When asked why the manager is proposing such a dilutive transaction, the manager accepts that the transaction is not immediately DPU-accretive. However, the occupancy of the Spanish portfolio is around 84.7%, providing the manager with the opportunity to lease the vacant area with a potential for positive rental reversions. In addition, the Spanish properties have remained resilient, with less than 2% of tenants by rent requesting for rental rebates in the April-June 2020 period, during the Spanish lockdown.
In September, three REITs announced equity fund-raising plans which are likely to exceed $1.7 billion. All three made, or are in the process of making, interested- party transactions, that is, they bought or are buying properties from their sponsors. IREIT Global announced the purchase of the remaining stake of 60% in four Spanish office buildings it does not own from Tikehau Capital for EUR47.8 million ($76.4 million). Tikehau Capital is one of IREIT Global’s two sponsors, the other being City Developments.
The manager has since announced — on Sept 18 — that it will be raising $142.8 million or EUR88.7 million through an issuance of 291.4 million new units, with a ratio of 454 units for 1,000 units at 49 cents apiece. This would result in a theoretical ex-price (TERP) of 65.5 cents. Based on pro forma net property incomes and distributable incomes for 1HFY2020 and FY2019, the transaction is dilutive to the extent of around 21% based on distribution per unit (DPU), and a dilution of 11.4% to 11.7% based on distribution yield.
