EU REAL ESTATE: Real Estate Outliers: IWGLN & PUPRIN

With Stoneweg pricing today, I was asked about some of the wider names in the Real Estate sector. Two names stand out in my view. IWGLN and PUPRIN

• IWGLN is asset light. The company has Leases of around $6.4bn which are not capitalized: rent is an Operational Cost. The leases sit in individual SPVs remote from the Parent. This enables IWGLN to run very low leverage of 1.4x ND/E the company is targeting 1.0x in the near term with EBITDA growing to $1bn. Fitch rates IWGLN BBB. IWGLN came at ms+387 and has been tapped subsequently. It currently trades z+250 mid. This is the widest name in IG real estate. We highlighted at time of launch that the equity had similar risk characteristics to Colonial (BBB+ ms+91) and Gecina (A- ms+72). In Lodging, Accor (BBB- ms+110 area) IHGLN (BBB ms+100a).
• PUPRIN Public Property Invest. This is a small company with only €850m portfolio value, low interest cover at 2.3x. LTV and ND/E are manageable at 42.5% and 7.8x respectively. The company also is associated with SBB I Norden which has a 36% stake. The key value proposition is the Tenant base. 92% are Government agencies (Norway is Aaa/AAA) with on average 18yrs tenure (WAULT of 4.6yr but they keep renewing). Mid z+216 came at +260.
• Both deals have performed very sell since launch but its worth having a view on the wider names. Liquidity in smaller names is never guaranteed though.