DBS Group Research on Monday reinitiated coverage on Cromwell European Real Estate Investment Trust (Cromwell E-Reit) with " buy" and a target price of 60 euro cents.

 

The target price implies a target yield of 5.9 per cent and price to net asset value multiple of 1.18 times. Units of Cromwell E-Reit were trading flat at 47.5 euro cents as at the midday trading break.

 

The reinitiating of coverage comes as the research team " remains excited" about the Reit manager' s pivot into the logistics sector, which accounted for about 35 per cent of assets as at December 2020.

 

" The Reit continues to increase exposure in this fast-growing sub sector and targets to increase its portfolio exposure to 50 per cent in the medium term," DBS said. It added that this strategy will drive a " further compression" in yields for Cromwell E-Reit.

 

DBS noted that Cromwell E-Reit has been an active asset recycler. With attractive yields north of 7.5 per cent, coupled with a potential inclusion to the FTSE EPRA/Nareit Global Real Estate Index, the research team sees multiple rerating catalysts for the Reit.

 

The research team is also of the view that the Reit has weathered the Covid-19 pandemic well, reporting resilient occupancies and achieving positive rental reversions. Cromwell E-Reit has a weighted average lease expiry of around 4.9 years, offering strong visibility to distributions, DBS said.

 

" We anticipate operational metrics improvement as the economy rebounds beyond the Covid-19 pandemic," the research team noted.

 

CROMWELL European Real Estate Investment Trust (Cromwell E-Reit) has raised 100 million euros (S$160.5 million) from a private placement of 232.6 million new units, its manager said on Thursday.

 

Cromwell E-Reit had sought to raise at least 90 million euro by placing out between 200 million and 209.3 million units. The placement was upsized following strong demand, the manager said.

 

The issue price was 43 euro cents per new unit, the lowest end of the indicative range of between 43 and 45 euro cents announced by the manager on Wednesday.

 

It represents a discount of 10.8 per cent to the volume-weighted average price (VWAP) of 48.2 euro cents of all trades done on Feb 23, the market day before the placement agreement was signed.

 

In its filing, the Reit manager said the placement was oversubscribed and " well-supported" by existing unitholders and new investors, including regional and global long-only institutional investors, property specialist funds, and private wealth clients.

 

Roughly a third of the proceeds will be used to replenish working capital, following the Reit' s recently completed 52.6 million euro acquisition of a logistics park in Italy.

 

Another 64 million euros will partially fund the Reit' s acquisition of 11 properties in the Czech Republic and Slovakia, which is expected to complete before March 31, 2021.

 

The rest will be used to pay fees and expenses incurred as a result of the placement.

 

DBS Citigroup Global Markets Singapore and UBS, Singapore Branch were the joint underwriters for the placement.

 

The new units are expected to be listed on March 5.

 

THE manager of Cromwell European Real Estate Investment Trust (Cromwell E-Reit) on Wednesday proposed a private placement of between 200 million and 209.3 million new units, at an issue price of 43 to 45 euro cents per new unit, to raise at least 90 million euros (S$144.3 million) in gross proceeds.

 

In its filing, the manager said the issue price range represents a discount of between 6.6 per cent and 10.8 per cent to the volume-weighted average price of 48.2 euro cents per unit for trades done for the preceding market day on Feb 23 up to the time the placement agreement was signed on Feb 24.

 

Based on the Reit' s recently announced full-year distribution per unit (DPU) of 3.484 euro cents, this translates to a FY2020 yield of 7.74 per cent to 8.1 per cent.

 

DBS, Citigroup Global Markets Singapore and UBS AG, Singapore Branch, are the joint underwriters for the placement. The private placement will be made eligible to institutional and other investors, said Cromwell E-Reit' s manager.

 

Following a book-building process, the manager and underwriters will determine the placement' s issue price and number of new units to be issued.

 

In its filing, the manager said it intends to use about 34.1 million euros or 37.8 per cent of the estimated gross proceeds to partially replenish working capital used for the Reit' s recently completed 52.6 million euro acquisition of a logistics park in Italy. At the time of the acquisition announcement in November 2020, the asset was expected to add around 10 per cent to the Reit' s overall portfolio net lettable area.

 

Another 54.2 million euros or 60.2 per cent of the gross proceeds will partially fund the acquisition of 11 properties in the Czech Republic and Slovakia, which the manager agreed to buy for 113.2 million euros in December 2020, below the properties' independent valuation of 115.6 million euros. Completion of the acquisition is expected to occur before March 31, 2021.

 

The remaining 1.8 million euros or 2 per cent of the gross proceeds will be used to pay the estimated fees and expenses incurred as a result of the placement.

 

Cromwell E-Reit' s manager said it believes the proposed private placement may raise the Reit' s market capitalisation as it would increase the total number of units in issue by at least 7.8 per cent.

 

An enlarged unit base would potentially improve the trading liquidity of the Reit' s units. Together with increased market capitalisation, this would provide the Reit with higher visibility within the investment community, it added.

 

The manager also views the private placement as an opportunity to broaden the Reit' s unitholder base by placing new units to " carefully chosen new investors" , which will further support Cromwell E-Reit' s trading liquidity and ability to raise further equity capital.

 

The placement is estimated to reduce the Reit' s pro forma aggregate leverage to 37.2 per cent, which translates to debt headroom of 109.9 million euros. This would help support the Reit' s future growth via asset acquisitions, build-to-suit opportunities, and proactive asset management initiatives.

 

Lastly, the manager said an increased free-float market capitalisation resulting from the placement - which will increase the Reit' s market capitalisation to 1.32 billion euros from 1.23 billion euros previously - may bring Cromwell E-Reit closer to being included in the FTSE EPRA/NAREIT Developed Asia Index.