The manager of Cromwell European REIT (CEREIT) CWBU has announced the completion of its divestment of an office asset in Poland for EUR15.86 million ($23.1 million) on March 28.
As part of the divestment, CEREIT entered into a sale and purchase agreement with Solida Capital Europe for the sale of Grojecka 5 (G5) asset in Warsaw, one of the REIT’s six office assets in Poland.
G5 is an office building with 10,864 sqm of net lettable area, 8 floors and 105 parking spaces. It is located in the Jerozolimskie office district in Warsaw, and is highly visible and accessible by car and public transportation.
The asset was independently valued by CBRE and by Perpetual Asia, in its capacity as trustee of CEREIT, at EUR14.75 million as at Dec 31, 2023.
The net proceeds from the divestment will be deployed to repay the revolving credit facility and for other working capital purposes.
CEO of the manager, Simon Garing, says the divestment of G5 is consistent with the REIT’s previously announced strategy to reduce exposure to non-core markets and B/C grade office assets, effectively reducing the portfolio’s exposure to Poland to 7.4%2 (down from 8.1%).
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“Pleasingly, our experienced on-the-ground team completed the divestment at a 7.5% premium to the latest valuation despite the relative illiquidity in the Central European real estate markets and record-low transaction activity in Europe,” he says.
Garing adds: “Since the beginning of 2022, we have executed EUR253.3 million divestments of non-strategic assets at a healthy EUR31.4 million or 14.2% premium to the latest valuations, approximately 63% of the target €400 million sales pipeline we set to complete by 2026. We continue to advance negotiations on other selective opportunities.”
The CEO believes CEREIT’s divestment success demonstrates the robustness of its net asset value (NAV) of EUR2.12 per unit, compared to CEREIT’s trading price of EUR1.40 per unit on the Singapore Exchange S68 (SGX).
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He notes that the REIT’s focus will be to manage its gearing in the 35% to 40% range over the medium term and improve upon its Fitch Investment Grade credit rating of “BBB- with stable outlook” to provide CEREIT with competitive financing and ample liquidity to undertake its active asset enhancement program in core Western Europe locations.
“In turn, our focus on delivering higher ESG standards and tenant amenities in CEREIT’s portfolio should also provide for higher sustainable distribution streams and ultimately drive higher risk-adjusted returns to our investors,” says Garing. “As the European real estate cycle turns on the back of the expected European Central Bank (ECB) rate cuts, CEREIT should be in a strong position to take advantage of other opportunities that may also present.”
Shares in CEREIT closed 4 Euro cents higher or 2.88% up at EUR1.43 on April 3.
