• IREIT Global (SGX:UD1U)’s 1Q operational updates indicate no major disruptions to its portfolio despite < 2% of tenants requesting rent assistance. A minimal 3% of leases expiring over the next two years provide income stability. Valuations are relatively attractive at 0.8x P/BV.
• Keep BUY and SGD0.83 Target Price, 22% upside with 8% yield.

1Q Portfolio Occupancy Remains Steady at 94.7%

• IREIT Global's 1Q portfolio occupancy remains steady at 94.7% (4Q19: 94.6%), with near-full occupancy maintained at IREIT Global’s German assets.
• A key tenant – Deutsche Telekom unit GMG Generalmietgesellschaft mbH – has exercised its break option to return two out of six floors at the Münster Campus on 28 Feb 2021. The manager has already identified and secured a 9-year lease with another tenant for the entire 3,600sqm space, or 13% of the lettable area commencing Mar 2021.
• We understand the tech/finance sector-based tenant is looking at further expanding its space, indicating the desirable nature of the asset. With this, there is a minimal 3% of leases expiring till end 2021 (including lease breaks), providing a high degree of income certainty to IREIT Global in these uncertain times.

< 2% Tenant Request for Rental Assistance

• Four of its Spanish assets tenants have requested for rental rebates/deferral, but no such requests have been received from the German portfolio. The manager is evaluating the merits of such requests. There were no rent arrears in 1Q and 98% of April’s rent has also been collected.
• With blue chip tenants accounting for > 80% of IREIT Global’s portfolio, we see minimal rent collection risks.

Sponsor and Strategic Investor Reaffirm Long-term Commitments

• In April, Tikehau Capital and City Developments (SGX:C09) (NEUTRAL, Target Price: SGD10.50) increased their respective stakes to 29.20% and 20.87% from 16.64% and 12.52%. AT Investments also emerged as a substantial shareholder after buying a 5.5% stake in IREIT Global from Tong Jinquan at SGD0.49/share. Tong’s shareholding is now down to 6%.

Appointment of Louis D'Estienne D'Orves as CEO

• d’Estienne d’Orves joined Tikehau’s real estate team in Nov 2018. As Executive Director, his responsibilities included sourcing and executing deals across Europe in the office, retail, hotel, and residential sectors, and securing external debt financing and capital raising for co-investment opportunities and funds. Before joining Tikehau, he spent 11 years at AXA IM Real Assets, most recently as the Co-Head of European Transactions – Special Situations.

No Major Debt Expiry Until 2026

• IREIT Global's gearing currently stands at 38% with a healthy interest cover of 7.8x. ~86% of IREIT Global’s debt (EUR 200m) will expire in 2026 and is fully hedged at an all-in cost of 1.5% pa.
• On the EUR32m bridging loan from a strategic investor expiring in May 2021, the manager has indicated it will use a combination of debt and equity to repay this – along with acquiring the 60% stake balance in the Spanish portfolio.
• IREIT Global is one of the RHB's Top Singapore Small Cap Companies - 20 Jewels 2020 Edition.

Source: RHB Invest Research - 21 May 2020