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IREIT's rights issue: Why did AK subscribe?

Friday, October 16, 2020

This blog is in reply to a reader's comment.

I decided to publish it as a blog as other readers might be interested in this.

"The rights issue is dilutive because it raises more money than is required to acquire the rest of the Spanish portfolio of assets.

"Also, much of the funds raised is used to reduce gearing.

"As an investor for income, it isn't something I like and I have blogged about this view before.

"However, I like IREIT Global's freehold properties, especially those in Germany.

"I like that its interest cover ratio is very high.

"I also like that it has CDL as a strategic partner.

"With the reduced gearing, I am reasonably optimistic that IREIT Global would do better in future.

"We also want to bear in mind that IREIT Global has a relatively high distribution yield and it is probably harder to make yield accretive acquisitions.

"Like I said, I don't necessarily like the rights issue but since I like the REIT for many reasons, I think of the rights issue as a necessary evil to help it to grow.

"Now, let me add a dash of speculation.

"Once the REIT is massive enough, it should attract more investors, especially the institutional investors and that is when we might see yield compressing to 5% or lower.

"Based on the DPU post rights issue, IREIT Global could trade at 90 cents a unit or higher then.

"In the meantime, I get paid while I wait.

"I like to think that patience will be rewarded."


1. IREIT Global is going to Spain.

2. REITs and rights issues: Dilutive or not?


Unknown said...

Hi Ak

Thanks for sharing. Does yr 90 cents means 60cents post rights? as DPU dilutive price has to be around 57 cents to get 8% yield.

AK71 said...

Hi Unknown,

Post rights, DPU is estimated to be about 4.5 cents.

Trading at 90 cents a unit would give a 5% distribution yield.

If yield compression takes place due to heightened investor interest, we could see 90 cents a unit.

Just pure speculation, of course. ;)

redponza said...

Hi AK,
Disagree that IREIT Global can trade at that 5% premium valuation.

If you take a look at Cromwell European REIT which is a REIT in indices and with institution interest, it is trading at around 7% yield.

So IREIT will not trade at a 5% yield, period.

AK71 said...

Hi redponza,

For me, it is a "if" and a "could."

It might or might not happen.

Just speculation on my part.

Whether it happens or not isn't important to me.

However, I know to never say never.

Cory said...

Aiya AK bro, mai let the cat out. I hold similar hopes ! Lucky you post this on 10/16 after rights excess is over !

Sunny said...


With so much is held by CDL, how could other funds come in? Just puzzled

AK71 said...

Hi Cory,

It could take a long while before it happens if it happens.

Of course, as an investor for income, if it happens, it is just a nice bonus. ;)

AK71 said...

Hi Sunny,

Well, AT Investments Limited found a way in. ;)

There could also be placements instead of rights issues in future.

Eddy said...

Thanks AK. Hopefully IReit can and will become like another CRT (Croesus Retail Trust) that consistently payout good dividends annually and ultimately being privatized at a decent price. 😄

AK71 said...

Hi Eddy,

I hope IREIT Global does not get delisted like Saizen REIT, Croesus Retail Trust, RHT Health Trust and, even, Accordia Golf Trust.

It is hard to find replacements. ;p

Eddy said...

True that AK. “)
Thanks to your analysis and talking to yourself. The CRT’s capital gained and dividend over the years have fully funded my daughter (graduated last year) her 3-yrs overseas (UK) university and lodging expenses. A timely bonus 👍🏼

AK71 said...

Hi Eddy,

I am so happy to hear that.


Good news in more ways than one. ;)

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