SINGAPORE (Dec 9): IREIT Global announced Dec 7 that it is acquiring a portfolio of four office properties in Spain for a total acquisition cost of €142.3 million ($213.9 million) in a 40:60 joint venture with Tikehau Capital.
The proposed acquisition will mark IREIT’s entry into Spain.
The four freehold properties – Delta Nova IV and Delta Nova VI in Madrid, and Il∙lumina and Sant Cugat Green in Barcelona – have a total gross lettable area (GLA) of 72,028 sqm and an overall occupancy rate of 80.9% as at Dec 1, 2019.
Delta Nova IV and Delta Nova VI are two office buildings forming an office complex located in the consolidated business office area of Manoteras, north of Madrid.
Il∙lumina is an office building located in Esplugues de Llobregat, a mixed use office and industrial area including a technology and audio-visual office cluster, while Sant Cugat Green is a modern office building in an attractive periphery office submarket within the metropolitan area of Barcelona.
The agreed property value of the Spanish portfolio on a 100% basis is at €133.8 million, representing a 3.3% discount to the aggregate valuation of €138.3 million by independent valuer, Cushman & Wakefield Spain.
The total cost of IREIT’s investment in the joint venture company is currently estimated to be approximately €57.6 million, comprising its proportionate share of the purchase consideration as well as other fees and expenses.
To help fund its proportionate share of the proposed acquisition, IREIT will be taking a bridging loan of €32.0 million from City Developments Limited (CDL).
Tikehau Capital and CDL are joint shareholders of IREIT Global’s manager.
As at Dec 7, Tikehau Capital owns a 16.74% stake in IREIT, and is regarded as a “controlling unitholder” of the REIT, while CDL is regarded as a “controlling shareholder” of the REIT manager.
The four properties are currently multi-tenanted and are anchored by a number of large reputable companies from diverse industries.
The REIT manager says the passing rents of these properties are generally below the current market rents, which presents an upside potential for IREIT by bringing the under-rented properties nearer to market levels and increasing the occupancy rate through active asset management.
With the proposed acquisition, the properties will also add 28 new tenants into IREIT’s tenant profile, thereby increasing its tenant and trade sector diversification.
With the call option granted by Tikehau Capital to IREIT to acquire its 60.0% stake in the joint venture, it also provides a future growth opportunity for IREIT, the manager adds.
The manager intends to finance the IREIT total acquisition cost with the proceeds from the CDL loan, debt financing, internal cash resources and equity fund raising.
“The strong support from our key unitholders Tikehau Capital and CDL is a clear testament on their commitment and support to the long-term growth strategy of IREIT. The proposed acquisition will provide IREIT exposure to Spain, an improving economy with sound fundamentals and investment climate,” says Aymeric Thibord, CEO of the manager.
“The Spanish portfolio is a strategic addition that complements well with IREIT’s existing portfolio, as its diversified blue-chip tenant base and well-staggered lease expiry profile will add strength, scale and diversification to the portfolio,” he adds.
Units in IREIT Global closed flat at 79.5 cents on Dec 6.
