Wednesday, October 5, 2016

IREIT To Expand Beyond German Properties

Readers would know that Ireit is currently my biggest position in the portfolio so I do look out for their news.

Earlier this year in May, there was an announcement for sale of the manager to Tikehau Investment Management which brings quite a bit of question marks as to what is going to happen should the sale go through.

Yesterday, there was an updated announcement to conclude the sale for the share purchase agreement with Tikehau where they would acquire 80% of the issued shares while the rest of the 20% shares would be held by Tong Jin Quan.

The agreement also has a mandate for Mr. Itzhak Sella (Chief Executive Officer) and Ms. Adina Cooper (Chief Investment Officer) to resign upon the completion of the agreement. My feeling is that they would rather bring someone they have in the group to manage the Reit for better connectivity with the fund.

There was also a mandate for the Reit to expand beyond the commercial properties just in Germany to all commercial income producing properties including offices, retail and industrial across all Europe as soon as reasonably practicable.

To me, this can go both ways as there are both advantages and disadvantages in doing this.

The main advantage to me is with Tikehau as a fund management (and sponsor), they would have plenty of pipeline sitting on their assets fund which can be recycled into the Reit. A quick look at their funds right now would see that they have a lot of industrial, retail and commercial properties in France but not much in other countries.

The good thing about it is these properties in France are fetching a net property yield of 7% unlevered. This bode well for the Reit because this would then be similar to the type of profile which they have on the Berlin properties which they acquire recently at 7.1% NPI yield. For me, as long as they can inject any properties in excess of 7% yield, the financial engineering would be easy to make it accretive and most importantly keep the dividend yield high for hungry investors like me to take a bite at it.

It remains to be seen whether they will dump assets which are non-accretive and non-quality to the Reits over time. My gut feel is they will use Ireit as a platform to expand their base into the other European market since they have already launched a French Reit where they can concentrate on the French properties for that.

The jury is still out right now but it is very easy to see over time what they will do with Ireit. The moment they do something silly that destroy shareholder's value, it is often easy to pick up and we as investors will run straight to the door. I am keeping my finger cross that it is not the case and I am giving them the benefit of the doubt right now, until they are proven guilty.


  1. Just wondering if they will rehire the CEO and CIO cos it seems a bit abrupt :)

    1. Hi Unknown

      I think they might bring their own man to manage the reits.

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