SINGAPORE (Aug 8): The addition of new properties and positive leasing momentum have helped Cromwell European REIT to an improved set of results in the 1H19 ended June.
Distribution per unit (DPU) climbed 3.0% y-o-y to 2.04 euro cents in 1H19. The 1H DPU was 4.6% higher than its IPO forecast of 1.95 cents.
Income available for distribution to unitholders leapt 33.3% y-o-y to €44.8 million.
Net property income (NPI) jumped 33.7% y-o-y to €54.1 million, driven by a 32.5% y-o-y increase in gross revenue to €82.4 million on the back of contributions from 22 new properties acquired in late 2018 and early 2019.
Excluding contributions from new properties, Cromwell’s light industrial/logistics portfolio would have recorded a 5% y-o-y uplift in NPI.
However, NPI contribution from its office portfolio and other assets were largely in line with those in the same period last year.
According to the REIT manager, Cromwell saw positive rental reversions on average, underpinned primarily by the light industrial/logistics properties in the portfolio.
“This validates the efficacy of our barbell approach, whereby the security that Cromwell’s office assets provide is balanced with the growth potential of its light industrial/logistics assets, especially from last-mile e-commerce urban warehouse tenant-customers,” says Simon Garing, CEO of the REIT manager.
In particular, Cromwell’s occupancy rate at Parc des Docks in Paris increased to 91.7% as at end June, from 87.4% as at Dec 31, 2018.
The REIT also extended or renewed 49% of leases subject to expiries or breaks until December 2019.
As such, Cromwell’s portfolio now has an overall occupancy rate of 91.6%, up 1.4 percentage points q-o-q, and a weighted average lease expiry of 4.7 years as at June 30, 2019.
Meanwhile, 85.9% of Cromwell’s debt is hedged, and its total borrowings have a 2.4-year weighted average term to maturity.
Its annualised cost of debt – excluding its revolving credit facility – and its interest coverage ratio are at about 1.34% and 8.7 times, respectively.
The weighted average term to maturity of Cromwell’s debt is expected to extend to more than 3.5 years, as the REIT manager is in advanced stages of refinancing debt due in November 2020.
Going forward, Garing says the REIT manager will remain focused on driving up occupancy rates and unlocking value through a proactive and disciplined approach to acquiring attractive assets and recycling capital.
“With a relatively low gearing and a high interest coverage ratio, CEREIT is well-positioned to continue capitalising on investment opportunities, especially with European interest rates remaining low for the foreseeable future and regulators in Singapore exploring a potential increase in leverage limits,” he says.
As at 4.19 pm on Thursday, units of CEREIT are trading half a cent higher at 75.5 cents.
