IREIT Global - RHB Invest 2023-06-05: Going Out-Of-Town Retail

• We like IREIT Global (SGX:UD1U)’s proposed acquisition of French out-of-town retail parks due to their defensive nature, tenant quality and income stability. The move also helps to diversify its geographical spread and asset class mix, while mitigating tenant concentration risks – which it is now facing.
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IREIT has proposed the acquisition of B&M, a French retail portfolio

• IREIT Global has proposed the acquisition of B&M, a French retail portfolio comprising 17 fully occupied single-tenant sites with a GLA of 61,756sqm (larger land area: 252k sqm), which accounts for 15% of B&M stores in France. These have a long WALE of 6.8 years (weighted average lease break: 4.6years). See IREIT Global's announcement dated 01 Jun 2023.
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• B&M Group is a leading London Stock Exchange listed fast-growing European discount retailer (market cap: GBP5.4bn) with estimated sales of EUR12bn across France in 2023. Amid rising inflation, the discount retail industry has grown quickly in recent years, driven by inflationary pressures and lower purchasing power. Between Sep 2021 and 2022, there was a ~24% rise in traffic at French discount stores, with 1.2m new customer visits tracked.
• Purchase price of EUR76.8m (S$112.2m), at a ~1.7% discount to its valuation, implies an attractive NPI yield of ~7.9% (~490bps spread over 10-year government bond yields). There are also in-built annual rental rate escalations pegged to France’s CPI.
• Post-acquisition, France will be IREIT Global’s second largest market by rental income (~27%, from 17% prior to the deal) with retail accounting for ~20% (13% previously). The assets are acquired from a fund managed by its sponsor Tikehau Investment Management, and the deal will be subject to unitholders’ approval.

Minimal earnings accretion but equity funding mix (~60% equity) boosts stability.

• Read more at SGinvestors.io.

Vijay Natarajan RHB Securities Research | https://www.rhbgroup.com/ 2023-06-05 SGinvestors.io

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