Cromwell European Real Estate Investment Trust Launches €236 Million Initial Public Offering (“IPO”)

NOT FOR DISTRIBUTION OR PUBLICATION IN THE UNITED STATES OR IN ANY OTHER JURISDICTION OUTSIDE SINGAPORE
Goldman Sachs (Singapore) Pte. and UBS AG, Singapore Branch are the Joint Issue Managers for the IPO (as defined below). DBS Bank Ltd., Goldman Sachs (Singapore) Pte. and UBS AG, Singapore Branch are the Joint Global Coordinators for the IPO. DBS Bank Ltd., Goldman Sachs (Singapore) Pte., UBS AG, Singapore Branch, Daiwa Capital Markets Singapore Limited and CLSA Singapore Pte Ltd are the Joint Bookrunners and Underwriters for the IPO.
 
  • First Singapore real estate investment trust (“REIT”) with a diversified Pan-European portfolio
  • Attractive 7.8%1 DPU yield compared to Europe and Singapore benchmarks
  • Offering of 428,535,000 Units at €0.55 per Unit
  • Opportunity to gain exposure to improving European markets
  • Stable, recurring income supported by a long lease profile and a diverse tenant base, with growth and upside potential from active asset management, asset enhancement and acquisitions
  • Singapore Public Offering opens at 9.00 p.m. today, 22 November 2017, and closes at 12.00 p.m. on 28 November 2017
 

SINGAPORE – Cromwell EREIT Management Pte. Ltd., the manager (the “Manager”) of Cromwell European Real Estate Investment Trust (“CEREIT”), today registered its Prospectus with the MAS in connection with the offering (the “Offering”) of 428,535,000 units in CEREIT (the “Units”). The Manager intends to raise gross proceeds amounting to approximately €236 million from the Offering.

CEREIT is the first Singapore REIT with a diversified Pan-European portfolio to be listed on Singapore Exchange Securities Trading Limited (the “SGX-ST”). Its initial portfolio (the “IPO Portfolio”2) comprises 74 quality properties (the “Properties”, and each a “Property”) with a total appraised value of approximately €1,354 million3 and an aggregate lettable area of approximately 1.1 million sq m as at 30 April 2017. The Properties are located across five countries in Europe (Denmark, France, Germany, Italy, and the Netherlands) with a balanced focus on the office and light industrial / logistics4 sectors.

The Offering

The Offering consists of an international placement of 392,171,000 Units to investors, including institutional and other investors in Singapore (the “Placement Tranche”) and an offering of 36,364,000 Units to the public in Singapore (the “Singapore Public Offering”), at an offering price of €0.55 per Unit (the “Offering Price”). Investors subscribing for Units under the Singapore Public Offering will pay the Offering Price in Singapore dollars (such amount being S$0.885, based on the exchange rate of €1.00 to S$1.6091 as determined by the Manager in consultation with DBS Bank Ltd.).

Concurrently with, but separate from, the Offering, Cerberus Singapore Investor LLC (“Cerberus Singapore”) (an affiliate of the vendor of certain of the Properties), Hillsboro Capital, Ltd., as well as Mr Gordon Tang and Mrs Celine Tang (together, the “Cornerstone Investors”) have entered into separate subscription agreements to subscribe for an aggregate of 581,819,000 Units at the Offering Price.

Cerberus Singapore is ultimately owned by investment funds that are managed by affiliates of Cerberus Capital Management, L.P., one of the world’s leading private investment firms which manages over US$30 billion with its affiliates. Hillsboro Capital, Ltd. is a private investment holding company of Dr Andrew L Tan and his family. Dr Tan is the chairman of Alliance Global Group Inc., one of the largest listed conglomerates in the Philippines. Mr Gordon Tang is a non-executive director of SingHaiyi Group Limited, which is listed on the Main Board of the SGX-ST and specialises in property development, real estate investment, real estate co-investing, property trading and real estate management services. Mrs Celine Tang is the group managing director of SingHaiyi Group Limited and also the wife of Mr Gordon Tang.

