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IReit to take full ownership of Spanish portfolio from Tikehau Capital, DPS at 2.85 cents for H1

IREIT Global on Friday announced its proposed acquisition of the balance 60 per cent interest of a Spanish portfolio from asset management and investment group Tikehau Capital, at an agreed market value of 136.4 million euro (S$221 million) on a 100 per cent basis.

The portfolio consists of four freehold multi-tenanted office properties located in Madrid and Barcelona. It is currently held through a 40:60 joint venture by IReit and Tikehau Capital.

Last December, IReit partnered with Tikehau Capital and City Developments Limited (CDL) to acquire 100 per cent interest in the Spanish portfolio. CDL’s wholly owned subsidiary, City Strategic Equity, extended a 32 million euro loan to IReit to fund its 40 per cent investment.

As part of the transaction, Tikehau Capital had granted IReit a call option to acquire its 60 per cent shares in the joint venture within 18 months following completion of the initial acquisition.

IReit on Friday exercised the call option to acquire Tikehau Capital’s 60 per cent share. The purchase consideration, which is subject to post-completion adjustments, is 47.8 million euros, derived based on the consolidated net asset value of the joint venture as of June 30 this year, after taking into account the average of two independent valuations of the portfolio.

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Louis d’Estienne d’Orves, chief executive of IReit Global Group (IGG), said: “The proposed acquisition allows IReit to achieve full ownership of a high-quality office portfolio. It is also in line with our strategy of building and strengthening IReit’s footprint across Europe.

“These properties offer attractive asset management opportunities while benefiting from the decentralisation trend driven by improved infrastructure, lower rents and limited supply in the CBD.”

In addition, IReit also announced its results for the first half ended June 30 on Friday.

The Europe-focused Reit’s distribution per stapled security (DPS) slipped 2.7 per cent to 2.85 Singapore cents from 2.93 Singapore cents a year ago. This represents an annualised distribution yield of 7.9 per cent based on IReit’s closing unit price as at the last trading day of Q2 2020.

Its distributable income remained stable year on year at 13 million euros, while net property income increased 1.4 per cent year on year from 15.4 million euros to 15.7 million euros.

“It’s thanks to picking (and) acquiring assets with strong tenants … That’s really something we’ve been extremely careful of, and we picked assets where we know that the tenants will pay the rent,” said Mr d’Estienne d’Orves of IReit’s H1 results.

The Reit collected over 98 per cent of the total rents in the months of April to June, despite the novel coronavirus outbreak and lockdown restrictions. Last month, IGG also extended about 95 per cent of its Spanish portfolio leases expiring in 2020.

With IReit’s proposed acquisition of the Spanish portfolio from Tikehau Capital, its geographical exposure to Spain will increase from 9 per cent to 19 per cent of its portfolio. The Reit’s portfolio will thus consist of five properties in Germany and four in Spain.

The proposed acquisition is expected to be completed by the fourth quarter of this year, subject to the approval of unitholders of IReit.

“We will continue to actively explore different avenues to increase the occupancy rate and optimise the Spanish portfolio for future income improvement,” said Mr d’Estienne d’Orves.

Stapled securities of IReit Global closed unchanged on Friday at S$0.755.

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