Cromwell European REIT Acquiring Three Freehold Light Industrial / Logistics Assets In Germany

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  • Acquisition is at competitive price of €38.0 million (approximately S$57.0 million1), 4.0% below independent valuation and at a 6.2% net operating income (“NOI”) yield2
  • Each asset will be fully let for a term of 15 years, increasing CEREIT’s WALE3 profile from 4.6 years to 4.7 years
  • Assets are well located in the cities of Pforzheim, Bretten and Königsbach-Stein, in the state of Baden-Württemberg, one of Europe’s leading economic regions

Goldman Sachs (Singapore) Pte. and UBS AG, Singapore Branch are the joint issue managers for the initial public offering of the units in Cromwell European Real Estate Investment Trust (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.

SINGAPORE – Cromwell EREIT Management Pte. Ltd., the manager (the “Manager”) of Cromwell European Real Estate Investment Trust (“Cromwell European REIT” or “CEREIT”), today announced that CEREIT entered into a purchase agreement and lease agreements with subsidiaries of Felss Group GmbH on 19 December 2019 to acquire a portfolio of three light industrial / logistics assets in Germany (the “Portfolio”) under a sale and leaseback arrangement. The acquisition of the Portfolio is expected to be completed in February 2020, once the customary conditions precedent are satisfied.

The Manager’s Chief Executive Officer, Mr. Simon Garing, commented, “The Portfolio is underpinned by a 15-year lease to a leading German components manufacturer at a 6.2% NOI yield2 . We look forward to working with our new tenant-customer. The acquisition will increase CEREIT’s exposure to the attractive German property market and further demonstrates our on-the-ground teams’ ability to source assets with long leases and at attractive yields, funded by CEREIT’s current low all-in cost of debt of less than 1.5%. Our focus is to continue exploring opportunities in Europe to create further value for and enhance distributions to unitholders by optimising CEREIT’s portfolio and responsibly managing its capital.”

The Assets

The Portfolio consists of three freehold, light industrial / logistics assets totalling 29,734 square metres (“sq m”) of gross lettable area (19,016 sq m of warehouse space; 6,225 sq m of office space; and 4,493 sq m of other spaces) on sites totalling 48,131 sq m. The assets were constructed between 1973 and 2017 and refurbished between 2015 and 2017. They will be fully let to subsidiaries of Felss Group GmbH, a global market leader in cold forming steel technology and a leading manufacturer of machine tools and components, for a term of 15 years under lease agreements (with no break clause) concluded on a triple-net basis, pursuant to which the tenant-customer will be responsible for all required capital expenditure works, including structural ones, if any, throughout the duration of the lease. The tenant-customer will provide a 12-month rental security under the form of either a deposit or a first demand bank guarantee.

The Portfolio assets are well-located in the cities of Pforzheim, Bretten and Königsbach-Stein, within Germany’s third-largest state, Baden-Württemberg, and near the state’s capital, Stuttgart. Baden-Württemberg is also one of the leading economic regions in Germany and Europe. It had a gross domestic product of €511 billion in 20184 and an unemployment rate of just 3.1% as at November 20195. It is home to many global companies like Bosch, Daimler, Porsche, SAP and German multinational industrial control and automation company Festo, as well as many successful and innovative small- and medium-sized companies. High levels of investments in research and development, the largest number of patents in Germany, and 88 universities across the state make Baden-Württemberg one of Europe’s most innovative regions as well.

The Portfolio was independently valued by Cushman & Wakefield Debenham Tie Leung Limited (“Cushman”) (commissioned by CEREIT) at €39.6 million (approximately S$59.4 million1), as at 19 December 2019, using the income capitalisation method, taking into account comparable market transactions.

The purchase consideration for the Portfolio is €38.0 million (approximately S$57.0 million1) (the “Purchase Consideration”), approximately 4% below the independent valuation and below estimated replacement costs. It was arrived at on a willing buyer and willing seller basis.

Rationale and Benefits

The Portfolio is being acquired at an attractive NOI yield2 of 6.2%, as compared to CEREIT’s existing portfolio’s NOI yield2 of just above 6.0%. The initial rent level under the lease agreements has been agreed within 3.0% of Cushman’s estimates of market rent.

The assets are situated on freehold land and the acquisition of the Portfolio will increase CEREIT’s exposure to Germany, with the size6 of its portfolio in the country rising to €157 million, up from €119 million as at 30 September 2019. Germany will then account for 7.4% of CEREIT’s portfolio, up from 5.7%6 as at 30 September 2019.

The assets will provide CEREIT with strong, growing and long-term cashflow due to their 15-year, triple-net, 100% index-linked leases to subsidiaries of Felss Group GmbH. These long leases increase the WALE3 profile of CEREIT’s overall portfolio from 4.6 years to 4.7 years, and the WALE3 profile of its light industrial / logistics portfolio from 4.3 years to 4.8 years.