Demonstrating confidence in the long-term success of CEREIT, Cromwell Property Group5 (the “Sponsor” has committed to hold 563,636,000 Units (which translates to approximately 35.8% of the total number of Units) as at the Listing Date (assuming the Over-Allotment Option6 is not exercised), strongly aligning its interests with that of prospective unitholders. Assuming the Over-Allotment Option6 is exercised in full, the Sponsor will hold 518,182,000 Units (which translates to approximately 32.9% of the total number of Units) as at the Listing Date.

Attractive Yield

CEREIT’s distribution yield at Listing is 7.8%7 based on the Offering Price and the estimated distribution per unit for Projection Year 2018. This compares favourably against other yield investment products in Europe and Singapore such as the Europe 10-Year Government Bond (1.1%)8, the FTSE EPRA Eurozone Index (4.5%)9, the FTSE Straits Times REIT Index (5.9%)10, and the MAS 10-Year Bond (2.2%)11.

Improving European Markets

CEREIT is well-positioned to benefit from the continued recovery in Europe. Real gross domestic product in the Eurozone area grew 1.7% in 2016 and is expected to rise to 2.2% in 201712. Unemployment has fallen over the last three years to its lowest level since 2010 and has further room for improvement12. Household consumption, investment, and industrial production are also expected to pick up from 2017 to 2020, supported by improving business sentiments, as well as employment and real earnings growth12. The European real estate market has benefited from the general macroeconomic recovery and rental rates are expected to continue to grow in the coming years.

Large, Geographically Diversified Portfolio with Balanced Asset Class Exposure

With no single geography or property accounting for more than 34.5%13 and 11.7%13 of the IPO Portfolio, respectively, CEREIT benefits from low concentration risks. CEREIT also has a balanced exposure across the office and light industrial / logistics sectors in Europe, with each accounting for 47.4%13 and 42.1%13 of the IPO Portfolio, respectively. Approximately 88.0%13 of the properties in the IPO Portfolio are situated on either freehold or ongoing leasehold14 land, and approximately 88.0%13 of the Properties are located in or close to major cities15.

Stable, Recurring Income

The IPO Portfolio has a long weighted average lease expiry (“WALE”)16 of 4.9 years with no more than 12.4% of leases by Headline Rent17 (based on WALE) expiring in each year up to 2021. With over 700 leases supported by a high quality and diverse tenant base that spans a broad range of trade sectors, the IPO Portfolio provides long-term income stability.

Growth and Upside Potential

Most of CEREIT’s leases are linked to inflation or similar indices, providing built-in rental growth. In addition, there is potential upside from the Manager’s active asset management strategy, which is expected to continue driving rental growth. Occupancy of the IPO Portfolio is expected to improve from 87.7%18 as at 30 April 2017 to 90.0% in Projection Year 2018 and 92.6% in Projection Year 2019, based on the average over such periods. The Manager will also consistently seek to maximise the value of CEREIT’s assets via asset enhancement, repositioning, or development initiatives.

The Manager’s Chief Executive Officer, Philip Levinson, added, “Our aim is to provide investors with access to a diverse portfolio of high quality assets across the European office and industrial sectors. As part of our proactive tenant management strategy, we focus on sourcing high quality tenants, optimising lease tenures, as well as maximising property cost efficiencies to organically increase gross revenue and net property income. We adopt a rigorous selection process focused on long-term trends and real estate fundamentals, as our goal is to acquire quality properties that provide attractive cash flows and enhance returns to unitholders.”

CEREIT is expected to benefit from the Sponsor’s disciplined research and investment analysis, in-depth knowledge of key local markets, and extensive acquisition sourcing capabilities across Europe, which is one of the largest and most liquid commercial real estate markets in the world. The volume of real estate transactions in Europe has increased steadily since 2010, with total investments reaching approximately €271 billion in 201612. The Sponsor’s European platform evaluated over €40 billion of potential acquisitions and completed approximately €900 million of acquisitions in the 18 months leading up to 31 August 2017.

