Cromwell Reit cuts IPO size, raises sponsor's stake

Cromwell European Reit, which plans to be the first euro-denominated Reit to list on the Singapore Exchange (SGX), is cutting the size of its initial public offering (IPO).
Cromwell European Reit, which plans to be the first euro-denominated Reit to list on the Singapore Exchange (SGX), is cutting the size of its initial public offering (IPO). ST PHOTO: LIM YAO HUI

Cromwell European Reit, which plans to be the first euro-denominated Reit to list on the Singapore Exchange (SGX), is cutting the size of its initial public offering (IPO).

The Reit is now selling up to 1.3 billion units at an IPO price of 55 euro cents to 57 euro cents each, according to an amended draft prospectus lodged on Masnet yesterday.

This is a reduction from the 1.58 billion offer size initially proposed. The offer price range remains unchanged.

The smaller unit offer size - excluding sponsor shares and those sold to cornerstone investors - means Cromwell European Reit could raise up to €739 million (S$1.19 billion) based on the 57 euro cent price. An offer of 1.58 billion could have reaped €903 million.

Under the revised terms, the Reit's sponsor - Australia-listed Cromwell Property Group - will now buy 567 million to 587 million units in the Reit, assuming the over-allotment option of up to 136 million units is not exercised.

This will give it a stake of 25.9 per cent in the Reit based on the maximum offering price and a stake of 26.8 per cent based on the minimum offering price.

Cromwell had earlier intended to keep its holdings in the Reit to between 12.7 per cent and 13.2 per cent and committed to purchase 279 million to 289 million units, assuming the over-allotment option is not exercised.

The Reit declined to comment on its reasons for reducing the offer size. Bookbuilding is ongoing and demand is "healthy", one person with knowledge of the matter told The Straits Times.

Both the international placement tranche and public tranche available to Singapore retail investors have been reduced. The total number of units that will be in issue post-IPO remains unchanged at 2.19 billion.

The Reit declined to comment on its reasons for reducing the offer size. Bookbuilding is ongoing and demand is "healthy", one person with knowledge of the matter told The Straits Times.

By taking up a greater stake in the Reit, Cromwell could signal stronger alignment of its interests with other unit holders, without going against its original intention for a high free float.

Unlike most Reits listed here, which have a portfolio of properties injected into them by their sponsor, Cromwell European Reit acquired its portfolio from a number of different funds looking for exits.

Some observers have noted that without a firm pipeline of assets from its sponsor, growth prospects may be limited.

Based on the IPO price range, the Reit is forecasting a distribution yield of 7.5 per cent to 7.7 per cent for next year, to be drawn from rental income across 81 properties in Europe.

The public offer will open at 9pm on Thursday and close at 12pm on Sept 26, with trading on the SGX to start on Sept 28.

A version of this article appeared in the print edition of The Straits Times on September 19, 2017, with the headline 'Cromwell Reit cuts IPO size, raises sponsor's stake'. Print Edition | Subscribe