IREIT Global (SGX:UD1U) is a little-known S$600 million Singapore REIT.
There’s nothing “exciting” about this Singapore REIT. But that’s the whole point of it.
And that’s what I like about it.
Let me explain.
You see, IREIT rents out its office spaces to some of the biggest companies in Germany.
And these Germany properties are well located in the big cities in Germany — Berlin, Bonn Darmstadt, Munster and Munich.
One thing to realize about IREIT is its tenants are stable blue-chips. The type of tenants you’d expect to keep paying you rent year after year.
And so far, IREIT’s tenants have stayed with them for a long, long time.
For example, Deutsche Telecom is one of their tenants. And it’s one of the world’s biggest integrated telco with 236 million mobile customers.
And another is Deutsche Rentenversicherung Bund — Europe’s largest pension insurance company with over 57 million customers.
Then, you also have DXC Technology which is a Fortune 500 IT services company.
And Allianz Handwerker Services, a unit of Allianz SE, one of the world’s biggest insurance companies.
That’s why IREIT was able to maintain close to 100% occupancy rate on its five German properties.
I like how this is a “sleepy” Singapore REIT
You could say IREIT is a “sleepy” Singapore REIT that doesn’t have to replace its tenants often.
Even though the German office market fell by 34% year-on-year last year because of the COVID pandemic, IREIT’s tenants stayed on.
COVID lockdowns and work from home are huge, but IREIT Global continued to collect rent through the pandemic crisis.
This makes IREIT’s properties COVID-proof.
Now, Germany is still Europe’s biggest economy and the fourth largest economy in the world.
And Germany has a mature office property market.
In its latest financial quarter, results, IREIT produced EUR37.8 million in gross rent. That’s 7.2% higher compared to its previous year.
It also produced net profits of EUR27.4 million, 8.6% higher compared to its previous year.
During the pandemic, IREIT rewarded unitholders with a higher distribution per unit (DPU). DPU grew 5.5% higher to 5.03 cents per unit.
Since IPO in 2014, IREIT has rewarded unitholders with abundance.
IREIT’s distribution average around 5.7 cents per year since its first dividend pay out in 2015.
Before the COVID pandemic, IREIT’s average share price is around S$0.74 per unit.
That gives it an average 7.6% dividend yield. Based on its latest dividend pay out this year, current dividend yield is 6.9%. Which is higher than many of the other Singapore REITs today.
One worry I have about IREIT is their struggling properties in Spain
But what I have concerns is its struggling properties in Spain.
In 2019, IREIT bought properties in Barcelona and Madrid, Spain.
The truth is, I’ve little idea where these properties are located.
Of its four Spanish office properties, one of them has a 85% occupancy rate, and another at 77% occupancy rate.
I’m not familiar with the tenants they are renting out to.
What’s more is, when IREIT bought these properties, they are below current market rents.
So, IREIT needs to do extra work to get their rents back up.
Including dividends, if you had held on to IREIT since its IPO, you’d have made 33% returns on your capital.
This is considering shares have not recovered from the COVID pandemic last year, IREIT shares plunged to a low of S$0.42 per unit back in March 2020.
So far, IREIT’s shares is sitting at S$0.64 per unit, which is still 27% down from its pre-COVID peak.
Aside from properties in Spain, IREIT’s Germany properties are profitable.
And this forms a strong foundation for the “Europe-focused” Singapore REIT.
Its steady high dividend yield should continue to reward unitholders in the future.
Sometimes, investing can be simple.
Always here for you,
Willie Keng, CFA
Founder, Dividend Titan
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