Cromwell European Reit hopes to raise $2b from IPO

An SGX sign is pictured at Singapore Stock Exchange on July 19, 2017.
An SGX sign is pictured at Singapore Stock Exchange on July 19, 2017. PHOTO: REUTERS

It will issue units at between 55 and 57 euro cents each

Cromwell European Reit has lodged a preliminary prospectus for a listing on the Singapore Exchange (SGX) mainboard, with plans to start trading on Sept 28.

The real estate investment trust, which draws rental income from 81 properties in six European countries, expects to raise gross proceeds of up to €1.25 billion (S$2 billion). Units will be issued at between 55 and 57 euro cents a unit.

Based on the IPO price range, the Reit is forecasting a distribution yield of 7.5 to 7.7 per cent for next year.

The offer size of 1.58 billion units consists of an international placement tranche of about 1.2 billion units, a Japanese public offering of 268 million units, and 79 million units that will be offered to the Singapore public.

The public offering will open at 9pm on Sept 21 and close at 12pm on Sept 26, based on its indicative timetable.

Cromwell European Reit will have a market cap of between €1.2 billion and €1.25 billion upon its debut.

The Reit has a portfolio of retail, office and light industrial properties in gateway cities in Denmark, France, Germany, Italy, the Netherlands and Poland, valued at €1.83 billion.

This will be the largest IPO since NetLink NBN Trust, which had a market cap of $3.1 billion upon its IPO in July. It $2.3 billion offer size was the biggest here in six years.

The Reit has more than 1,000 leases and a weighted average lease expiry of 5.1 years, which means that no more than 12 per cent of headline rent will expire in each year up to 2021.

About 69.1 per cent of the property portfolio comprises freehold land.

The IPO has two cornerstone investors - Cerberus Singapore, which is taking up a 7 per cent stake, and Hillsboro Capital with 8 per cent stake. Cerberus is affiliated with the vendor of certain of the Reit's properties.

The Reit sponsor is Australia- listed Cromwell Property Group. Cromwell will take up a stake of between 8.7 and 12.7 per cent in the Reit, based on the maximum offering price and depending on whether the over-allotment option for 91 million units is exercised.

The Reit manager, Cromwell EReit Management, chose to structure the Reit to have a high free-float as its aim is to be eligible for regional index inclusion shortly after listing.

With an aggregate leverage of between 34.3 and 36.6 per cent, below the ceiling of 45 per cent, the Reit has ample borrowing capacity to fund growth acquisitions, the draft prospectus said.

Goldman Sachs and UBS are the joint issue managers. They are also the joint bookrunners and underwriters together with DBS, Daiwa Capital Markets and CITIC CLSA Securities.

This will be the largest IPO since NetLink NBN Trust, which had a market cap of $3.1 billion upon its IPO in July. It $2.3 billion offer size was the biggest here in six years.

Cromwell EReit's listing will be the 14th IPO on the SGX this year.

The Reit will be Singapore's first euro-denominated Reit. Distributions will be declared in euros and paid in Singdollars, unless investors opt to receive the distributions in euros.

A version of this article appeared in the print edition of The Straits Times on September 09, 2017, with the headline 'Cromwell European Reit hopes to raise $2b from IPO'. Print Edition | Subscribe