Many things are happening for this month. Following up with the merging between Fraser Commercial Trust and Fraser Logistics and Industrial Trust, and Mapletree expanding into Japan. Another company IREIT Global announced their plans to acquire assets in the country of Spain.
Business Time News
Now that really came as a surprise to me. IREIT Global portfolio currently consists of properties located only in Germany, although it make sense to diversify portfolio to reduce concentration risk, but why choose Spain? The country of Spain never strikes me as an economic powerhouse in Europe. As I have quite an amount of investment in IREIT Global, I decided to look deeper into this country sitting at the edge of Western Europe.
Spain it appeared is slowly recovering from their economic crisis which occurred between the years of 2008 - 2014. Spain has managed to gain a GDP annual growth of 2.5% in year 2018. This make Spain the fifth largest economy in Europe. But that doesn't really explain the rational basis behind the decision to invest in Spain. I took a closer look at the region IREIT Global is moving into. IREIT Global is acquiring 4 assets in two cities namely Barcelona and Madrid.
Barcelona is the capital of Catalonia and the second largest city in Spain. It has the second most populous municipality in Spain with a population of 1.6 million. Madrid is the capital and most populous city of Spain. It is the administrative and financial capital of Spain. Well, that does speak for the potential concentrated volume of spending power within a city.
Looking at the assets they are acquiring, 2 assets are located in each city. All 4 are Freehold assets. Based on the chart above, the assets located in the capital city of Madrid look promising with more than 90% occupancy rate and had just done refurnishing in year 2015. While the assets located in Barcelona look less tasty with a low occupancy rate of less than 80%, IL-Lumina is just a little more than half of occupancy at 69%. No refurnishing had been done for these two assets, I could see some possibility of upgrading works for it. This would prove a challenging task ahead for the management of IRET Global to transform these two assets in Barcelona.
Moving ahead, for long-term perspective. This might took quite a while to see results. If Spain economy continued to grow, IREIT Global could bring the more under-rented assets to market levels and increasing occupancy rate, these could add more values and sustainability to IREIT Global portfolio. Generally, I am more caution with oversea investment. The market price of IREIT Global has grow to a higher price of $0.80, it is unlikely I would allocate anymore investment into this counter in future unless Mr Market offered a window of opportunity.
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