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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?
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