CEREIT aims to generate superior risk-adjusted returns for its Unitholders by buying, owning and actively managing real estate in line with its investment strategy (including disposal of any property that has reached a stage that offers only limited scope for growth or has higher risk).
The investment strategy of the Manager is focused on a long-term target portfolio of 75% or more within Western Europe and 75% or more in office and light industrial / logistics with current predominant focus on:
- increased exposure to the light industrial/ logistics sector towards 50% of CEREIT’s portfolio, including logistics opportunities in the post-Brexit U.K. market;
- divesting a number of select office buildings and other non-strategic assets; and
- progressing key redevelopment opportunities in Paris, Amsterdam and Milan.
The Manager aims to achieve CEREIT’s objectives through executing on the following key strategies:
Active asset management and asset enhancement
- Seek to drive organic growth in revenue and income and maintain strong tenant-customer relationships;
- Continually monitor each asset’s expected contribution to earnings and NAV growth, utilising the proprietary 13-risk factor dynamic portfolio optimisation tool;
- Explore selling assets that do not meet the risk-return criteria and look to reinvest capital into opportunities that will ultimately increase DPU and NAV per unit; and
- Regularly evaluate properties to identify if potential property enhancement or redevelopment opportunities can enhance CEREIT’s returns.
Growth through acquisitions
- Adopt rigorous research-backed selection process focused on long-term sector trends and fundamental real estate qualities to ensure investments are focused on the right cities and sectors;
- Aim to grow DPU and NAV per unit through the acquisition of quality income-producing commercial properties across Europe;
- Seek assets that can provide attractive cash flows and yields, which fit within CEREIT’s purpose to enhance risk-adjusted returns for Unitholders; and
- Source potential acquisitions that create opportunities for future income and capital growth, leverage extensive on-the-ground teams and participate in both on- and off-market acquisitions.
Responsible capital management
- Maintain strong balance sheet and an investment grade credit rating, employ an appropriate mix of debt, hybrids and equity with sufficient liquidity;
- Access diversified funding sources, including global financial institutions and capital market investors; and
- Optimise cost of debt and financing and utilise interest rate and foreign exchange hedging strategies where appropriate.
High ESG standards and disclosures
- Employ a rigorous approach to ESG matters to achieve high sustainability standards in the operation and management of CEREIT, consistent with the values of the Sponsor and with guidance from the board of the Manager (the “Board”) and meeting relevant regulations;
- Safeguard Unitholders’ interests through robust corporate governance and risk management;
- Continuously enhance corporate disclosures and ESG policies;
- Augment senior management’s ESG-linked KPIs; and
- Improve CEREIT’s ranking in relevant Singapore and global ESG ratings.
Research-backed approach to acquisitions
The Manager’s approach to investment combines research-based fundamental market analysis with rigorous evaluation of property-specific variables and financial forecasts to enable Manager to select assets that meet its investment criteria and enhanced risk adjusted returns.
The initial asset selection entails top-down comprehensive analysis including a number of criteria covering mega trends and a mixture of cities and countries. The process identifies long-term sector mega trends and fundamental real estate attributes to shortlist countries and sectors that will provide attractive returns.
Once top-down comprehensive data analysis has yielded targeted city locations and asset type, the bottom-up investment strategy process focuses on the refinement of the data of portfolio optimisation. For this part of the process, the investment management team has developed proprietary analytics tools that provide the Board with a broad framework to assist them in the evaluation of the proposed acquisitions and divestments. This, in turn, allows the asset management team to optimise the portfolio through monitoring key asset and market risks and identify “outliers”. The tools include the following:
- An enhanced property risk matrix across three broad categories, encapsulating 13-risk factors, that provides a framework to assess existing properties, proposed investments and potential divestments. The matrix factors in asset, market location, execution, financial and ESG risks. The matrix visualises how the identified asset enhances or detracts from the existing portfolio risk / return profile and lays out the assessed risks in a standardised framework to consider against the projected returns; and
- A dynamic portfolio optimisation tool that provides a real-time measure of CEREIT’s overall risk and return via producing an “efficient frontier curve”. The tool maps out a dynamic efficient frontier of CEREIT’s investable universe, based on the investment team’s evaluation of expected returns and an assessment of the overall risk profile of a typical CEREIT property across each asset class in identified cities and countries.