquid. Diversifying will also help to improve the Reit&rsquo s financing credit, allowing the manager to raise money for the trust more easily, said Viens.

 

He believes there are opportunities in the next few years to buy good assets at attractive yields.

 

Signs of recovery in Spain market

Earlier this week, IReit Global announced that its portfolio occupancy for Q3 ended Sep 30 stood at 89.6 per cent &ndash a &ldquo marginal&rdquo decrease of 0.2 percentage point from the previous quarter. It attributed the decrease to lower occupancy rates among the properties in its Spanish portfolio.

 

At the briefing on Wednesday, Viens said that lease contracts in Spain tend to be short &ndash between two to three years long. Therefore, it is &ldquo a more difficult exercise&rdquo to retain existing tenants and attract new ones in that market.

 

&ldquo That is why we struggle to maintain and significantly increase the occupancy ratio, which is around 70 per cent today,&rdquo he said.

 

However, he noted that the manager has received more interest in its Spanish assets in the last few months, with more potential tenants requesting to view the properties.

 

&ldquo And so we have the impression that the Spanish market is showing good signs of recovery,&rdquo he said. He expects the occupancy rate to increase to 77 per cent in the coming months.

 

Transforming IReit Global&rsquo s biggest asset

The Reit manager&rsquo s biggest project for 2025 will be repositioning its portfolio&rsquo s largest asset, the Berlin Campus, said Viens. The campus will be transformed from a single-use property to a mixed-use, multi-let asset at the end of its existing tenant&rsquo s lease on Dec 31.

 

The move will diversify the tenant base and reduce the risk of the asset, he said.

 

Two hospitality operators will sign on as new tenants in the coming weeks, he added. Collectively, they will take up around 17,000 square metres, or about a quarter of the property&rsquo s lettable area.

 

Their rent will also comprise half of the asset&rsquo s previous rental income, said Viens.

 

Overall, he is positive on the outlook for IReit Global.

 

&ldquo (With) the start of the decrease in interest rates, we feel that the worst is over and we now have good prospects.&rdquo

 

However, the Reit will experience a &ldquo significant drop&rdquo in its distribution per unit (DPU) for the duration of the Berlin repositioning project, he said. The trust posted a DPU of 0.96 euro cent for the first half ended Jun 30, 2024.

 

Anne Chua, the chief financial officer of the Reit manager, explained that while the Reit&rsquo s occupancy rate is expected to go up, this increase will not be enough to offset the loss of income from the repositioning of the campus.

 

Dilapidation costs of about 15.5 million euros (S$22 million) awarded by the Berlin Campus&rsquo vacating tenant will also not be used to top up the DPU. Instead, they will go towards capital expenditure for the campus&rsquo repositioning, she added.

The group&rsquo s aggregate leverage at 37.2% as at Jun 30

 

EUROPE-FOCUSED real estate investment trust (Reit) IReit Global : UD1U +1.79% posted a distribution per unit (DPU) of 0.96 euro cent for the first half ended Jun 30, 2024. This is 3.2 per cent higher than its DPU of 0.93 euro cent a year ago.

 

Meanwhile, income to be distributed increased 3.9 per cent year on year to 12.9 million euros (S$18.7 million).

 

Its revenue for the first half rose 28.8 per cent year on year to 36.6 million euros, while net property income increased 22.8 per cent to 27 million euros.

 

The group attributed the increase in revenue to the completion of its acquisition of retail properties in France under the discount retailer B& M.

 

Dilapidation cost paid by the main tenant at its office property in Berlin and rental income from its office property in Darmstadt also contributed to higher revenue from its Germany portfolio.

 

The group&rsquo s aggregate leverage was 37.2 per cent as at Jun 30, while its interest coverage ratio stood at about 7.4 times for the trailing 12 months period from Jul 1, 2023 to Jun 30, 2024.

 

Louis d&rsquo Estienne d&rsquo Orves, CEO of the Reit&rsquo s manager, said that lower inflation, rising real wages and further interest rate cuts are expected to support a recovery of the European economy and revitalise the European real estate market.

 

&ldquo To enhance IReit&rsquo s portfolio value proposition and capture the upside potential, we intend to embark on a strategic repositioning of Berlin Campus into a sustainable mixed-used asset,&rdquo he said. The campus is one of five office properties under IReit&rsquo s Germany portfolio.

 

The group will also focus on securing new leases and lease renewals to improve IReit&rsquo s overall portfolio occupancy rate, he added

 

The analyst lowers dividends per unit forecasts by 5 to 6% for the 2025 to 2026 financial years

RHB Research cut its target price for IReit Global : UD1U +3.45% by 14.9 per cent to S$0.40 from S$0.47, but maintained its &ldquo buy&rdquo call, it said in a report on Thursday (Jul 11).

 

The new target, which represents a 35.6 per cent upside from its current unit price, follows last month&rsquo s announcement by the real estate investment trust (Reit) that its key tenant would not extend its lease on Berlin Campus. Berlin Campus, located just outside Berlin&rsquo s city centre, is a complex of buildings used mainly for offices.

 

While the research house was unsurprised by the announcement, it pointed out that the tenant&rsquo s departure &ndash amid a tough macro and funding climate &ndash triggered a decline in the Reit&rsquo s stock price.

 

Factoring in the tenant&rsquo s exit and assuming a S$5 million in rental top-up, analyst Vijay Natarajan lowered his dividends per unit forecasts by 5 to 6 per cent for the 2025 to 2026 financial years.

