SINGAPORE — IREIT, the first pure-play real estate investment trust in Singapore with office assets in Germany, made a healthy debut on the Singapore Exchange (SGX) yesterday, closing at S$0.895, 1.7 per cent higher than its initial public offering price of S$0.88.

This marks a positive start for a REIT that was 7.6 times subscribed in the initial public offering when the offer ended on Aug 11, with strong backing from developer Soilbuild’s co-founder and executive chairman Lim Chap Huat and Chinese real estate tycoon Tong Jinquan.

IREIT’s current portfolio includes four freehold office buildings in German cities Bonn, Darmstadt, Munster and Munich, totalling S$478.3 million in value. This will give investors positive exposure to Germany’s robust economy — the eurozone’s biggest — while rental income is secure due to strong anchor tenants, manager IREIT Global said in its IPO prospectus.

With an above-average 8 per cent yield projected for next year, market interest is unsurprising, VOYAGE Research’s deputy head of research Ng Kian Teck said, but investors should be aware of the potential risks in its European portfolio.

“For instance, escalating tensions in the Middle East and, notably, the Ukraine-Russia situation will impact Germany more than Asia,” he said. “All these can lead to (volatility in) industrial demand, consumer sentiment and, of course, demand for offices in Europe, which is already struggling with an economic recession.”

Mr Ng said another risk for investors is the potential fluctuations in asset utilisation due to the assets’ reliance on a few anchor tenants.

“But given its attractive yield, I still see IREIT moving up at least a bit, with more upside if the geopolitical tensions can quieten down,” he added. Wong Wei Han