Is IREIT Global A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of IREIT Global and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To April 2025

Business Description

IREIT Global is an Office and Commercial REIT that was listed in 2014 and owns office and commercial properties in Europe.

What I Like About IREIT Global:

• The management have a clear acquisition and managing strategy.

  
  

• The overall portfolio’s WALE is high (Figure 11)

  
  

• Most properties are on a freehold basis. As such, there is a minimal impact of lease decay.

What I Do Not Like About IREIT Global:

• High tenancy concentration risk (Figure 12). This is demonstrated from the Berlin Campus episode where revenue & DPU has to be significantly impacted when any repositioning or tenant shift occurs.

  
  

• The debt maturity profile is not spread evenly; this exposes the cost of borrowing to high levels of interest rate risk (Figure 6)

  
  

• The manager's abilities to deliver yield accretive acquisition are unproven and they have a poor record of capital preservation, as seen from the deterioration of the DPU and share price over the years.

Updates From Recent Performance (FY 2024)

General Comments:

• The focus in 2025 will be on the execution of the repositioning project on the Berlin Campus into a mixed-use property from a single-use, single-tenant property. This will result in severe disruption in DPU.

  
  

• The growth in gross revenue (+16.3%) and net property income (7.2%) was mainly due to the full-year contribution from the B&M portfolio and the recognition of the dilapidation cost payable by the main tenant at the Berlin Campus.

  
  

• The weighted average cost of debt remained unchanged at 1.9% and the gearing ratio improved by 0.3% to 37.60% due to the debt repayment following the divestment of II.luminia.

Positive Headwinds:

• The cost of borrowing is expected to remain stable in FY 2025 as there is no refinancing requirement.

Negative Headwinds:

• The absence of income from the Berlin Campus is expected to have a significant impact (~25%) on the REIT’s gross revenue.  As such, expect the distribution to be significantly disrupted during this reposition which could last around 18-24 months (commencing 2Q 2025)

  
  

• Growth is expected to be weak in Germany. This may result in additional headwinds associated with the repositioning of the Berlin Campus. That said, Berlin’s office-based employment is expected to outperform the national average over the next 10 years which should help offset some of the headwinds associated on a national level.

  
  

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

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