IREIT Global: 214 for 1000 rights issue.

Earlier in April, IREIT Global announced that they were looking at acquiring 27 of Decathlon's assets in France.

In reply to readers' comments, I said that it wasn't a fantastic deal but it wasn't a bad deal either as IREIT Global's relatively high distribution yield makes it harder for them to make yield accretive acquisitions.

The deal comes with a relatively long lease to a blue chip sporting goods company and that makes it more appealing with stability being the name of the game.

Lovely pun, that.

I also said that in today's very low interest rate environment, we are probably being well compensated for any risk that comes with the deal.

I would think of the rights issue as an invitation to invest in more properties in Europe which are leased to a big corporate tenant for a 7+% rental yield.

So, it should be interesting to anyone looking to increase their passive income in the form of rental income.

In April, after the intention to acquire those 27 assets was made known, I said that a rights issue was almost certain to take place.

I prefer a rights issue to a private placement because I most certainly would not get invited to participate in private placements.

I also made a guess that a rights issue would probably be relatively small and that it could be a 1 for 5 or 1 for 4 issue.

Well, a rights issue was announced yesterday.

A 214 for 1000 rights issue means it is closer to 1 for 5 than 1 for 4.

Priced at 59.5 cents per rights unit, it is a fairly good price especially when compared to the private placement price of 61.55 cents per rights unit.

The private placement being offered at a higher price although relatively small in size helps to keep the rights issue smallish.

IREIT Global's gearing level is conservative in comparison to many other S-REITs and using more debt to fund the purchase in a low interest rate environment is probably an interesting idea.

However, IREIT Global's manager might be keeping some powder dry by staying more cautious.

Whatever the case may be, I rather fancy being a landlord to Decathlon, given the numbers.

So, I will be taking part in the rights issue, taking up my entitlement and also applying for excess rights when the time comes.

This will make IREIT Global the largest investment in my portfolio.

If you are interested in my replies to comments from readers back in April, please see the blog: HERE.

See rights issue announcement: HERE.

You might also be interested in this blog:
REITs and rights issues: Dilutive or not?

Use CPF savings for homes and investments?

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

Hi Tonny,

Apologies for the tardy reply. 

Didn't check my blog for a couple of days. 

Been spending my time sailing in another world. ;p

We are likely to stay in a low interest rate environment for some time to come. 

So, using our CPF OA money which generates 2.5% risk free return every year to fund the purchase of homes is rather silly.

Of course, for some people, there really isn't any other choice but for those of us who have a choice, if we have idle cash, using that to fund the purchase of homes makes better sense.

If we do not have idle cash but have assets which can be liquidated to generate cash, I would liquidate assets which are not generating an income first if I am thinking of raising cash that way.

Income generating assets should not be liquidated first especially very good income generating assets like investments made in the local banks at rock bottom prices during the crisis.

Of course, the CPF is risk free and volatility free while our investments are not so.

Still, our local banks are well capitalised and well run. 

They are probably the next best thing to the CPF. 

If we have paid rock bottom prices for their stocks, they are probably generating very attractive return on investment for us.

What is more important to us? 

Having something that is risk free and volatility free that generates a decent return like the CPF? 

Or having the next best thing for higher returns like investing in our local banks? 

I don't know what gives you peace of mind. 

You decide. :)

Since I am on the subject, recently, we have been bombarded with advertisements to use our CPF OA money to invest in properties. 

I always say that no one cares more about our money than we do.

Who are these people telling us it is OK to use our CPF OA money to invest in properties if we do not have cash and that owning multiple properties is not something only the rich can do?

These people have vested interest in making us part with our money.

We buy a property through them, they make money.

If the property does not do well later on and if we have to sell, they make money too.

They have nothing to risk and everything to gain.

Don't bite off more than we can chew because some do choke and some choke to death.

Related posts:
1. Buy 2nd property and pay ABSD?

2. Disastrous investments in property market.

3. $500,000 stuck in property investment.

4. Don't do silly things and retire smart.

5. This condo investment has been a drag.