Cromwell European REIT Review @ 3 September 2023

Basic Profile & Key Statistics

• Main Sector(s): Office, Industrial & Logistics
• Country(s) with Assets: Netherlands, Italy, France, Poland, Germany, Finland, Denmark, Slovakia, Czechia & England
• No. of Properties (exclude associate/fund): 113

Key Indicators

Performance Highlight

Gross revenue and NPI have improved slightly YoY. However, distributable income and DPU declined YoY mainly due to higher finance costs and the absence of distribution from divestment gain.

Rental Reversion

CEREIT achieved +5.9% rent reversion for 1H 2023 and + 3.6% in 2Q 2023.

Divestment

On 30 June, CEREIT divested Piazza Affari 2 at a 14.6% premium to the purchased price. While the divestment of Viale Europa 95 is still pending.

Development

Development of Lovosice ONE Industrial Park has been completed with 46% pre-let and is expected to be fully leased up by year-end. Whereas developments for Via Nervesa 21 and Maxima are in progress, Nervesa 21 is on track to be completed by 1Q 2024.

Related Parties Shareholding

• REIT Sponsor's Shareholding: ± 10% from median
• REIT Manager's Shareholding: Below median by 20% or more
• Directors of REIT Manager's Shareholding: Blow median by 20% or more

Lease Profile

• Committed Occupancy: ± 5% from median
• Income in SGD/Major Currencies: Below median by 10% or more
• WALE: Above median by 10% or more
• Highest Lease Expiry within 5 Years: Below median by 20% or more; Falls in 2025
• Weighted Average Land Lease Expiry: Above median by 20% or more

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing Ratio including Perps: ± 10% from median
• Cost of Debt: Below median by 20% or more
• Fixed Rate Debt %: Above median by 20% or more
• Unsecured Debt %: ± 10% from median
• WADM: Below median by 10% or more
• Highest Debt Maturity within 5 Years: Above median by 20% or more; Falls in 2025
• Interest Coverage Ratio: Above median by 20% or more

Diversification Profile

• Top Geographical Contribution: Below median by 20% or more
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 20% or more
• Top Tenant Contribution: ± 10% from median
• Top 10 Tenants' Contribution: Below median by 10% or more

Key Financial Metrics

• Property Yield: ± 10% from median
• Management Fees over Operating Distributable Income: Below median by 20% or more; €14.93 distribution for every dollar paid 
• Operating Distributable Income on Capital: Above median by 10% or more
• Operating Distributable Income Margin: ± 10% from median
• Operating Distribution Proportion: Above median by 5% or more

DPU Breakdown

• Distributable Income Breakdown:
• 99% from Operation
• 1% from Proceeds from Divestment

Trends

*DPU and NAV per Unit are adjusted for the 5-to-1 consolidation.

• Uptrend: Committed Occupancy
• Flat: DPU from Operation
• Slight Downtrend: NAV per Unit
• Downtrend: Interest Coverage Ratio, Property Yield, Operating Distributable Income on Capital, Operating Distributable Income Margin

Relative Valuation

• Dividend Yield: Above +1SD for for 1y & 3y; Above +2SD for 5y
• P/NAV: Below -1SD for 1y & 3y; Below -2SD for 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Manager's Shareholding
Long WALE	Low Directors of REIT Manager's Shareholding
Well Spread Lease Expiry	Short WADM
Long Weighted Average Land Lease Expiry	Concentrated Debt Maturity
Low Cost of Debt	Interest Coverage Ratio Downtrend
High Fixed Rate Debt %	Property Yield Downtrend
High Interest Coverage Ratio	Operating Distributable Income on Capital Downtrend
Low Top Geographical Contribution	Operating Distributable Income Margin Downtrend
Low Top Property & Top 5 Properties' Contributions
Low Top 10 Tenants' Contribution
Competitive Management Fees
High Operating Distributable Income on Capital
High Operating Distribution Proportion
Committed Occupancy Uptrend

The performance is similar to the previous quarter. In July & August, CEREIT refinanced those debts that mature in 2024 with a new RCF and term loan. Subsequent to this, there is no refinancing requirement until Nov 2025. And with a high fixed rate proportion, the cost of debt is expected to be stable starting from 3Q onward.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.