The manager of Cromwell European REIT has reported an indicative distribution per unit (DPU) of 3.505 Euro cents (5.1 cents) for the 1QFY2024 ended March 31, 10.2% lower than the DPU of 3.902 Euro cents in the corresponding quarter the year before.
Income available for distribution also fell by 10.2% y-o-y to EUR19.7 million due to higher finance costs, which rose by 20.4% y-o-y to EUR8.6 million. The increase was mainly due to a higher average quarter interest rate of 3.04% compared to 2.41% in the 1QFY2023. The higher finance costs have an impact of 0.26 Euro cents or EUR1.5 million q-o-q due to higher interest rates and lower debt balance.
Gross revenue fell by 2.7% y-o-y to EUR53.3 million while NPI also fell by 2.7% y-o-y to EUR32.7 million. The lower revenue and NPI were due to asset sales, in particular, Bari Europa, Bari Trieste and Piazza Affari. Piazza Affari was sold in June 2023 while Bari Europa and Bari Trieste were sold in October 2023 and December 2023 respectively. The sale of the three properties had an impact of about 0.42 Euro cents or EUR2.3 million q-o-q.
On a like-for-like basis, however, 1QFY2024 NPI grew by 5.0% y-o-y.
As at March 31, the REIT’s aggregate leverage stood at 41.3%, one percentage point (ppt) higher than the 40.3% as at Dec 31, 2023.
Net gearing as at March 31 stood at 39.7%, up from 38.4% as at end-December 2023.
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The REIT’s interest coverage ratio (ICR) as at March 31 stood at 3.6 times.
As at March 31, total portfolio occupancy stood at 93.4. Its weighted average lease expiry (WALE) stood at 4.8 years.
Net asset value (NAV) including accrued DPU stood at EUR2.08 per unit, down 1.9% q-o-q.
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“We remain ahead in our disposal program and maintain net gearing below 40%, with no debt maturing until November 2025. The EUR2.08 NAV/Unit is approximately 40% higher than Cromwell European REIT’s SGX most recent trading unit price,” says Simon Garing, CEO of the manager.
"The strategic pivot to logistics and light industrial is progressing well, with the portfolio now weighted to a more significant 53% in this sector. Cromwell European REIT continues to benefit from the low European logistics market vacancies, which stand at a mere 2.9%. We delivered +5.0% positive rent reversion in this sector in the quarter, despite Europe's recent relative cyclical economic weakness. The major industrial lease in the period was a 20-year renewal to a 6,800 sqm data centre tenant-customer in Copenhagen,” he adds.
"I am especially pleased with Cromwell European REIT's office sector performance. We achieved 89% office tenant retention and maintained occupancy at approximately 90% due to our environmental, social and governance (ESG) / energy savings strategies and strong tenant relationships. Rent reversion growth reached +10.3%, driven by the new leases at the Nervesa21 redevelopment in Milan at significantly higher rents. This rent growth validates our strategy to redevelop older, well-located office assets into highly efficient modern buildings with excellent ESG credentials,” Garing continues.
Looking ahead, the CEO says the REIT manager is focused on maintaining the REIT’s DPU “as high as possible” to support its unit price. Based on the REIT’s closing price of EUR1.46 as at April 22, 1QFY2024 DPU represents a yield of close to 10%, compared to the average Singapore REIT (S-REIT) yield of around 6.8%.
“Since the beginning of the downturn in 2022, we have prioritised divestments to reduce debt/gearing, which is less impactful on DPU than raising equity,” says Garing.
“Our three top priorities for the rest of the year remain: focusing on active asset management of the existing portfolio to maintain high occupancy and drive rental income growth, managing the November 2025 bond maturity, and executing further divestments of non-strategic assets to recycle into accretive our next phase of asset enhancement initiatives (AEIs),” he adds.
As at 2.56pm, units in Cromwell European REIT are trading 1 Euro cent lower or 0.67% down at EUR1.48. Its SGD listing is trading 3 cents higher or 1.41% up at $2.16.