Sponsored by an Experienced Global Real Estate Manager

The Sponsor, Cromwell Property Group, is a global real estate owner and investment manager listed on the Australian Securities Exchange Ltd. It has an established property and asset management platform with highly experienced teams and a track record that spans more than 15 years in the European real estate industry19. As at 30 June 2017, the Sponsor has €3.4 billion of assets under management in Europe and an established “on-the-ground” presence with over 190 employees in 20 offices across 13 countries in the region.

CEREIT has also been positioned to be eligible for regional index inclusion shortly after Listing.

Further Information

The Singapore Public Offering opens at 9.00 p.m. today, 22 November 2017 and closes at 12.00 p.m. on 28 November 2017. The Units are expected to commence trading on the Main Board of the SGX-ST at 2.00 p.m. on 30 November 2017.

Goldman Sachs (Singapore) Pte. and UBS AG, Singapore Branch are the joint issue managers for the Offering. DBS Bank Ltd., Goldman Sachs (Singapore) Pte., and UBS AG, Singapore Branch are the joint global coordinators for the Offering. DBS Bank Ltd., Goldman Sachs (Singapore) Pte., UBS AG, Singapore Branch, Daiwa Capital Markets Singapore Limited, and CLSA Singapore Pte Ltd are the joint bookrunners and underwriters for the Offering.


MEDIA  ENQUIRIES

Newgate Communications
Terence Foo
Managing Partner
+65 6532 0606
terence.foo@newgatecomms.com.sg
Bob Ong
Senior Consultant
+65 6532 0606
bob.ong@newgatecomms.com.sg
  
Amira Sadiran
Consultant
+65 6532 0606
amira.sadiran@newgatecomms.com.sg
Sing Li Lin
Executive
+65 6532 0606
lilin.sing@newgatecomms.com.sg
  

ABOUT CROMWELL EUROPEAN REAL ESTATE INVESTMENT TRUST

Cromwell European REIT (“CEREIT”) is a real estate investment trust (“REIT”) with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income-producing real estate assets in Europe that are used primarily for office4, light industrial / logistics4, and retail purposes20. With an initial public offering (“IPO”) portfolio2 of 74 properties in or close to major gateway cities in Denmark, France, Germany, Italy, as well as the Netherlands and a balanced focus on the office4 and light industrial / logistics4 sectors, it is also the first REIT with a diversified Pan-European portfolio to be listed on Singapore Exchange Securities Trading Limited.

CEREIT’s IPO portfolio has an aggregate lettable area of approximately 1.1 million sq m with over 700 leases and a weighted average lease expiry16 profile of around 4.9 years. Comprising primarily freehold or ongoing leasehold14 assets, the IPO portfolio has an appraised value of approximately €1,354 million3 as at 30 April 2017.

CEREIT is managed by Cromwell EREIT Management Pte. Ltd., a wholly-owned subsidiary of CEREIT’s sponsor, Cromwell Property Group5, a global real estate investment manager listed on the Australian Securities Exchange Ltd.

IMPORTANT NOTICE

The Prospectus has been registered with the MAS on 22 November 2017. Capitalised terms used in this media release shall unless otherwise defined, bear the same meanings assigned to them in the Prospectus.

This media release is for information only and does not constitute an offer of, or invitation to subscribe or purchase or solicitation of subscriptions or purchases of Units in Singapore or any other jurisdiction nor should it or any part of it form the basis of, or be relied upon in any connection with, any contract or commitment or any investment decision whatsoever. The information in this media release in respect of CEREIT is qualified in its entirety by, and is subject to more detailed information in the Prospectus in relation to the Offering of the Units. The Offering is made by the Manager. The information presented in this media release is subject to change. Anyone wishing to subscribe for or purchase Units should read the Prospectus, and in particular, the section on “Risk Factors” for a discussion of certain factors to be considered, and make his own assessment before deciding whether to purchase Units and will need to make an application in the manner set out in the Prospectus. Any decision to purchase Units should be made solely on the basis of information contained in the Prospectus and no reliance should be placed on any information other than that contained in the Prospectus.

