IREIT Global

[Dosser]

IREIT recently refinanced its total borrowing, of about Euro 200m. What struck me is the rate: 1.5% for seven years, compared with the existing 2%.

https://links.sgx.com/FileOpen/IREIT%20P...eID=542643

[BlackCat]

It seems that Deutsche Telekom is a bloated, ex-government agency.  Which is under continual, long term, downsizing pressure (being resisted by the unions):

Jan 2019: https://www.bloomberg.com/opinion/articl...pean-firms
"national carriers almost uniformly have a cost disadvantage to their privately founded peers, namely that they employ significantly more people."  Theres a chart comparing revenue per employee for European telecom companies.

May 2018: https://www.mobileworldlive.com/featured...nvestment/
"Deutsche Telekom...in the years to 2021, cut €1.5 billion of annual overheads...the operator group said savings would be made through increased automation and digitisation across its European footprint, with half coming from cuts in staff costs....Other savings include removing legacy systems and reducing its real estate footprint."

June 2018: Cutting jobs from T-systems, their IT services division: 6000 out of 17000 employees in Germany are being laid off:
  - https://www.reuters.com/article/us-deuts...SKBN1JH2C6
  - http://business-review.eu/international/...ion-183914

This has been going on a long time.  Heres a 2005 article: "Deutsche Telekom to Shed 32,000 Jobs".

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IREIT Global's largest tenant is Deutsche Telekom, contributing 52% of revenue.  At end 2018, they were the single tenant for three buildings (Bonn, Darmstadt, Munster).  WALE for these properties was 4.3, 3.8, 4.3 years respectively (p32), meaning they are due in 2022 and 2023.
Out of their gross revenue, this probably accounts for the 25% lease expiry was due in 2022, and the 23% in 2023.


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Its a shame. I really like a lot about this REIT:

• freehold property
  
• Good quality tenants (except DT)
  
• conservative manager: only done one acquisition which was accretive, and are slowly paying off debt.
  
• 7+ % yield from 90% payout ratio.
  

But I'll think I'll wait till 2023 to see whether DT's downsizing plans have an effect. At what share price would this risk be considered priced in?