Funding and Financial Effects

The total cost of the acquisition is estimated to be approximately €40.9 million (approximately S$61.4 million1), comprising the Purchase Consideration, the acquisition fee payable to the Manager in cash, as well as professional and other fees and expenses in connection with the acquisition (which includes real estate transfer tax, but excludes recoverable value-added tax). It will be funded by drawing on CEREIT’s revolving credit facility.

The acquisition is not expected to have any material effect on CEREIT’s net tangible assets.

Other Information

Based on the relative figures as computed on the bases set out in Rule 1006 of the listing manual of Singapore Exchange Securities Trading Limited (the “Listing Manual”), the acquisition of the Portfolio is a “Non-Discloseable Transaction” within the meaning of Rule 1008 of the Listing Manual.

The Portfolio

Bretten Asset

Image of Bretten Asset

Pforzheim Asset

Pforzheim Asset

Königsbach-Stein Asset

Konigsbach-Stein Asset

ABOUT CROMWELL EUROPEAN REAL ESTATE INVESTMENT TRUST

Cromwell European REIT 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 office, light industrial / logistics, and retail purposes. With a portfolio of 103 properties as at the date of this announcement in or close to major gateway cities in Denmark, Finland, France, Germany, Italy, the Netherlands as well as Poland, and a balanced focus on the office and light industrial / logistics sectors, it is also the first REIT with a diversified Pan-European portfolio to be listed on Singapore Exchange Securities Trading Limited.

As at 30 September 2019, CEREIT’s portfolio has an aggregate lettable area of approximately 1.5 million sq m with close to 1,000 tenant-customers and a WALE profile of around 4.6 years. Comprising primarily freehold or ongoing leasehold assets, the portfolio has an appraised value of approximately €2,082 million as at 30 September 2019.

CEREIT is managed by Cromwell EREIT Management Pte. Ltd., a wholly-owned subsidiary of CEREIT’s sponsor, Cromwell Property Group7, a real estate investor and manager with operations in 15 countries, listed on the Australian Securities Exchange Ltd.

Media Enquiries

Cromwell EREIT Management

Elena Arabadjieva
Chief Operating Officer & Head of Investor Relations
+65 6817 9589
elena.arabadjieva@cromwell.com.sg

Newgate Communications

Bob Ong   Amira Sadiran   Cherie Hui
Associate Director   Senior Consultant   Executive
+65 6532 0606   +65 6532 0606   +65 6532 0606
bob.ong@newgatecomms.com.sg  amira.sadiran@newgatecomms.com.sg  cherie.hui@newgatecomms.com.sg

Further information on this announcement, including the SGX announcement is available in our Investor Relations section here.

Footnotes:
1. Based on exchange rate of €1:S$1.50.
2. NOI Yield is calculated as the year 1 net operating income pre asset management fees divided by the purchase price excluding transactions costs incurred in connection with the acquisition
3. “WALE” is defined as weighted average lease expiry by headline rent based on the final termination date of the agreement (assuming the tenant-customer does not terminate the lease on any of the permissible break date(s), if applicable). WALE is as at 30 September 2019.
4. Source: www.cecidata.com
5. Source: www.statistik-bw.de
6. By valuation of CEREIT’s existing portfolio of 103 assets as at 30 September 2019; 97 properties valued as at 30 June 2019 and the six properties acquired in July and September 2019 recorded at purchase price.
7. Comprising Cromwell Corporation Limited and the Cromwell Diversified Property Trust (the responsible entity of which is Cromwell Property Securities Limited).

IMPORTANT NOTICE

This announcement is for information purposes only and does not constitute or form part of an offer, invitation or solicitation of any securities of CEREIT in Singapore or any other jurisdiction nor should it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever.

The value of the Units and the income derived from them may fall as well as rise. Units are not obligations of, deposits in, or guaranteed by, the Manager, Perpetual (Asia) Limited, in its capacity as trustee of CEREIT, the Cromwell Property Group as the sponsor of CEREIT, the Joint Issue Managers, Joint Global Coordinators, the Joint Bookrunners and Underwriters or any of their respective affiliates.

An investment in the Units is subject to investment risks, including the possible loss of the principal amount invested. Unitholders have no right to request that the Manager redeem or purchase their Units while the Units are listed. It is intended that Unitholders 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 announcement 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. 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. A potential investor is cautioned not to place undue reliance on these forward-looking statements, which are based on the Manager’s current view of future events.

This announcement is not an offer for sale of the Units in the United States or any other jurisdiction. The Units have not been and will not be registered under the Securities Act and may not be offered or sold in the United States unless registered under the Securities Act, or pursuant to an applicable exemption from registration. There is no intention to register any portion of the offering in the United States or to conduct a public offering of securities in the United States.

This announcement is not to be distributed or circulated outside of Singapore. Any failure to comply with this restriction may constitute a violation of United States securities laws or the laws of any other jurisdiction.