The value of the Units and the income derived from them may fall as well as rise. The Units are not obligations of, deposits in, or guaranteed by, the Manager, Perpetual (Asia) Limited (as trustee of CEREIT), the Sponsor, Joint Issue Managers, the Joint Global Coordinators, the Joint Bookrunners and Underwriters or any of their respective affiliates, advisers or representatives. An investment in the Units is subject to investment risks, including the possible loss of the principal amount invested. Investors have no right to request that the Manager redeem or purchase their Units while the Units are listed. It is intended that holders of the Units may only deal in their Units through trading on the SGX-ST. Listing of the Units on the SGX-ST does not guarantee a liquid market for the Units.

This media release may contain forward-looking statements that involve assumptions, risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. The forecast and projected yields and yield growth are calculated based on the Offering Price and the accompanying assumptions in the Prospectus. Such yields and yield growth will vary accordingly for investors who purchase the Units in the secondary market at a market price different from the Offering Price.

Predictions, projections or forecasts of the economy or economic trends of the markets are not necessarily indicative of the future or likely performance of CEREIT. The forecast financial performance of CEREIT is not guaranteed. Investors are cautioned not to place undue reliance on these forward-looking statements, which are based on the Manager’s current view of future events. A potential investor should read the Prospectus and in particular, the section entitled “Forward-Looking Statements” and make his own assessment before making any decision to purchase the Units.

A copy of the Prospectus and the application forms may be obtained during office hours and on request, subject to availability from DBS Bank Ltd. at 12 Marina Boulevard Level 46, Marina Bay Financial Centre Tower 3, Singapore 018982, Goldman Sachs (Singapore) Pte. at 1 Raffles Link, #07-01 South Lobby, Singapore 039393, UBS AG, Singapore Branch at One Raffles Quay, #50-01 North Tower, Singapore 048583, Daiwa Capital Markets Singapore Limited at 6 Shenton Way, #26-08 OUE Downtown 2, Singapore 068809, CLSA Singapore Pte Ltd at 80 Raffles Place, #18-01 UOB Plaza 1, Singapore 048624 and, where applicable, from members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore. Copies of the Prospectus and the application forms, subject to availability, are also available at CEREIT’s booth at Ocean Financial Centre, 10 Collyer Quay, Singapore 049315 during office hours on 23 and 24 November 2017, as well as 1 Raffles Place, Singapore 048616 during office hours on 27 November 2017 and from 9.00 a.m. to 12.00 p.m. on 28 November 2017. A copy of the Prospectus is also available on the MAS’ OPERA website at http://eservices.mas.gov.sg/opera.

This media release may be restricted by law in certain jurisdictions. Persons who may come into possession of this media release are advised to consult with their own legal advisers as to what restrictions may be applicable to them and to observe such restrictions. This media release may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised.

Neither this media release nor any copy or portion of it may be sent or taken, transmitted or distributed, directly or indirectly, into the United States of America (the “United States” or “U.S.”). The Units have not been, and will not be, registered under U.S. Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state of the U.S. and the Units may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws. This media release is not an offer for sale of securities in the United States. The Manager does not intend to conduct a public offering of the Units in the United States.

Neither this media release nor any of its content may be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Information contained in this media release does not constitute a part of the Prospectus. Failure to comply with these restrictions may result in a violation of the Securities Act, United States securities laws or the applicable laws of other jurisdictions.

