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Cromwell European Real Estate Investment Trust

Cromwell European Real Estate Investment Trust (CEREIT) IPO Called Off

(updated on 23 September 2017, 850am)

Below is an article published barely two days ago. It is related to Cromwell European Real Estate Investment Trust (CEREIT) IPO on 21 September 2017. And today, the local newspaper and media announced the abrupt called off of this first everEuro denominated REIT. The reason given was the poor market condition. Well, this may be a good ending before a bad start for this new REIT to be listed in SGX.  Our earlier comment below remains as it is.

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The public offer for Cromwell European Real Estate Investment Trust (CEREIT) will open at SGX on 21 September 2017 and closes investing in reitsits IPO application on 26 September 2017.  It will be public listed on 29 September 2017

Cromwell European Real Estate Investment Trust (CEREIT) was sponsored by the Australia listed Cromwell Property Group. It targets selling 1.27 billion to 1.3 billion units at an IPO price of 0.55 euros to 0.57 euros each. This REIT could be valued at a whopping value of $1.25 billion euros. It may attract two key investors, namely Hillsboro Capital and Cerberus Capital Management.

It may not be known the reason why there is a recent revised offer as such Cromwell Property Group changed its intended holdings from a 25.9 to 26.8 per cent stake in contrast to its initial take up between 8.7 to 12.7 per cent as per their earlier August announcement. It is also projected with a distribution yield of 6-7%.

CEREIT has a property portfolio of 81 offices, light industrial buildings, logistics and retail properties. These assets are mainly located in Poland, Netherland and Italy. There could be a few discussion points after some breeze reading on its IPO prospectus:

  1. Why a 100% Europe centric portfolio does not list in Europe nor in ASX where its sponsor is listed?
  2. A Europe centric portfolio may pose a potential currency exchange risk for Euro dollar. Any downside in exchange rate may erode the earnings.
  3. Occupancy Rate of 89.3% would mean a over 10% vacancy rate of the overall portfolio. Will this vacancy rate get worse? It was mentioned that its target semi annual distribution policy is 100% (until 2019) and thereafter 90%.
  4. Is a Gearing ratio of 34.3% acceptable or a bit at a high side?

It may not be a surprise if our local retail investors get overly excited about it. Afterall, this is our first ever Euro Dominated REIT listed in Singapore. It may be also attractive to many retail investors for its large market size and forecasted distribution yield. There could be also analyst out there talking good about this upcoming Europe Centric REIT. But Europe is also affected by the global economic uncertainty and the impact of BREXIT is yet to be full blown. European Central Bank (ECB) announced on early September 2017 that it continues to maintain interest rate at 0.0% and planning to increase stimulus is telling us how strong is the current Europe market. Thus, it may be good to stay aside for the time being first. There is really no need to be in a rush.

This post is just for sharing purpose and it should not be treated as any form of recommendation. Do your own due dilgence please.

 

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