 

He also raised his cost of equity assumption by 100 basis points on development risks.

 

In June, IReit Global&rsquo s manager said it plans to proceed with its proposal to convert Berlin Campus into a mixed-use urban precinct.

 

In Natarajan&rsquo s view, the redevelopment is a medium-term positive move that could unlock the asset&rsquo s undervalued potential.

 

&ldquo With IReit Global providing greater-clarity capital expenditure (capex) needs, the returns potential will likely act as a share-price catalyst,&rdquo he added.

 

He noted that potential capex for the redevelopment could come to 150 million to 200 million euros (S$219.1 million to S$292 million), spread across the estimated project time frame of 12 to 24 months.

 

Natarajan also said he believes IReit Global will jointly develop the project with its two capable sponsors or outside investors. This would allow the Reit to monetise a portion of the asset and reduce capex outlay and risks.

 

Peter Viens takes over from current CEO Louis d&rsquo Estienne d&rsquo Orves, who joins Tikehau Capital

 

THE manager of IReit Global on Thursday (Jul 4) said it has picked Peter Viens to be its new chief executive, following the departure of existing CEO Louis d&rsquo Estienne d&rsquo Orves.

 

d&rsquo Estienne d&rsquo Orves, who has been CEO of the manager since 2020, will assume a senior role in Tikehau Capital, one of IReit&rsquo s joint sponsors, and relocate to Asia.

 

Incoming CEO Viens is now a fund manager at Sofidy, a European real-estate asset manager which is part of the Tikehau Capital group. He has been with Sofidy more than seven years, managing real-estate investments surpassing 500 million euros (S$730 million) in value.

 

Before that, he held senior roles in corporate real-estate departments for major institutions, including multinational companies and a global financial institution. He has more than 20 years of experience in the real-estate sector, including extensive experience in real-estate management.

 

The manager intends for him to be based in Europe. It also plans to appoint d&rsquo Estienne d&rsquo Orves as a non-executive director on its board to leverage his experience and knowledge of IReit Global.

 

IReit&rsquo s manager also announced that it will appoint a Europe-based chief investment officer (CIO), who will assist the CEO in overseeing the investment and asset management functions for iReit, said the manager.

 

Emilio Velasco, Tikehau Capital&rsquo s head of real estate in Spain and Portugal, has been named for the role, and will undertake it on a part-time basis.

 

This is because he will continue in his roles at Tikehau. In fact, he has been promoted to Tikehau Capital&rsquo s head of real assets Iberia, and Tikehau Investment Management&rsquo s co-head of real-estate acquisition.

 

He has more than 15 years&rsquo experience in investment banking and real estate. He was responsible for establishing Tikehau Capital&rsquo s real-estate strategy in the Spanish and Portuguese markets, including developing strategic plans and leading the investment and real-estate management teams.

 

The manager is targeting for these senior management changes in IReit to take effect by the first quarter of 2025. It has yet to determine an exact date and will first require the receipt of necessary regulatory approvals, including those from the Monetary Authority of Singapore.

It is the trust&rsquo s top tenant by rental income

 

A LONG-TERM main tenant of IReit Global : UD1U -1.59%&rsquo s Berlin Campus,will not be extending its lease, which is due to expire on Dec 31, 2024.

 

On Monday (June 24), the real estate investment trust (Reit) manager said the tenant&rsquo s lease contributed about 20 per cent of the Reit&rsquo s total gross income.

 

It added that the tenant, German pension insurance company Deutsche Rentenversicherung Bund (DRV), was the trust&rsquo s top tenant by rental income.

 

DRV has been occupying the Berlin Campus since 1995. In July last year, it extended its lease. As part of the deal, DRV agreed to pay a revised rent that is about 45 per cent higher than its current office rent, effective Jul 1, 2024.

 

On top of this rent revision, DRV also agreed to pay a lump sum of about 15.5 million euros (S$23 million) &ndash or 16 months of its total current rent &ndash as compensation for dilapidation costs to reinstate its current space back to its original state in the event DRV vacates Berlin Campus at the end of its extended lease term.

 

The dilapidation costs will be paid to IReit by Jun 30, 2024.

 

Following DRV&rsquo s decision to not extend its lease, the Reit manager said it plans to proceed with its proposal to convert the Berlin Campus into a functional mixed-used urban precinct after the tenant vacates the premises.

 

The precinct would be designed to offer &ldquo maximum flexibility&rdquo in terms of use types to cater to a range of tenant requirements, said the manager.

 

It noted that potential uses of the space could include office space, hospitality space and conference facilities.

 

Louis d&rsquo Estienne d&rsquo Orves, chief executive officer of the Reit&rsquo s manager, said: &ldquo We believe the repositioned property could benefit from substantially increased rent rates (as compared to its current rent).&rdquo

 

&ldquo We are also in exclusive discussions with a leading hotel brand and long-stay operator to lease about a quarter of the total lettable space,&rdquo he added.

 

IReit&rsquo s manager also said it expects distributions per unit (DPU) to fall amid work on the repositioning of the campus.

 

To mitigate the decrease in DPU, the manager noted that it will explore options such as making one or more top-up distributions to unitholders during the course of the repositioning work.

 

The top-ups would come from proceeds from the divestment of its Barcelona office asset and/or the dilapidation costs that will be paid by DRV.

 

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