IReit Global to acquire Decathlon properties in France for 110.5m euros

IREIT Global has, through its wholly-owned subsidiary Fit 2, entered into a conditional sale agreement to acquire Decathlon's properties in France for 110.5 million euros (S$176.8 million).

The portfolio comprises 27 retail properties with a gross lettable area of 95,477 square metres.

Upon completion, all properties will be leased-back to the sporting goods retailer. The deal comprises a committed occupancy of 100 per cent with weighted average lease expiry by gross rental income of 10 years, and an option to break after six years, said the manager on Wednesday.

The Decathlon properties are part of the out-of-town retail (OOT) asset class, which refers to shops or facilities that are situated away from the centre of a town or city.

Typically, these retail parks and standalone stores are easily accessible and have a large car-parking facility, which enables consumers to access the stores quickly and easily while keeping to social-distancing measures.

In a call on Wednesday evening following the announcement, Louis d'Estienne d'Orves, chief executive of the manager, noted that the OOT asset class has remained "extremely resilient" amid the Covid-19 pandemic, due to the characteristics of these assets.

He added: "It could be seen a little bit like last-mile delivery - people do some click and collect, and then collect their good(s) from these stores, so it's a mix between retail, and almost warehousing."

The proposed acquisition also marks IReit's foray into France, providing it with an "attractive entry point" into the country - the third largest economy in Europe by gross domestic product. In doing so, the trust will also be able to reduce its reliance on any single geographical location or trade sector, said the manager in a statement.

IReit's current portfolio comprises office properties in Germany and Spain.

Post-acquisition, its enlarged property portfolio will have an occupancy rate of 96.9 per cent, and a total valuation of 833.5 million euros (S$1.33 billion) - an increase of 15.8 per cent since Dec 31, 2020. The Reit will also see a market capitalisation of S$610 million and a historical yield of just above 7 per cent.

On why Decathlon is selling its properties, Mr d'Estienne d'Orves said that the sporting goods retailer, for one, is looking to spend more money into its working capital.

"All their stock - just to show how their business is working well - they were running out of stock on a lot of things over the last 12 months," he added.

Decathlon is also looking to optimise its digitalisation efforts, and thus requires more capital.

The acquisition will be partially financed through an equity fundraise, which may comprise a private placement of new units to investors and/or a non-renounceable preferential offering to existing unitholders. The final funding structure will be ascertained "at the appropriate time", said the manager.

"Through the proposed placement, we hope to reach out to a wider group of new investors," added Choo Boon Poh, chief financial officer of the manager, during the call.

Key investors have provided an undertaking to subscribe in full to their allotment in a preferential offering, it added, which, including excess units, sums up to about S$59 million.

The acquisition is expected to be completed by Q3 2021, subject to unitholders' approval.

Mr Choo said that the proposed acquisition would, it is hoped, boost IReit's market capitalisation and trading liquidity.

He added: "We are considered one of the smallest S-Reits... and really what we're doing, as always, is trying to constantly build scale in order to achieve a size that investors will find interesting."

Units of IReit Global closed 0.8 per cent or half a Singapore cent lower at 64.5 cents on Wednesday.