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Some readers might remember that I said IREIT Global was a bargain in September last year in a blog.
In that blog, I took into consideration a vacant asset in Darmstadt and how that would impact IREIT Global's distribution per unit (DPU.)
I said that we could see a reduced annualized DPU of 3.5c or 3.4c.
IREIT Global declared a half year DPU of Euro 1.28c and if we were to annualize this, we get Euro 2.56c.
Income will be distributed on 23 March and assuming an exchange rate of 1 Euro to 1.42 S$, we get a DPU of around 1.82c.
Annualizing 1.82c gives us 3.64c which is at the upper end of my estimate.
So, IREIT Global met my expectation and did not disappoint.
Assuming a unit price of 52c, a DPU of 3.64c gives us a distribution yield of 7%.
A 7% distribution yield is higher than the 6.5% to 6.7% I was expecting and it is not bad at all.
We have to remember that IREIT Global retains 10% of distributable income or else distribution yield would have been higher.
Retaining 10% of distributable income is why the REIT has a very strong balance sheet by S-REITs' standards.
Also, a 7% distribution yield from a REIT with a relatively low gearing ratio of 32% is really quite good because there is no risk of dilution through equity fund raising.
A highly geared REIT offering a 7% distribution yield might have to raise funds through a private placement or rights issue which makes that 7% a lot less attractive.
If we are looking for a relatively rewarding REIT which gives us peace of mind in the current high interest rate environment, IREIT Global is a good fit in more ways than one.
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| Source: IREIT Global |
If you want a refresher on why I thought IREIT Global was a bargain, read this blog:
Don't want to rehash (too much.)
Income will most probably improve as the asset in Darmstadt will be progressively filled in the coming months.
Rental escalation will continue as rents are linked to CPI which is rising due to a strong inflationary environment in Europe.
Short term pain for long term gain.
Still, my investment in IREIT Global is an important passive income generator for me as it is now an even larger investment than before.
In fact, it is larger than my investment in AIMS APAC REIT.
To all fellow IREIT Global investors, stiff upper lip and soldier on.
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13 comments:
Darmstadt Campus only vacanted since Dec 2022. So the recent results only showed the impact for 1 month. Am i right?
Hi LKH,
Yes, the Darmstadt asset was vacated by end of November.
So, if we expect the asset to remain vacant for a full year, a reduced DPU of about 3.3c is a possibility, all else being equal.
Hi Ak, thanks for the quick confirmation. There will also be an increase in property operating expenses as there is a cost to upkeep a vacant property. So worst case scenario, will probably be a dividend yield of around 6%, i guess.
based on current price of $0.52 when i mentioned yield of 6%
Dear AK
I was thinking of you when I saw the results yesterday evening. Vindicated my adding at 50-51 cents recently. I fully agree with you. The market expected better and the price might drop to 50 plus change, if the ten year goes closer to 4, it has now retreated after crossing 3.90
Cromwell reit did better although I am still deep under water. I might add to that as well
Regards
Garudadri
Hi LKH,
Let us hope that the worst case scenario does not materialize. -.-"
Hi Garudadri,
When another reader suggested Cromwell REIT, I explained that I rather preferred IREIT Global's financial ratios.
You might want to do a quick comparison of their financial ratios:
http://ireitglobal.listedcompany.com/financial_ratios.html
https://investor.cromwelleuropeanreit.com.sg/financial_ratios.html
In the current environment, resilience is at the top of the list for me.
Also, all of IREIT Global's assets are in countries with deep markets which makes it easier to liquidate assets while not suffering heavy losses in the worst case scenario.
Seemingly unimportant in a business as usual scenario, this is a big plus in case things do go awry.
Crossing fingers.
IREIT becoming a bargain again as it goes under 50 cents a share, don't know average down or not. Maybe they doing something to the vacant Darmstadt campus. Happier looking at my fixed deposit for now . Lol
Hi C,
Looking at the charts, IREIT Global is definitely very oversold.
Has been oversold since it went XD.
If it should go under 50c a unit and retest the low of 47.5c seen in October last year, I would probably add to my position.
dont buy too much pls leave some for us :")
Hi YLD,
That's a new nick! LOL!
Don't worry.
Plenty to go around. ;p
Dear Master AK,
Sorry the previous comment wasn't published.
Price for I reits global has fallen to 36 cents today. Given the current high interest rate environment. What should be a fair price/yield for a reit such as I reits global. In retrospective terms, reits use to be around 10-12% yield in 07/09 when risk free is at 5-6%. Giving a market premium of 6% (12 -6%).
Appreciate you talking to yourself and US.
PS: your tone sounds bearish and serious in your latest youtube video on property prices
Best regards,
Your Loyal Disciple
Hi YLD,
Higher for longer.
We are in unchartered waters.
Things could get a lot worse from here.
So, rather than take a chance, I am going to wait and see.
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