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Would AK invest in IREIT Global today?

Sunday, February 5, 2017

"I read your analysis of IREIT and how your strategy turned out in August 2015. You said that you wanted a minimum of 8% yield to invest in IREIT. So, you waited. At today's price, you would get more than 8%. Would you invest in it today?"

The reader was referring to a blog dated 14 August 2015. If anyone is interested in the background which led to this blog, please read: 
How did IREIT Global's rights issue turn out for AK?

"Wow! You read that recently? You must be combing my blog's archives! Gambatte! 

"Anyway, back then, my average price was about 66c and, estimating a DPU of 6c today is not unrealistic. So, conservatively, I am getting a 9.1% distribution yield for that investment.

"Actually, as things turned out, less than a week after I published that blog, I increased my investment in IREIT a lot more at 66c and 65.5c.

"On hindsight, I didn't have to go through all that trouble to get IREIT at a lower price during its rights issue but who could have known that Mr. Market would go into a mild depression later in August 2015? I am not saying that it was a bad thing, of course.

"I added to my investment in IREIT again in mid-2016 at 71c a unit which was 7.5% higher than 66c. Even though it was a higher price, I still found the REIT attractive as an investment for income. More recently, I added a bit more to my investment last month, paying 72.5c a unit."

Now, would you invest in IREIT Global today? It depends on what you are after and whether IREIT Global does the job for you.

Related posts:
1. FLT and CRCT added.

2. Projected yield of 8% safe?


AK71 said...

Recorded a 20.8% year on year increase in DPU to 6.33c for FY2016.

At 75 cents per unit, distribution yield is 8.44%.

AK82 said...

Hi AK,
IREIT’s distribution policy : To distribute 100% of annual distributable income from IPO to end
FY2016 and thereafter, at least 90% for each financial year.

Should I expect the DPU to be decreased for FY2017, aka 90% of 6.33c which is 5.7c?

AK71 said...

Hi AK82,

Building that expectation into your investment thesis is a good idea. ;)

AK71 said...

“The affirmed (‘BB’ rating with a stable outlook) reflected IREIT's relatively small scale and concentrated lease expiry profile compared with rated peers”, said S&P.

“These risks are balanced by a stable portfolio of quality assets with high occupancy rates and strong tenants."

S&P also expects the REIT’s gearing to remain at about 40%, which allows limited financial flexibility given the 45% limit.

“We do not view the recent change in ownership and control as having a significant effect on the business or financial prospects”, said S&P, in reference to the Tikehau Investment Management’s acquisition of an 80% stake in the REIT’s manager.

Tikehau has also said that it will expand the REIT’s investment mandate beyond German office properties.

“In addition, any risks due to property type or geographical location are likely to be offset by increases in scale and diversity”, said S&P, adding that it expects Tikehau’s network in Europe to be beneficial for potential acquisition deals.


AK says:
"I took advantage of recent price weakness to add to my investment in IREIT Global at 71.5c per unit."

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