Cromwell E-Reit buying 23 European properties for $605m; to partly fund with 38-for-100 rights issue

Two properties are located in the Netherlands, 11 are in Finland, and three are in Poland.
Two properties are located in the Netherlands, 11 are in Finland, and three are in Poland.PHOTO: CROMWELL EUROPEAN REIT
Two properties are located in the Netherlands, 11 are in Finland, and three are in Poland.
Two properties are located in the Netherlands, 11 are in Finland, and three are in Poland.PHOTO: CROMWELL EUROPEAN REIT
Two properties are located in the Netherlands, 11 are in Finland, and three are in Poland.
Two properties are located in the Netherlands, 11 are in Finland, and three are in Poland.PHOTO: CROMWELL EUROPEAN REIT

SINGAPORE - Cromwell European Reit (Cromwell E-Reit) is acquiring 23 properties across the Netherlands, Finland, Poland, Italy and France for around 384.4 million euros (S$604.98 million), and will seek to raise 224.1 million euros in an underwritten and renounceable rights issue to partially fund the purchases.

The acquisitions will enhance Cromwell E-Reit's resilience "through a larger portfolio with increased geographical diversity, as well as more freehold and perpetual leasehold assets", it said in a press statement on Wednesday.

The manager of the real estate investment trust (Reit) will seek unitholder approval to partially fund the acquisitions via a 224.1 million euro, 38-for-100 underwritten and renounceable rights issue. The manager will seek to issue some 600.83 million new units at an issue price of 0.373 euros per unit.

The issue price is a 31.6 per cent discount to the closing price of 0.545 euros per unit on Oct 30, 2018 - the last trading day of the units prior to the announcement of the proposed rights issue - and a discount of around 25 per cent to the theoretical ex-rights price of 0.498 euros per unit.

Substantial unitholders Gordon Tang, his wife Celine Tang and Hillsboro Capital Ltd will sub-underwrite 245.42 million rights units, while the Reit's sponsor Cromwell Property Group will subscribe to 35.31 per cent of the rights issue, its full entitlement.

The rights issue is underwritten by UBS, DBS, Morgan Stanley and Daiwa.

Two properties are located in the Netherlands, 11 are in Finland, and three are in Poland. They are mostly office properties, sit on freehold plots and have good accessibility to major transport infrastructure including key airports, railway and train stations and motorways.

These properties have an aggregate net lettable floor area (LFA) of around 150,235 square metres (sq m) and an average occupancy rate of about 84.5 per cent, with a 4.7 year weighted average lease expiry (WALE) as at Aug 31, 2018.

The French properties comprise four predominantly logistics properties and one DIY (do-it-yourself) home improvement centre located along the strategic French logistics corridor. Four of the properties are situated on freehold land with the fifth situated on a site with a 29-year residual term. The French properties have a total LFA of 42,322 sq m and are all fully occupied; they have a 2.5-year WALE as at Aug 31, 2018.

The two Italian properties comprise freehold office buildings, one each in the southern city of Bari and sixth-largest city Genova. They have an LFA of 27,211 sq m. Both Italian properties are master leased to Agenzia del Demanio, the entity in charge of managing the real estate assets of the Italian State and as at Aug 31, 2018, and have a 5.0-year WALE.

The European properties are collectively valued at 390.1 million euros based on independent valuations.

The acquisitions will provide it with access to the Finnish and Polish office markets, both of which are experiencing robust growth, Cromwell E-Reit said, while strengthening its positions in the Dutch and Italian office markets as well as the French logistics market.

The acquisition raises the number of properties in Cromwell E-Reit's portfolio to 98 from 75 and the valuation of its portfolio will rise by around 28.1 per cent to 1.8 billion euros from 1.4 billion euros.

"The acquisitions represent an opportunity to accelerate the growth of Cromwell E-Reit while also strengthening its defensiveness. They are expected to be earnings accretive, increasing Cromwell E-Reit's net property income, distributable income, and DPU (distribution per unit) yield.

They will also provide us with access into two new countries that are among the fastest growing economies in Europe and deepen our presence in three countries in which we already operate," said the manager's chief executive Simon Garing, adding that the Reit acquired the properties at "attractive yields".