Half Year Results - Cromwell European REIT Continues to Exceed Forecasts

NOT FOR DISTRIBUTION OR PUBLICATION IN THE UNITED STATES OR IN ANY OTHER JURISDICTION OUTSIDE SINGAPORE

  • Both gross revenue and net property income exceed IPO Forecast1 by 2.2% and 3.1%, respectively
  • Distribution per unit of 2.53 Euro cents, 3.0% above IPO Forecast1, translates to annualised distribution yield of 7.9%2
  • Active asset management drives increase in net asset value and decrease in gearing
  • Poised for growth given strong pipeline sourcing capabilities and deep pool of acquisition opportunities
  Actual 30-Nov-17 to 30-June-18 IPO Forecast1 30-Nov-17 to 30-Jun-18Variance
Gross Revenue (€’000) 72,845 71,287 2.2%
Net Property Income (€’000) 47,743 46,303 3.1%
Income Available for Distribution to Unitholders (€’000) 40,062 38,914 3.0%

Cromwell  EREIT  Management  Pte.  Ltd., the  manager  (the  “Manager”)  of Cromwell European  Real Estate  Investment  Trust  (“Cromwell  European  REIT”  or  “CEREIT”),  today  announced CEREIT’s financial results for the period 30 November 2017 (being the date of CEREIT’s listing) to 30 June 2018 (the “Reporting Period”).

CEREIT generated gross revenue amounting to €72.8 million during the Reporting Period, 2.2% above the IPO Forecast1. In line with the better topline performance, net property income (“NPI”) recognised during the Reporting Period came in at €47.7 million, 3.1% higher than projected1. This was primarily due to the higher NPI recorded by CEREIT’s pan-European light industrial portfolio, which exceeded the IPO Forecast1 by €1.5 million, while CEREIT’s portfolio of office and other properties performed in line with expectations.

Income available for distribution to unitholders amounted to €40.1 million in the Reporting Period, 3.0% above the IPO Forecast1. Given CEREIT’s policy of distributing 100% of its annual distributable income for the period from 30 November 2017 to 31 December 2019, the distribution per unit (“DPU”) for the Reporting Period likewise is 2.53 Euro cents, 3.0% more than projected1. This will be paid out to unitholders on 28 September 2018 and translates to a 7.9%2 annualised distribution yield.

The Manager’s Chief Executive Officer, Mr. Philip Levinson, commented, “CEREIT continues to outperform forecasts since its listing, validating not only the intrinsic quality of CEREIT’s portfolio, but also our strategies to extract value from the underlying assets and optimise returns through new initiatives. These initiatives include focused efforts to drive growth organically via active asset and portfolio management.”

Active Asset and Portfolio Management

As evidence of its active asset management strategy, CEREIT successfully renewed 32 existing leases3 during the April – June 2018 period. These include a new 7.5-year lease with Dutch e-commerce company Coolblue BV which will commence at Central Plaza in the Netherlands from January 2019, securing approximately €2.0 million of rental income.

CEREIT’s portfolio has an 88.7% occupancy rate as at 30 June 2018, one percentage point above the occupancy rate stated in the Prospectus, and a 73% tenant retention rate4 during the April – June 2018 period. Its weighted average lease expiry (“WALE”)5 profile remains stable at 5.0 years.

On a portfolio level, CEREIT’s income base expanded with the completion of the acquisition of a freehold office property in Ivrea, Italy, on 27 June 2018. This increased CEREIT’s property portfolio value from €1,361 million as at 31 March 2018 to €1,390 million as at 30 June 2018.

In addition, the Manager settled a deferred consideration in respect of the Parc Des Docks light industrial / logistics property in Paris, France (“Parc Des Docks”), for €6 million instead of the original €12 million, leading to a €6 million valuation gain. This helped increase CEREIT’s net asset value (“NAV”) to €897.9 million as at 30 June 2018, up 2.1% compared to its NAV as at 31 March 2018. Consequently, NAV per unit rose from 55.9 Euro cents as at 31 March 2018 to 57.0 Euro cents as at 30 June 2018.

