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Cromwell European REIT: A Great Start To Life As A Listed REIT

Listed in November 2017, Cromwell European Real Estate Investment Trust (SGX: CNNU) has a portfolio of 75 predominantly office and light industrial properties located in Netherlands, France, Denmark, Germany and Italy. It is sponsored by its namesake , Cromwell Group, which is listed in Australia.

On Monday (13 August), Cromwell European REIT released its earnings update for the seven-month period since its initial public offering (IPO) in November 2017. Here are some of the key takeaways:

1. Total revenue between 30 November 2017 and 30 June 2018 was €72.8 million. This is 2.2% higher than the IPO forecast of €71.3 million. Net property income was 3.1% higher than the forecast of €47.7 million.

2. Distributable income was €40.1 million, translating to a distribution per unit of 2.53 Euro cents, 3% above the IPO forecast. Specifically, for the three-month period ended June 30, DPU was 1.10 Euro cents, 2.2% higher than the IPO forecast.

3. The charts below illustrate the breakdown of net property income by country and asset class:

 

Source: Cromwell European Real Estate Investment Trust’s Earnings Presentation

4. As of 30 June 2018, net tangible asset per unit was up 2.1% from 31 March 2018 to €0.57 due to a settlement agreement for the deferred consideration for Parc Des Docks that resulted in a portfolio valuation increase of €6 million.

5. The trust had gross debt of €498.8 million and assets valued at €1.47 billion, giving it a gearing ratio of 34.8% after accounting for distributions. Interest coverage ratio was a comfortable 8.8 times at the end of the reporting period. Weighted average term to maturity stood at 3.6 years. There is no debt due this year, with only €38 million due in 2019. 85.4% of its debt is hedged or on fixed rates.

6. The REIT’s portfolio of 75 properties had an occupancy rate by net lettable area of 88.7%, with still room for improvement. Weighted average lease expiry of the leases was 5.0 years and reversionary rate, a proxy to capitalisation rate, was 5.9%. Notably, 88% of all the REIT’s properties sit on freehold land, and continuing or perpetual leasehold.

7. Here is a look at Cromwell European REIT’s lease expiry profile:

Source: Cromwell European Real Estate Investment Trust’s Earnings Presentation

8. On 27 June, Cromwell European REIT completed the acquisition of a property in Italy called Via Jervis for €16.9 million. The property sits on freehold land and has an initial rental yield of 8.4%.

9. In June, the REIT became a constituent of MSCI Singapore Small Cap Index, a milestone for the trust.

10. The REIT manager’s chief executive, Philip Levinson, said:

“Over the past seven months, we have established a robust platform 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 out 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 [Cromwell European REIT] has ample borrowing capacity to fund growth acquisitions.”

At the time of writing, units of Cromwell European REIT traded at €0.60 each, translating to a price-to-book ratio of 1.05 and an annualised distribution yield of 7.2%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Jeremy Chia doesn’t own shares in any companies mentioned.