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Ireit Global- Berlin property

Q&A › Category: Dividend Stocks › Ireit Global- Berlin property
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Cass Ng asked 10 months ago
I have some questions regarding IREIT Global’s Berlin Campus repositioning. Two hospitality tenants have been secured, commencing leases in 2027:
  • Premier Inn: 20-year lease, €2.2M annual rent for the first 4 years, increasing to €2.6M
  • Stayery: 20-year lease, €2.7M for the first 3 years, increasing to €3M
To secure these leases, IREIT will incur:
  • €50M directly to tenants (is this consider income support or incentives?)
  • €32M for façade refurbishment and other upgrades
Based on these terms, total rental over 20 years is projected at €112M. However, after deducting the €50M incentives, net rent is effectively €62M — nearly 45% of total rental goes toward upfront support. It would take roughly 11–15 years to recoup the initial investment, depending on assumptions. Although these two tenants will take up nearly 24% of the lettable space, locking them in comes at the cost of significant incentives and heavy upfront CAPEX, with the likelihood of another major refurbishment once the 20-year lease ends. Did I overlook any key factors, or does this deal appear unattractive based on these terms?
I've also included the two announcements for your reference.


Thank you!
Attachments
IREIT-Signing-of-Hospitality-Lease-Press-Release.pdf
IREIT-Signing-of-Stayery-Hospitality-Lease-Press-Release.pdf
1 Answers
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Rusmin Ang Staff answered 10 months ago
Hi Cass I'm less familiar with European REITs because I have not studied them in-depth but from your sharing, it looks like tenant wanted landlord to refurbish the asset at landlord's own pocket money since it is landlord's asset. In return, tenant commits to lease the asset for long-term. This is quite common among longer leases commercial properties. We have seen similar thing with Parkway REIT where the REIT agreed refurbish asset during the renewal and in return, there is step-up increment in the rent that landlord can charge the tenant. Generally any money plough into the asset will increase the asset value for landlord. So I do not see it as a form of income support.
Cass Ng replied 10 months ago

But recoup will take 11-15 years, is this length of time consider normal?
By the end of the lease will probably need another refurbishment, so basically the rental collected maybe only left 5-9yrs (and thats excluding the interest).

Rusmin Ang Staff replied 10 months ago

They usually will calcualte the ROI from the additional investment. Similar to AEI, REIT manager will consider if I put additional X amount of capital, what would be additional income that I’m getting. You can drop them an email asking this question. They will be in better position to answer your good question!

Cass Ng replied 10 months ago

Thanks!