Cromwell European REIT (SGX: CNNU) is the first REIT with a diversified pan-European portfolio to be listed on the Singapore Exchange. They are sponsored by Cromwell Property Group which has approximately EUR 3.8 billion of real estate assets under management with 19 offices across 14 European countries.
| Valuation (Eur mil) | % | |
| The Netherlands | 615 | 30% |
| France | 393 | 19% |
| Italy | 462 | 22% |
| Poland | 245 | 12% |
| Germany | 175 | 8% |
| Finland | 116 | 6% |
| Denmark | 76 | 4% |
| Total | 2,082 | 100% |
As at 30 September 2020, Cromwell European REIT have a total of 95 properties across Europe. Looking at the overall weightage by valuation, the properties in Netherlands, Italy and France holds approximately 71% of the overall properties composition.
In this post, we will be looking into Cromwell European REIT FY19 and 3Q20 performance. As Cromwell European REIT was listed not too long ago, there will be lack of historical performance to look at. Before we dive in, do note that the financials are denominated in Euro.
Historical Performance (FY18 & FY19)
1) Acqusition of 14 new properties and disposal of 1 property during the year
| Date | Events | Number of Properties | Remarks |
| 31-Dec-18 | Total Properties | 90 | |
| 23-Jan-19 | Acquisition | 3 | 3 in France |
| 14-Feb-19 | Acquisition | 4 | 1 in France, 3 in Poland |
| 17-Jul-19 | Acquisition | 3 | 3 in France |
| 25-Jul-19 | Acquisition | 2 | 2 in Poland |
| 24-Sep-19 | Acquisition | 1 | 1 in Poland |
| 18-Oct-19 | Disposal | -1 | 1 in Poland |
| 28-Nov-19 | Acquisition | 1 | 1 in Italy |
| 16-Dec-19 | Initiated Disposal (next FY) | – | 12 in France, the
Netherlands and Denmark |
| 19-Dec-19 | Initiated Acquisition (next FY) | – | 3 in Germany |
| 31-Dec-19 | Total Properties | 103 |
To help investors understand more on Cromwell European REIT, we will start out with some of the key events during the year. As there are various events occurring, we will focus on some of the key acquisitions and disposal during the year. As at 31 December 2018, Cromwell European REIT has a total of 90 properties across Europe.
During the year itself, they have acquired 7 new properties in France, 6 properties in Poland and 1 in Italy. Similarly, they have also initiated another 3 acquisition in Germany towards the end of the year. In terms of acquisition,they have disposed off one property in Poland with another 12 more properties due to be disposed in the coming FY.
From these acquisition sand disposal exercise during the year, Cromweel European REIT has increased its overall portfolio from 90 properties to 103 properties as at 31 December 2019.
2) Improved in occupancy rate and achieved positive rental reversion
| FY18 | FY19 | |
| No.of Properties | 90 | 103 |
| Occupancy Rate | 91% | 93% |
| Rental Reversion | 7% | 4% |
Given that there is not much historical data to fall back on, we will look at Cromwell European REIT last 2 years operational performance. In terms of occupancy rate, it has improved from 91% in FY18 to 93% in FY19. This is further fueled by the increase in acquired properties during the year.
Not only that, they have also managed to achieve a positive rental reversion in both FY18 and FY19. This is definitely a favourable point. Purely from operational standpoint, Cromwell European REIT performance is commendable. Firstly, the manager have been proactive in its acquisition. Secondly, the occupancy rate of the REIT has also been improving year on year. On top of that, they have been achieving a overall positive rental reversion.
We will look further if this translated to a better financial performance in a bit.
3) Improvement in financial performance
We would have expect the financial performance of Cromwell European REIT to be performing as well echoing its strong operational performance. Given that the financials in FY18 is from 30-Nov-17 to 31-Dec-18, we will look at the pro-rated performance. Ths would give investors a better apple to apple comparison.
If we were to look at its pro-rated net property income, it has increased from EUR 93 million in FY18 to EUR 116 million in FY19. The increased is fueled by the overall improved in occupancy rate, positive rental reversion achieved and newly acquired properties.
Despite the solid financial performance in FY19, investors should definitely still keep a close lookout on the impact of the initiated disposal in the next financial year.
4) Increased in overall distribution per unit
Similar to its financial performance, Cromwell European REIT distribution per unit has increased from 3.75 cens in FY18 (pro-rated) to 4.08 cents in FY19. That is a 8.8% increased.
5) Gearing level at a healthy level
As at 31 December 2019, Cromwell European REIT has a total borrowings of EUR 830 million. This would translate to a gearing of 34.5% which is still below the permissible limit of 50% giving them ample debt headroom for further acquisition and asset enhancement initiatives.
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3Q20 Performance
6) Acqusition of 4 properties in Germany
Durng the year making up 3Q20, Cromwell European REIT acquired a total of 4 more properties. These 4 properties are all located in Germany further strengthen its presence in Germany.
7) Disposal of 12 properties
Contrary to the 4 acquisitions, Cromwell European REIT has also disposed of 12 properties. This is as shared in the earlier point initiated by the REIT manager late FY19. The properties disposed are spread across France, Denmark, and the Netherlands.
8) Stable occupancy rate with positive rental reversion in 3Q20
Given the uncertainty of COVID-19, Cromwell European REIT still manage to maintained an occupancy rate of approximately 94% in 3Q20. Not only that, they have also sucessfully achieved an overall positive rental reversion. This is definitely a favourable point.
9) Improved in financials but decline in DPU
Last but not least, let’s take a look at its 3Q20 performance. Looking at its net property income, it is higher at EUR 88 mil in YTD 2020 as compared to EUR 83 mil in YTD 2019. The increased is mainly attributable to the contributions from new acquisitions completed in the previous year.
Distribution per unit, on the other hand has declined. The DPU for YTD2020 stands at 2.94 cents compared to 3.05 cents in YTD 2019.
Summary
Based on REIT Pulse overall analysis, Cromwell European REIT has been performing fairly well in the past especially in terms of its operational performance. Its stable and increasing occupancy trend compared to historical years is a plus. Coupled this with its positive rental reversion, this is definitely a favourable aspect.
Some of the adverse area concerning Cromwell European REIT includes its DPU downtrend in YTD2020. Nevertheless, this could be due a short term impact due to COVID-19.
What are your thoughts on Cromwell European EIT? If you are just getting started, feel free to read more of our REIT Guide and REIT Analysis. You can also read more about what REITs are if you are new to REITs.
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