<News Analysis> Secured new tenant for vacating key tenant

  • Secured new tenant to replace the floors to be vacated by its existing key tenant, GMG 
  • Rental rates are similar to the existing lease agreement and Münster Campus will have an occupancy of 95.7% from September 2022
  • Lease is slightly more than five years with two prolongation options of five years each
  • Positive development that is within our expectations and has been factored into our projections
  • Maintain BUY recommendation and TP of S$0.76

What’s New

Secured new tenant to replace an expiring lease at one of its key properties. IREIT has successfully secured a new lease with a German federal government body to take up all five floors of office space at Münster Campus once its existing key tenant, GMG, vacates when its lease expires in March 2022.

About the new tenant

  • The new tenant is a municipal association of 27 cities and districts from the region “Westfalen-Lippe” and is one of Germany’s largest associations offering aid to people with disabilities.
  • It operates 35 special schools, 21 clinics, care centres as well as 18 museums, scientific institutions for the study of cultural heritages and other cultural institutions.
  • It is considered one of the largest and best-known employers in Münster and has a total of 18,000 employees.

Details of the lease agreement

  • The new tenant will occupy the five floors in a two-step process
    • One upper floor at Münster South from 01 April 2022
    • Remaining three floors at Münster South and one upper floor at Münster North from 01 September 2022
  • The rental rates secured are similar to its previous tenant’s (GMG) lease
  • The lease will expire on 31 December 2027 and has two prolongation options of five years each
  • In addition, the tenant has been granted an option to occupy two additional floors at Münster North if the space becomes available

Our Thoughts

Positive development that is in line with our expectations and forecast. Given that there was sufficient lead time to secure a new tenant, the vacancy rate in the city is low (c.1.5%), and that it was in advanced negotiations with a few tenants to fill up the space, our financial projections have factored in a new renewal when its key tenant, GMG, vacates. With the new lease agreement with the tenant, the office space at Münster Campus will be 100% occupied from September 2022 with only the storage space at the basement of Münster South still vacant. The overall occupancy rate of Münster Campus will be 95.7%. The lease term is also long (slightly more than five years) with prolongation options and IREIT’s portfolio WALE would improve from 4.0 years to 4.2 years.

Maintain BUY and TP of S$0.76.