Cromwell European REIT (CEREIT) has reported an indicative distribution per unit (DPU) of 4.005 Euro cents (5.83 cents) for the 3QFY2023 ended Sept 30, 3.0% higher q-o-q. The q-o-q growth was largely due to the release of a tax accrual previously made in the Netherlands, which is now no longer required.
Distributable income for the 3QFY2023 stood at EUR22.5 million, 6.8% lower y-o-y but 3.0% higher q-o-q.
Indicative DPU for the 9MFY2023 fell by 9.2% y-o-y to 11.795 cents while distributable income for the same period fell by 9.2% y-o-y to EUR66.3 million. That said, on a like-for-like basis, the indicative DPU for the 9MFY2023 fell by 4.1% y-o-y.
3QFY2023 gross revenue fell by 4.2% y-o-y but rose by 0.4% q-o-q to EUR53.6 million.
Net property income (NPI) for the period fell by 6.6% y-o-y and 7.6% q-o-q to EUR32.2 million due to lower income following the sale of Piazza Affari 2, as well as higher expenses and higher service charge expenses and non-recoverable expenses.
9MFY2023 gross revenue fell by 0.9% y-o-y to EUR161.9 million while NPI fell by 1.1% y-o-y to EUR100.8 million. The dip in NPI was attributed to divestments, the vacant site of Maxima in Rome under its strip out works, as well as the 15% rent reduction mechanism claimed by Italian government and higher operating costs. On a like-for-like basis, NPI stood 2.1% higher y-o-y.
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As at Sept 30, total portfolio occupancy stood at 95.2%; its light industrial/logistics occupancy stood at 97.1% for the period while office occupancy stood at 89.1%. During the third quarter, the light industrial/logistics sector saw a minor temporary increase in vacancy in France and the Netherlands with the space now being leased. For the 9MFY2023, 128,943 sqm in new leases and extensions – or 10.8% of the light industrial/logistics portfolio – were signed at an average rent reversion of 5.0%. The REIT’s office portfolio saw 77,105 sqm in new leases and renewals or 15.0% of the office portfolio. The office portfolio was signed at a rent reversion of 9.2% for the period.
As at Sept 30, the REIT’s weighted average lease expiry (WALE) stood at 4.6 years. The weighted average lease to break was at 3.5 years.
As at Sept 30, the REIT saw a positive total portfolio rent reversion of 10.6%.
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Proforma net gearing stood at 37.4% as at Sept 30.
“We are pleased to have maintained occupancy above 95% and achieved over 10% positive rent reversion for the quarter, demonstrating the resilience and quality of the portfolio and the Cromwell teams across Europe. We delivered 3QFY2023 indicative DPU of 4.0 Euro cents per unit, 3% higher versus 2Q 2023. Year-to-date (ytd) 2023 like-for-like NPI growth was 2.1%, leading to a nine-month indicative DPU of 11.795 Euro cents per unit, only 4.1%2 lower than last year on a like-for-like basis,” says Simon Garing, CEO of the REIT manager.
“We demonstrated our focus on balance sheet strength by reducing proforma net gearing to 37.4% due to recent asset sales, resulting in a high 91% debt fixed/hedged ratio. Our pivot to logistics and light industrial continues, with CEREIT’s portfolio now weighted to a majority of 51% to this sector, as CEREIT benefits from low logistics market vacancies of only 2.6%,” he adds. “The quarter also saw several independent agencies endorsing our strategy and management capabilities, with Fitch Ratings reiterating its investment grade BBB- stable outlook and GRESB upgrading CEREIT’s rating to 4 stars, with full marks for social and governance aspects.”
Looking ahead, Garing says that he believes that most of the interest rate hikes are now behind us.
“However, we remain vigilant and continue to identify opportunities to offset related financial and valuation risks brought about by tighter credit conditions and softening Eurozone economy which is now expected to grow only 0.5% in 2023. Globally, transaction volumes have reduced substantially, while real asset values continue to decline as a result,” he says.
“Our three top priorities for the rest of the year and coming into 2024 include continued focus on active asset management of the existing portfolio to maintain high occupancy and drive positive rent reversions, proactive capital management to minimise the impact of higher interest rates on distributable income and a focus on liquidity by preserving cash and maintaining sufficient committed undrawn debt facilities, and judicious use of divestment proceeds towards partial debt repayment, unit and/or bond buybacks and funding of selective accretive asset enhancement initiatives (AEIs) and developments,” he adds.
Units in CEREIT closed at EUR1.22 on Nov 10.
