City Developments Limited has aligned itself with Paris-based asset manager Tikehau Capital and the family office of Singapore billionaire Arvind Tiku in set of transactions that takes their combined holdings in IREIT Global to over 50 percent, according to an announcement yesterday by the Singapore-listed real estate investment trust.
In a series of off-market deals carried out this week, CDL raised its stake in the REIT from 12.5 percent to 20.9 percent at a consideration of S$26.1 million ($18 million), while Tikehau paid S$38.7 million to bump up its unitholding from 16.6 percent to 29.2 percent.
In addition, the Tiku family office – which has an asset portfolio worth $2 billion – purchased a 5.5 percent stake in the REIT for S$17.2 million in a third off-market transaction.
IREIT Global’s stock value has taken a pounding as a result of the COVID-19 pandemic, with its equity down a third from S$0.89 per unit in February to S$0.62 at the close of trading today.
Buying From a Mainland Tycoon
The SGX-listed REIT, which consists of a 230,000 square metre (2.5 million square foot) portfolio of office assets in Germany and Spain worth €630 million ($685 million), said that the three parties had purchased a combined 26 percent of the the trust’s units from mainland property tycoon Tong Jinquan.
As a result of the transactions, Tong, who is chairman of Shanghai Summit Property Development, has slimmed down his holding in the listed vehicle to 6 percent, after initially purchasing a 60 percent stake in IREIT Global when the trust listed in 2014.
“The joint increase in stake by both Tikehau Capital and CDL reflects our positive long-term view on the growth prospects and strategy of IREIT, and clearly demonstrates our strong alignment of interest with minority unitholders,” said Tikehau Capital’s senior partner, Bruno de Pampelonne.
Referring to the move as a “strategic partnership”, de Pampelonne said that the REIT also welcomed the Tiku family office as the manager works towards “bringing IREIT to the next level of growth and diversification”.
Reinforcing a REIT Partnership
CDL is strengthening its position in IREIT Global just under a year after the Singapore developer spent S$18.4 million to acquire a 50 percent stake in the manager of the REIT as it expanded its fund management business.
At the same time that it had carved out that half-stake in IREIT Global Group Pte Ltd, CDL had also spent S$59.4 million to purchase 12.4 percent of the REIT’s total issued units.
“We remain confident in the long-term fundamentals of the established European economies,” CDL group’s CEO Sherman Kwek said in yesterday’s announcement, reinforcing an investment thesis that has seen the developer – which controls London-listed Millennium & Copthorne Hotels and a portfolio of offices and hotels in the Netherlands through its affiliate First Sponsor – bet heavily on Europe .
IREIT Global said that it would continue to grow the REIT’s portfolio, despite what it characterised as “the uncertain macroeconomic backdrop”.
Reassuring Unitholders as Europe Battles COVID-19
In a separate release three weeks ago, the REIT manager had sought to reassure unitholders that the financial impact on the listed trust had so far been limited, noting that the majority of its rental income is derived from long-term leases with blue-chip tenants such as Deutsche Telekom – which is Europe’s largest telecommunications provider – and German pension fund Deutsche Rentenversicherung Bund.
At the end of last year, IREIT’s portfolio had a weighted average lease expiry of 4.2 years, with 97.7 percent of the leases due for renewal from 2022.
The SGX-listed REIT has an existing relationship with with Tikehau, having formed a joint venture with the private equity firm that purchased a 40 percent stake in a set of four office properties in Spain from a Blackstone-controlled REIT for €138 million in December last year.
The manager of the REIT noted in yesterday’s announcement that its intention is to acquire the remaining 60 percent of that portfolio at an “appropriate juncture”.