Cromwell European REIT - Phillip Securities 2022-06-27: A Portfolio Of Gems

CROMWELL EUROPEAN REIT (SGX:CWBU)

Cromwell European REIT - A Portfolio Of Gems

We visited 12 assets in three of Cromwell European REIT’s key markets, namely the Netherlands, France, and Italy, which account for 62% of Cromwell European REIT’s portfolio. Assets visited were enviably located near highways and train stations.
Key office and logistics markets benefitting from positive fundamentals; portfolio largely insulated from inflation.

Local expertise championing value creation through off-market deals and portfolio optimisation through AEIs/redevelopments and divestment of non-core assets.

Cromwell European REIT (SGX:CWBU) was listed on the SGX in November 2017.
Cromwell European REIT's portfolio comprises 115 predominantly freehold properties with an appraised value of approximately €2.5bn as of April 2022. Its assets are located in or near major gateway cities in the Netherlands, Italy, France, Poland, Germany, Finland, Denmark, Slovakia, the Czech Republic and the United Kingdom with an aggregate lettable area of ~1.8mil sqm and more than 800 tenant-customers.
Cromwell European REIT's portfolio consists predominantly of office and light industrial/logistics assets which make up ~52% and ~43% of total assets respectively.

Approximately 43% of Cromwell European REIT’s portfolio is in light industrial and logistics assets. Demand for these asset types is well supported by increased e-commerce penetration, pivot to just-in-case inventory management and on-shoring of production.
While structural, economic and geopolitical risks headwinds for the Polish and Finnish office markets remain, the Netherlands office market, which represents 23% of Cromwell European REIT’s AUM, continues to experience rental growth on the back of favourable demand-supply imbalances.

Cromwell European REIT’s portfolio occupancy is at an all-time high of 94.8% with a WALE/WALB of 4.6/3.4 years. European leases have inflation-linked annual escalations embedded in the lease, while energy and utility costs are passed through to the tenant, minimising impact to Cromwell European REIT’s earnings.

Local expertise has allowed Cromwell European REIT to source off-market deals at favourable yields and discounts to valuation, while simultaneously divesting non-core assets above valuations. Having boots on the ground allows Cromwell European REIT to accelerate its rebalancing strategy, pivoting towards its target 60% light industrial/logistics and 40% office asset allocation from its current 52% office and 43% light industrial/logistics allocation.
Cromwell European REIT completed €212.6mil/€344mil in light industrial/logistics acquisitions at a blended 6.3%/6.5% NOI yield since FY21/FY20.

Cromwell European REIT has identified a €250 million development pipeline over the next few years. Initiatives are expected to rejuvenate the portfolio, command higher rents, and in some cases, increase portfolio NLA.
Continue to read the 12-page PDF report attached below for more details on the investment merits of Cromwell European REIT.

Cromwell European REIT is exposed to country risks including economic changes, political changes or policy changes in the EU or in countries where its assets are located. An economic downturn in Europe might negatively affect tenant demand for Cromwell European REIT’s properties, and consequently DPU.

While Cromwell European REIT's DPUs are Euro denominated, earnings from 3 out of 9 - Denmark, Poland and the Czech Republic - are paid in their respective currencies. and account for ~15% of earnings.

Natalie Ong Phillip Securities Research | https://www.stocksbnb.com/ 2022-06-27

SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000