Cromwell European REIT Review @ 3 March 2022

Basic Profile & Key Statistics

Cromwell European REIT (CEREIT) is a diversified REIT that invests mainly in office, industrial and logistics sectors. CEREIT owns 113 properties across 10 countries.

Performance Highlight

Gross revenue, NPI and distributable income have increased YoY due to contribution from properties which were acquired in 2021. However, DPU has dropped slightly due to enlarged unitholders based, after accounted for the 5 to 1 units consolidation. 

Rental Reversion

Rental reversion for FY21 is at +5%, where 4Q 21 achieved 6.4% positive rental reversion.

Acquisition

In December, CEREIT has completed the acquisition of 3 properties in U.K. and Netherlands.

Development

For the re-development of Via Nervesa 21, early strip-out work and demolition has commenced where the general contractor would be appointed in 2Q 2022. The development of Nove Mesto ONE Industrial Park I, the construction for phase 1 and phase are expected to commence in mid 2022 and Jan 2023 respectively. As for the potential re-development of Via dell’ Amba Aradam 5, no detail was provided in the latest presentation. 

Asset Enhancement Initiatives

In 4Q, CEREIT has completed the AEIs for 3-5 Allée de la Seine, Ivry sur Seine, France, Blaak 40, Rotterdam, Amsterdam and Willemsplein 2-4, Den Bosch.

Related Parties Shareholding

• REIT sponsor's shareholding is slightly high at 27.905%
• REIT manager's shareholding is low at 0.383%
• Directors of REIT manager's shareholding is low at 0.02%

Lease Profile

• Occupancy is slightly high at 95%
• WALE is slightly long at 4.6 years
• Highest lease expiry within 5 years is high at 33.6% which falls in 2022
• Weighted average land lease expiry is long at 93.84 years

Debt Profile

• Gearing ratio is moderate at 36.6%, including perps, gearing ratio is at 39.1%
• Cost of debt is low at 1.72%
• All debts are fixed-rate debts
• Unsecured debt is high at 91%
• WADM is long at 3.4 years
• Highest debt maturity within 5 years is high at 54%, which falls in 2025
• Interest coverage ratio is high at 5.8 times

Diversification Profile

• Top geographical contribution is low at 8.4% 
• Top property contribution is low at 7.8% 
• Top 5 properties contribution is low at 28.9% 
• Top tenant contribution is moderate at 11.9%
• Top 10 tenants contribution is low at 31.2%
• Top 3 countries contribution is from Netherlands, Italy and France which contribute around 2/3 of GRI

Key Financial Metrics

• Property yield is slightly high at 5.5% 
• Management fees over distribution is low at 6% in which unitholders receive £ 16.67 for every pound paid 
• Distribution on capital is high at 4%
• Distribution margin is moderate at 46.8%

Trends

• 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 -1SD for 1y; Average for 3y and 5y
• Dividend Yield - Above average for 1y; Average for 3y; Below average for 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Manager's Shareholding
Long Weighted Average Land Lease Expiry	Low Directors of REIT Manager's Shareholding
Low Cost of Debt	Concentrated Lease Expiry
100% Fixed Rate Debt	Concentrated Debt Maturity
High Unsecured Debt %	DPU Downtrend
Long WADM	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

For the first time, CEREIT has present their development projects of around €250 million. Development projects generally provided higher yield and cost but it would take longer time to be fruitful. Moving forward, the contribution from the 4 newly acquired properties should improve the performance of CEREIT, albeit slightly, given the current AUMs of CEREIT.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.