9 Quick Things Investors Should Know About IREIT Global’s Latest Earnings

Credit: Simon Cunningham

In mid February, IREIT Global (SGX: UD1U) announced its 2017 fourth quarter and full year earnings update. As a quick introduction, IREIT Global is a REIT that has a focus on investing in office, retail, and industrial real estate in Europe. Its portfolio currently comprises five freehold commercial properties in Germany.

Here are nine things investors should know about the REIT’s latest results:

1. Gross revenue for the reporting quarter grew 1.3% year-on-year to €8.7 million while net property income (NPI) inched up by 0.3% to €7.9 million.

2. The REIT’s distribution per unit (DPU) for 2017’s fourth quarter declined by 7.6% year-on-year (in Singapore dollar terms) to 1.46 Singapore cents.

3. Based on IREIT Global’s 2017 total DPU of 5.77 Singapore cents, and its closing unit price of S$0.80 as of 26 February 2018, the REIT has a trailing distribution yield of 7.21%

4. As of 31 December 2017, the REIT’s gearing stood at 40.3%, which is close to the regulatory gearing ceiling of 45%. But, the REIT does have a high interest coverage ratio of 8.5.

5. The REIT’s portfolio had a committed occupancy rate of 98.3% at end-2017.

6. The weighted average lease to expiry profile (by gross rental income) was 5.1 years as of 31 December 2017. There are no leases expiring in 2018.

7. The REIT’s top five tenants accounted for 97.4% of its gross rental income as of 31 December 2017, with the largest tenant, namely Deutsche Telekom, taking up a 52.3% share.

8. IREIT Global has hedged its distributions for 2018 at an average hedge rate of around S$1.63 per euro. From 2019 onwards, IREIT Global will be hedging its income to be repatriated from overseas to Singapore on a quarterly basis, in accordance with its currency hedging policy,

9. Here are comments shared by IREIT Global in its latest earnings update on its outlook:

The German economy ended 2017 on a positive note, with a higher GDP growth of 2.2% compared to the growth rate of 1.9% achieved in 2016. Driving this healthy growth was a combination of favourable business sentiment, domestic consumption and higher employment. This has lent support to the office real estate market in Germany, both in terms of investment and leasing demand.

In 2018, Germany is expected to remain as one of the main destinations for European commercial real estate investments, in view of the sound economic fundamentals, firm occupier demand and rising rents.

For FY 2018, the operating performance of IREIT’s existing properties should continue to be supported by its freehold quality assets, blue chip tenant base and long leases, with notably no lease expiries in the 12 months ahead.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.