Cromwell REIT drops plans for Singapore IPO

Cromwell Property Group chief Paul Weightman.
Cromwell Property Group chief Paul Weightman.PHOTO: CROMWELL PROPERTY GROUP

SYDNEY - Australian real-estate company Cromwell European Reit has elected not to proceed with its plans for an initial public offering of a Reit on the Singapore Exchange, the company said in a filing on the Australian exchange on Friday (Sept 22).

The IPO was to be the first euro-dominated Reit on SGX, and touted to be Singapore's second-largest this year.

Cromwell European Real Estate Investment Trust, a unit of Australia-listed Cromwell Property Group, had started taking orders earlier this month.

The company, which draws rental income from 81 properties in six European countries, had received significant interest from strategic, institutional and retail investors, but its decision to drop plans for €1.09 billion (S$1.75 billion) was taken given current market conditions, the company said in the stock exchange filing.

"Cromewell continues to believe in the quality of CEREIT's portfolio, its investment thesis, and the exposure it provides to improving European real estate fundamentals," Cromwell chiec executive officer Paul Weightman said, according to the filing.

It will re-assess the situation in conjunction with key stakeholders and strategic partners and will provide a further update in due course, the filing added.

However, media reports said the demand for its units was tepid. Demand from institutional investors wasn't up to the company's expectations as the deal size was too large, the Dow Jones Newswires reported quoting sources familiar with the matter.

Also, some investors were skeptical of the growth prospects in some of its European assets given these investors' unfamiliarity with those markets, it said.

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.

It 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.

A spokesman for Cromwell Property Group declined to comment.

A spokesman for SGX said that they cannot comment on specific companies. "Our REITs and business trust cluster is the biggest in Asia outside Japan with a total of 50 listings valued at close to S$100 billion. The most recent such listing, NetLink NBN Trust, received IPO subscriptions of S$5 billion, testifying to robust investor interest. We continue to support a healthy pipeline of companies seeking to list REIT and infrastructure assets from diverse geographies," theSGX spokesman said.

Earlier this week, The Straits Times had reported that the Reit had earlier decided to cut the size of the IPO, reducing the number of units on sale from 1.58 billion to 1.3 billion units.

The offer price remained unchanged at 0.55 euros to 0.57 euros (S$0.93) each, according to an amended draft prospectus lodged on Masnet.

This is a reduction from the 1.58 billion offer size initially proposed. The offer price remains unchanged. The Reit was expected to raise up to 739 million euros (S$1.19 billion) based on the 0.57 euros unit price.

Cromwell had earlier intended to keep its holdings in the Reit to between 12.7 and 13.2 per cent and committed to purchase 279 million to 289 million units, assuming the over-allotment option is not exercised. It had declined to comment on its reasons for reducing the offer size.

The Reit was forecasting a distribution yield of 7.5 to 7.7 per cent for next year, to be drawn from rental income across 81 properties in Europe.