|30 November 2017|
|Cromwell European REIT – Singapore’s First Diversified Pan-European REIT|
Drivers of the European Property Market
In its IPO prospectus, Cromwell European REIT has identified some drivers for Europe’s real estate market:
§ Improving macroeconomic fundamentals with headroom for further growth – According to the Independent European Property Market Research Report by Cushman & Wakefield, real gross domestic property growth in the Eurozone area has shown positive momentum over the past three fiscal years and is projected to increase to 2.2% in 2017 (up from 1.7% in 2016) coupled with lowest unemployment levels since 2010.
§ Favourable consumption, investment and production trends – As economic recovery in the Eurozone is projected to gradually strengthen, household consumption, investment and industrial production activity in the Eurozone is expected to improve from 2017 to 2020. This is supported by improving business sentiments, strong recovery in credit growth and growth in employment and real earnings.
§ Stable rental growth in European office and light industrial/logistics sectors – The REIT manager believes that stable demand and growth for industrial properties in Europe is supported by limited quality supply and increasing positive sentiment on manufacturing. Industrial production is also expected to grow by an average of 1.1% to 1.6% per annum (Cushman & Wakefield).
Cromwell European REIT’s IPO
Cromwell European REIT is the first Euro-denominated Singapore REIT with a diversified Pan-European portfolio to list on SGX, offering investors the opportunity to gain exposure to income-producing real estate assets in Europe. It has an initial portfolio of 74 properties across the office and light industrial/logistics sectors in Denmark, France, Germany, Italy and the Netherlands.
Some key extracts from Cromwell European REIT’s prospectus include:
Business Strategies and Future Plans
§ Active asset management and enhancement strategy to improve and/or enhance income streams.
§ Acquisition growth strategy supported by a rigorous research driven selection process and an extensive on-the-ground presence in Europe with strong sourcing capabilities.
§ Prudent capital management strategy to optimise cost of debt financing and minimise exposure to market volatility and maximise risk-adjusted returns to unitholders.
§ Best practice approach to Sustainability, Corporate Governance, and Corporate Social Responsibility.
§ Large, geographically diverse portfolio with balanced asset class exposure.
§ Long and well-staggered lease profile across all asset classes.
§ High quality and diverse tenant base with different businesses.
§ 88.0% of the total appraised value comprises of either freehold land or ongoing leasehold land.
Breakdown of Appraised IPO Portfolio Value By Geographies
Source: Company prospectus.
Key Risks (page 58 of IPO prospectus shows complete list of risk factors)
§ The REIT may be adversely affected by economic and real estate market conditions, political or constitutional instability, conflicts and/or crises, as well as changes in regulatory, fiscal or governmental policies in Europe.
§ Properties in the REIT might be adversely affected if the manager does not provide adequate management and maintenance.
§ The REIT’s ability to make distributions is dependent on its financial position of the corporate entities.
§ The REIT may be exposed to risks associated with exchange rate fluctuations and changes in foreign exchange regulations.
Financials from Prospectus
§ According to the forecasted and projected financial statements, gross revenue for projection years 2018 and 2019 are €123.4 million and €127.0 million respectively.
§ Net income for distribution to unitholders for projection years 2018 and 2019 are €68.0 million and €70.2 million respectively.
§ The REIT has a distribution policy to distribute 100% of its annual distributable income for the period from the listing date to the end of projection year 2019. Thereafter, the REIT will distribute at least 90% of its annual distributable income for each financial year. It has a distribution yield of 7.8% and 8.0% for projection years 2018 and 2019 respectively.
Source: Company prospectus
§ According to the prospectus, Cromwell European REIT’s unaudited net asset value as at the listing date is €0.53 per unit (based on 1,573,990,000 units in issue). This implies a price-to-net asset value (P/NAV) ratio of 1.04x based on the offer price of €0.55.
§ Aside from Cromwell European REIT, SGX lists five REITs and property trusts with exposure to Europe’s real estate market. The five trusts have diversified asset classes and over 40 properties across Europe, and have a combined market capitalisation of over S$8 billion.
§ Prior to the listing, SGX lists a total of 42 REITs and property trusts with a combined market capitalisation of S$87 billion and a market capitalisation weighted P/B ratio of 1.1x. The 42 REITs and property trusts have an average dividend yield of 6.2% and have generated a market capitalisation weighted average total return of +23.3% in the YTD.
Of the 42 REITs and property trusts, there were 15 Office and Industrial REITs (GICS®) which make up 36% of the REITs and property trusts cluster.
List of REITs with Exposure to Europe’s Real Estate Market on SGX
Source: Bloomberg & SGX StockFacts (data as of 29 November 2017).