CEREIT’s gearing ratio also decreased from 35.1% as at 31 March 2018 to 33.9% as at 30 June 2018.

Market Recognition

CEREIT became a constituent of the MSCI Singapore Small Cap Index as at 1 June 2018. Together with its high free float and portfolio of significant scale, the index inclusion better positions CEREIT to attract the interest of a broader group of investors seeking to gain exposure to European real estate markets.

More recently, CEREIT was conferred a Platinum Award, in the category for industrial REITs with market capitalisations of US$1 billion and above, at the Asia Pacific Best of the Breeds REITs AwardsTM 2018 ceremony on 2 August 2018. The accolade bears testament to CEREIT’s excellence in six areas:

  • Financial performance
  • Market performance
  • Corporate governance
  • Underlying asset quality
  • REIT manager quality
  • Risk management policies

Winners were determined by a judging panel comprising senior professionals in the financial and real estate sector, with balanced representation from research houses, rating agencies, and advisory firms across different countries.

Sustainability Efforts

In line with the Manager’s commitment to actively reduce the environmental impact of its properties, CEREIT secured a new contract for the use of renewable energy and green natural gas in its German properties. This lowered tenants’ operational expenses by 12% and reduced annual carbon emissions by 3,500 metric tonnes.

Setting the stage for its inaugural sustainability report, CEREIT participated in the 2018 Global Real Estate Sustainability Benchmark (“GRESB”) survey which will measure and compare CEREIT’s sustainability performance to its peers. GRESB is a global environmental, social and governance benchmark for real estate assets, with more than US$3.7 trillion in assets under management represented.

Looking Ahead

Guided by its key objectives of providing unitholders with regular and stable distributions and achieving long-term DPU and NAV growth, the Manager will remain focused on meeting and exceeding IPO Forecasts1. The portfolio is primed for organic and inorganic growth, with inflation-linked leases in place to benefit from favourable Eurozone economic outlook. The Manager expects to unlock asset value further through a proactive approach to acquisitions and divestments.

Mr. Levinson concluded, “Over the past seven months, we have established a robust platform for delivering sustainable value to stakeholders. Steady momentum has been built and we are now positioned for growth. Moving forward, we will continue to work closely with our Sponsor and property manager, leveraging their on-the-ground teams in Europe and strong pipeline sourcing capabilities. Together, we have identified a deep pool of acquisition opportunities for further review and action. With its prudent gearing, CEREIT has ample borrowing capacity to fund growth acquisitions.”

Resources

Footnotes:
1. The prospectus of Cromwell European REIT dated 22 November 2017 (“Prospectus”) disclosed a 1-month profit forecast for the period from 1 December 2017 to 31 December 2017 (“December 2017 Forecast”), and a full-year profit projection from 1 January 2018 to 31 December 2018 (the “FY2018 Projection”). The FY2018 Projection disclosed in the Prospectus was derived from four separate quarterly projections which in aggregate formed the FY2018 Projection. The “IPO Forecast” figures referred to in this media release were, where not expressly disclosed in the Prospectus, derived from the December 2017 Forecast and the first and second quarterly projections for the period from 1 January 2018 to 30 June 2018 which had been used by the Manager to form the FY2018 Projection.
2. Based on CEREIT’s €0.55 per unit IPO price
3. As at 30 June 2018, CEREIT has 797 leases well diversified across trade sectors and geographies.
4. Tenant retention rate by Estimated Rental Value (“ERV”) is the percentage quantum of ERV retained over a reference period with respect to Terminable Leases. Terminable Leases is defined as leases that either expire or in respect of which the tenant has a right to break over the relevant reference period.
5. “WALE” is defined as weighted average lease expiry by headline rent based on the final termination date of the agreement (assuming the tenant does not terminate the lease on any of the permissible break date(s), if applicable).

Important Notice

This announcement is for information purposes only and does not constitute or form part of an offer, invitation or solicitation of any offer to purchase or subscribe for 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 units in CEREIT (“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) or any of their respective affiliates.