The manager of Cromwell European REIT (CEREIT) CWBU has reported a distribution per unit of 7.79 Euro cents (11.5 cents) for the 1HFY2023 ended June 30, 10.4% lower than the DPU of 8.695 Euro cents in the 1HFY2022.
Income available for distribution fell by 10.4% y-o-y to EUR43.8 million due to higher interest costs as well as the board’s decision to not declare a capital distribution top-up in the 1HFY2023 to preserve capital gains. The board’s decision was due to the weaker macro fundamentals and tighter credit markets, says the REIT manager.
Gross revenue rose by 0.9% y-o-y to EUR108.3 million while net property income (NPI) rose by 1.8% y-o-y to EUR68.5 million.
The slight increase was mainly attributed to income from the five acquisitions completed in the FY2022 in Italy, Germany, Denmark and the UK. Higher income from annual inflation indexation across the portfolio, and outperformance of the French light industrial/logistics portfolio also led to the higher gross revenue and NPI. However, this was offset by the loss of income from the REIT’s Italian office asset, Maxima, in FY2022 due to lease expiry in preparation for redevelopment. The REIT also registered loss of income from the divestments that were completed in the FY2022, lower rental income from the 15% rent reduction by government decree for three Italian properties and lower income from Business Garden in Poland due to the absence of one-off additional income.
On a like-for-like basis, DPU for the 1HFY2023 stood 4.5% lower y-o-y excluding income from Maxima and distribution of capital gain recorded in 1HFY2022.
According to the REIT manager, Nervesa 21 in Milan, Italy, is expected to resume contributing income in 1HFY2024 upon completion and successful leasing
During the 1HFY2023, the REIT reported a total loss of EUR15.6 million compared to the total return of EUR53.1 million in the 1HFY2022 mainly due to the fair value loss on investment properties compared to the fair value gain in the same period the year before.
As at June 30, the REIT’s portfolio valuations fell by 1.6% h-o-h to EUR2.39 billion.
Portfolio occupancy stood at 95.4% as at June 30 while weighted average lease expiry (WALE) stood at 4.4 years. Rent reversion stood at 5.9% for the period.
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As at June 30, the REIT’s aggregate leverage stood at 41.5% with an interest coverage ratio of 4.4x. As at July 31, the REIT’s aggregate leverage stood at 39.5% following the full revolving credit facility (RCF) repayment with proceeds from Piazza Affari 2. The REIT has no debt expiring till November 2025.
On Aug 14, the REIT said that it had signed a new four-year sustainability-linked EUR157.5 million term loan.
Cash and cash equivalents as at June 30 stood at EUR140.5 million.
“We are pleased that CEREIT’s portfolio has now effectively reached a majority weighting to the logistics / light industrial sector at 51%, post the pending completion of the sale of Viale Europa 95 in Bari, Italy. This majority portfolio sector delivered very positive like-for-like NPI growth of 8.7% in 1HFY2023 and maintained occupancy at 97.9%, as e-commerce continued to grow and supply chains expanded. We also executed on plans to recycle office and other assets, with EUR135 million of divestments at a 5.4% premium to valuation ensuring conservative gearing of 39.5% today. CEREIT now has EUR500 million of headroom to the Monetary Authority of Singapore’s (MAS) limits and is within the board’s policy range of 35-40%,” says Simon Garing, CEO of the manager.
“CEREIT’s portfolio valuations outperformed, modestly declining by 1.6% in the first half of the year. Valuations were supported by active leasing and renewals of over 30% of the portfolio and sustained high level of positive rent reversions in the last 18 months, which largely offset the rise in cap rates,” he adds. “CEREIT’s logistics / light industrial portfolio increased in value over the period by 0.8% while its office portfolio only declined in valuation by 3.9%, with CEREIT’s Dutch Grade A office values outperforming the Grade B office assets in Poland, Italy and Finland. Cromwell’s experienced local asset managers re-leased 6.8% of CEREIT’s portfolio at a healthy +5.9% higher rent reversion, maintaining overall occupancy at 95.4% in 1HFY2023.”
Unitholders will receive their DPUs on Sept 28.
Units in CEREIT closed flat at EUR1.55 on Aug 11.
