Last week, IREIT Global (SGX: UD1U) announced its 2018 first quarter earnings update. As a quick introduction, IREIT Global is a real estate investment trust that focuses on investing in office, retail, and industrial properties in Europe. Its current portfolio consists of 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 declined 2.0% year-on-year to €8.6 million while net property income (NPI) declined by 1.9% to €7.7 million.
2. But, the REIT’s distribution per unit (DPU) for the quarter grew by 1.4% year-on-year to 1.46 Singapore cents.
3. Based on IREIT Global’s annualised DPU of 5.84 Singapore cents, and its closing unit price of S$0.775 as of 17 May 2018, the REIT has an annualised distribution yield of 7.5%
4. As of 31 March 2018, the REIT’s gearing stood at 40.5%, 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 the end of the quarter.
6. The weighted average lease to expiry profile (by gross rental income) was 4.8 years as of 31 March 2018. 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 March 2018, with the largest tenant, namely Deutsche Telekom, taking up a 52.1% share.
8. IREIT Global has hedged its distributions for 2018 at an average hedge rate of around S$1.63 per €1. 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 European real estate market has in general experienced rising rents, decreasing vacancy rates and attractive spreads between property yields and government bond yields. With a portfolio backed by a blue-chip tenant base and none of the leases expiring in 2018, the operating performance of IREIT’s existing properties is expected to remain stable for the year.
Ahead of the various lease expiries in 2019, IREIT has started discussions with the existing tenants for a possible extension in lease tenures. In respect of Berlin Campus, IREIT is expected to be notified by Deutsche Rentenversicherung Bund pertaining to the lease break option around the middle of 2018. The office space that is subject to the lease break option represents approximately 6.1% of IREIT’s total gross rental income as at 31 March 2018.”
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