FOOTNOTES:
1 For Projection Year 2018. Based on the Offering Price and the accompanying assumptions in the Prospectus. Such yield will vary accordingly for investors who purchase Units in the secondary market at a market price different from the Offering Price and according to differences between actual and assumed exchange rates.
2 The initial portfolio comprises (i) the 70 Properties which will be acquired by CEREIT on or just prior to the Listing Date, (ii) three Properties in the Netherlands, Central Plaza, Koningskade and De Ruijterkade which are currently indirectly owned by CEREIT and (iii) one Property in Italy, Firenze, which will be acquired no later than 20 February 2018 unless the Italian Republic exercises its pre-emption right to acquire it. In the event the Italian Republic exercises its pre-emption right to acquire Firenze, the number of Properties in the IPO Portfolio will comprise 73 Properties.
3 Appraised Value means the aggregate of the higher of the two independent valuations for each Property conducted by Cushman & Wakefield Debenham Tie Leung Limited and Colliers International Valuation UK LLP as at 30 April 2017.
4 “Office” properties refer to real estate that are predominantly used for office purposes, whether in existence by themselves as a whole or as part of larger mixed-use developments and “light industrial / logistics” properties refer to real estate that are predominantly used for light industrial, warehouse, and logistics purposes, the majority of which may have an attached office component.
5 Comprising Cromwell Corporation Limited and the Cromwell Diversified Property Trust (the responsible entity of which is Cromwell Property Securities Limited).
6 Refers to the option granted by the Unit Lender to the Joint Bookrunners to purchase from the Unit Lender up to an aggregate of 45,454,000 Units at the Offering Price, solely to cover the over-allotment of Units (if any).
7 Such yield will vary accordingly for investors who purchase Units in the secondary market at a market price different from the Offering Price and according to differences between actual and assumed exchange rates.
8 Based on the monthly averages (non-seasonally adjusted data) of the yields of the 10-year government bonds of the countries in the Eurozone. They refer to central government bond yields on the secondary market, gross of tax, with a residual maturity of around 10 years. The bond or the bonds of the basket have to be replaced regularly to avoid any maturity drift. This definition is used in the convergence criteria of the Economic and Monetary Union for long-term interest rates, as required under Article 121 of the Treaty of Amsterdam and the Protocol on the convergence criteria. Data are presented in raw form.
9 Based on Bloomberg L.P.’s estimated DPU yield for the year ended 31 December 2018 for FTSE EPRA Eurozone Index as at the Latest Practicable Date. FTSE EPRA Eurozone Index is a market capitalisation weighted index consisting of listed real estate companies and REITs in the Eurozone.
10 Based on Bloomberg L.P.’s estimated DPU yield for the year ended 31 December 2018 for FTSE Straits Times Real Estate Investment Trust Index as at the Latest Practicable Date. The FTSE Straits Times Real Estate Investment Trust Index is a market capitalisation weighted index consisting of listed REITs in Singapore.
11 Based on Bloomberg L.P.’s bid yield to maturity of bond as at the Latest Practicable Date.
12 According to the Independent European Property Market Research Report by Cushman & Wakefield Debenham Tie Leung Limited.
13 Based on Appraised Value as at 30 April 2017.
14 Classified as Continuing Leasehold or Perpetual Leasehold. A Continuing Leasehold is agreed in principle for an indefinite period of time but has a fixed ground rent paid to the land owner which must be re-agreed at the end of a certain period, which may result in a termination if the leaseholder and the land owner do not agree on the new ground rent. A Perpetual Leasehold is for an indefinite period of time and the ground rent has been paid off perpetually (which type of leasehold is most similar to a freehold situation).
15 “Major cities” for this purpose refers to Amsterdam, Bari, Copenhagen, Florence, Frankfurt, The Hague, Hamburg, Milan, Munich, Paris, Rome, Rotterdam, and Stuttgart.
16 By Headline Rent as at 30 April 2017 and based on the next permissible break date at the tenant’s election and pursuant to the lease agreement. WALE is adjusted for two committed lease agreements at Milano Piazza Affari and includes the Rental Guarantee for Milano Piazza Affari (which assumes that the permissible break date and final termination date is equivalent to the expiry date of the Rental Guarantee).
17 As at 30 April 2017.
18 By Lettable Area as at 30 April 2017, and assumes Milano Piazza Affari is 100% leased in view of the Rental Guarantee.
19 All information relating to the Sponsor is as at 30 June 2017.
20 “Retail” properties refer to real estate that are predominantly used for retail purposes.