IREIT acquires four office properties in Spain

It exercised the call option to acquire Tikehau Capital’s 60% share in the properties.

SGX-listed IREIT Global (IREIT) is acquiring 60% interest in four freehold multi-tenanted office properties in Spanish cities Madrid and Barcelona, a press release revealed. It will be bought from Tikehau Capital at an agreed market value of $220.75m (€136.4m) on a 100% basis.

The portfolio is currently held through a 40:60 joint venture (JVCo) by IREIT and Tikehau Capital. In 2019, IREIT partnered with Tikehau Capital and City Developments Limited (CDL) to acquire 100% interest in the spanish properties. CDL’s wholly-owned subsidiary City Strategic Equity extended a $51.79m (€32m) loan to IREIT to fund its 40% investment.

As part of the transaction, Tikehau Capital has granted IREIT a call option to acquire its 60% shares in the JVCo within 18 months following completion of the initial acquisition, which IREIT has now exercised.

The purchase consideration, which is subject to post-completion adjustments, is approximately $77.36m (€47.8m). It was derived based on the consolidated net asset value of the JVCo as at 30 June, after taking into account the average of two independent valuations of the Spanish portfolio.

IREIT’s Spanish portfolio has a total gross lettable area of 72,167 sqm, an overall occupancy rate of 84.7%, and a weighted average lease expiry (WALE) of 4.1 years as at 30 June.

In July, the manager extended about 95% of its Spanish portfolio’s leases that were expiring in 2020. This is expected to increase the WALE of IREIT’s enlarged portfolio post acquisition from 3.7 years as at 30 June to 3.8 years, with less than 4% of leases expiring in 2020 and 2021.

After the deal, IREIT’s portfolio post will have five properties in Germany and four properties in Spain. All nine properties are 100% freehold, boasting a high portfolio occupancy rate of approximately 95.7% and a healthy WALE of 3.8 years.

The proposed acquisition will also increase IREIT’s geographical exposure to Spain from 9% to 19%. Additional asset diversification will be achieved as no single property will contribute to more than 30% of IREIT’s valuation post acquisition.

IREIT intends to finance the acquisition with a rights issue in which Tikehau Capital, CSEPL and AT Investments Limited have given their respective undertakings to subscribe, for all unsubscribed rights units in the rights issue. Part of the net proceeds will also be used to repay the $51.79m (€32m) loan granted by CSEPL in December 2019.

The proposed acquisition is expected to be completed in Q4, subject to the approval of unitholders of IREIT for the proposed acquisition at an upcoming extraordinary general meeting to be convened at the appropriate time.