*Last price of companies are denoted in their respective trading currencies. SGD equivalents are shown in table.
Additional Information from Prospectus (click here)
Cromwell European REIT’s initial portfolio has 74 predominantly freehold, perpetual leasehold or continuing leasehold properties, with an aggregate net lettable area (NLA) of approximately 1.1 million sq m. The REIT’s initial portfolio has an occupancy rate of 87.7% as at 30 Apr 2017, and projected occupancy rates for projection years 2018 and 2019 are 90.0% and 92.6% respectively.
Cromwell Property Group, a global real estate investment manager in Australia, is the sponsor of the REIT. As at 30 Jun 2017, it had a total AUM of approximately A$10.1 billion (€6.7 billion) across Australia, New Zealand and Europe and manages over 330 properties globally across 16 countries.
§ Offer price at €0.55
§ 428.5 million units under the offering (subject to over-allotment option) comprising:
§ 392.2 million shares under the placement tranche
§ 36.4 million shares under the public offer
§ Estimated IPO market capitalisation at €865.7 million (assuming the over-allotment option is not exercised)
At the same time as but separate from the offering, each of the cornerstone investors has entered into separate subscriptions agreements with the manager to subscribe for an aggregate of 581.8 million units (37.0% of the total units in issue). The cornerstone investors are Cerberus Singapore, Hillsboro Capital, and Mr Gordon Tang and Mrs Celine Tang. For more information, please refer to page 98 of the Prospectus.
An option granted by the Unit Lender to the Joint Bookrunners to purchase from the Unit Lender up to an aggregate of 45.5 million units at the Offering Price.
|My Gateway & SGX StockFacts|
SGX’s investor education portal with market, product and investment information and events. Sign up now at sgx.com/mygateway to receive our investment updates and economic calendar.
Whether you are seeking new or established companies to invest in, SGX StockFacts can provide you with the information you need to identify and understand the stocks that best fit your investment strategy. Visit now at sgx.com/stockfacts.
This document is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Singapore Exchange Limited (“SGX”) to any registration or licensing requirement. This document is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This document is for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Use of and/or reliance on this document is entirely at the reader’s own risk. Further information on this investment product may be obtained from www.sgx.com. Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Examples provided are for illustrative purposes only. While each of SGX and its affiliates (collectively, the “SGX Group Companies”) have taken reasonable care to ensure the accuracy and completeness of the information provided, each of the SGX Group Companies disclaims any and all guarantees, representations and warranties, expressed or implied, in relation to this document and shall not be responsible or liable (whether under contract, tort (including negligence) or otherwise) for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind, including without limitation loss of profit, loss of reputation and loss of opportunity) suffered or incurred by any person due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information, or arising from and/or in connection with this document. The information in this document may have been obtained via third party sources and which have not been independently verified by any SGX Group Company. No SGX Group Company endorses or shall be liable for the content of information provided by third parties. The SGX Group Companies may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this document is subject to change without notice. This document shall not be reproduced, republished, uploaded, linked, posted, transmitted, adapted, copied, translated, modified, edited or otherwise displayed or distributed in any manner without SGX’s prior written consent.
Nikkei owns the copyright and any other intellectual property rights in the Nikkei Stock Average itself, and the method for calculating the Nikkei Stock Average and the like. All ownership of trademarks and any other intellectual property rights with respect to marks representing "Nikkei Inc.," "Nikkei," and "Nikkei Stock Average" belongs to Nikkei. Nikkei is not obliged to continuously publish the Nikkei Stock Average, nor is it liable for any error or delay in, or discontinuation of the publication thereof. Nikkei owns the right to change the content of the Nikkei Stock Average, such as the calculation method thereof, and the right to suspend the publication thereof. Nikkei does not give any warranty, nor is it responsible for any and all financial instruments and the like, which are based on, or otherwise refer to, the Nikkei Stock Average.
All rights in the FTSE China A50 Index (the “Index”) vest in FTSE International Limited (“FTSE”). “FTSE®” is a trademark of the London Stock Exchange Group companies and is used by FTSE under license.
The SGX FTSE China A50 Index Futures (the "Product") has been developed solely by Singapore Exchange Derivatives Trading Limited. The Index is calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote the Product and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Product. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the Product or the suitability of the Index for the purpose to which it is being put by Singapore Exchange Derivatives Trading Limited.
Futures or options contract on any MSCI Index are not sponsored, guaranteed, endorsed, sold or promoted by MSCI, any affiliate of MSCI or any other party involved in, or related to, making or compiling any indexes (but expressly including the exchange) MSCI bears no liability of any kind with respect to such contracts