Cromwell European REIT Review @ 3 March 2023

Basic Profile & Key Statistics

• Main Sector(s): Office, Industrial & Logistics
• Country(s) with Assets: Netherlands, Italy, France, Poland, Germany, Finland, Denmark, Slovakia, Czechia & England
• No. of Properties (exclude development/associate/fund): 113

Key Indicators

Performance Highlight

Gross revenue and NPI improved yoy mainly due to contributions from properties that were acquired between Aug 2021 to Oct 2022. However, income available for distribution and DPU only improved slightly due to higher finance costs, tax expenses and others trust expenses. Without the distribution of divestment gain, DPU declined by 1.3% yoy.

Rental Reversion

CEREIT achieved 7.6% rental reversion for 2H FY22.

Acquisition

On 18 Oct 2022, CEREIT acquired Sognevej 25, Brøndby in Denmark.

Divestment

On the same day with the acquisition of Sognevej 25, Brøndby, CEREIT divested 2 properties in Germany above their purchased price. On 12 Dec 2022, CEREIT divested another property, Bois du Tambour in France.

Development

Developments of Via Nervesa 21 and Lovosice ONE Industrial Park are in progress. As for Maxima, strip-out works are planned to start in March.

Sensitivity to Interest Rate

Should the 3-month Euribor rate increase to 3%, the DPU impact would be around 2.5%.

Distribution Breakdown

• Distributable Income Breakdown:
• 97.9% from Operation
• 2.1% from Proceeds from Divestment
• Distribution = 100% of Distributable Income
• Distribution to Perpetual Securities Holder = 2.4% of Distributable Income

Related Parties Shareholding

• REIT Sponsor's Shareholding: ± 10% from median
• REIT Manager's Shareholding: Below median for more than 20%
• Directors of REIT Manager's Shareholding: Blow median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 10%
• Highest Lease Expiry within 5 Years: Below median for more than 20%; Falls in 2025
• Weighted Average Land Lease Expiry: Above median for more than 20%

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing Ratio including Perps: ± 10% from median
• Cost of Debt: Below median for more than 20%
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: ± 10% from median
• WADM: ± 10% from median
• Highest Debt Maturity within 5 Years: Above median for more than 20%; Falls in 2025
• Interest Coverage Ratio: Above median for more than 20%

Diversification Profile

• Top Geographical Contribution: Below median for more than 20%
• Top Property Contribution: Below median for more than 20%
• Top 5 Properties' Contribution: Below median for more than 20%
• Top Tenant Contribution: ± 10% from median
• Top 10 Tenants' Contribution: Below median for more than 20%

Key Financial Metrics

• Property Yield: ± 10% from median
• Management Fees over Distribution: Below median for more than 20%; €15.87distribution for every dollar paid 
• Distribution on Capital: Above median for more than 10%
• Distribution Margin: ± 10% from median

Trends

• Uptrend: Occupancy
• Downtrend: DPU, NAV per Unit, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

*DPU and NAV per Unit are adjusted for the 5-to-1 consolidation.

Relative Valuation

• P/NAV: Below average for 1y; Below -1SD for 3y; Below -2SD for 5y
• Dividend Yield: Above average for 1y; Above +1SD for 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Manager's Shareholding
Long WALE	Low Directors of REIT Manager's Shareholding
Well Spread Lease Expiry	Concentrated Debt Maturity
Long Weighted Average Land Lease Expiry	DPU Downtrend
Low Cost of Debt	NAV per Unit Downtrend
High Interest Coverage Ratio	Interest Coverage Ratio Downtrend
Low Top Geographical Contribution	Property Yield Downtrend
Low Top Property & Top 5 Properties' Contributions	Distribution on Capital Downtrend
Low Top 10 Tenants' Contribution	Distribution Margin Downtrend
Competitive Management Fees
High Distribution on Capital
Occupancy Uptrend

In comparison to the previous half-yearly report, the distributable income has slightly decreased due to higher finance costs and tax expenses, despite a rise in gross revenue and NPI. Nevertheless, the occupancy rate remains stable, and the rental reversion remains strong. From the presentation, CEREIT plans to selectively divest non-strategic assets over the next 2 to 3 years to fund developments and offset potential pressure on LTV.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.