A LONG-TERM main tenant of IReit Global’s Berlin Campus,will not be extending its lease, which is due to expire on Dec 31, 2024.
On Monday (June 24), the real estate investment trust (Reit) manager said the tenant’s lease contributed about 20 per cent of the Reit’s total gross income.
It added that the tenant, German pension insurance company Deutsche Rentenversicherung Bund (DRV), was the trust’s top tenant by rental income.
DRV has been occupying the Berlin Campus since 1995. In July last year, it extended its lease. As part of the deal, DRV agreed to pay a revised rent that is about 45 per cent higher than its current office rent, effective Jul 1, 2024.
On top of this rent revision, DRV also agreed to pay a lump sum of about 15.5 million euros (S$23 million) – or 16 months of its total current rent – as compensation for dilapidation costs to reinstate its current space back to its original state in the event DRV vacates Berlin Campus at the end of its extended lease term.
The dilapidation costs will be paid to IReit by Jun 30, 2024.
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Following DRV’s decision to not extend its lease, the Reit manager said it plans to proceed with its proposal to convert the Berlin Campus into a functional mixed-used urban precinct after the tenant vacates the premises.
The precinct would be designed to offer “maximum flexibility” in terms of use types to cater to a range of tenant requirements, said the manager.
It noted that potential uses of the space could include office space, hospitality space and conference facilities.
Louis d’Estienne d’Orves, chief executive officer of the Reit’s manager, said: “We believe the repositioned property could benefit from substantially increased rent rates (as compared to its current rent).”
“We are also in exclusive discussions with a leading hotel brand and long-stay operator to lease about a quarter of the total lettable space,” he added.
IReit’s manager also said it expects distributions per unit (DPU) to fall amid work on the repositioning of the campus.
To mitigate the decrease in DPU, the manager noted that it will explore options such as making one or more top-up distributions to unitholders during the course of the repositioning work.
The top-ups would come from proceeds from the divestment of its Barcelona office asset and/or the dilapidation costs that will be paid by DRV.
Units of the Reit closed flat at S$0.315 on Friday.
