Cromwell E-Reit to acquire Copenhagen logistics asset for 117.4m Danish kroner

CROMWELL European Real Estate Investment Trust (Cromwell E-Reit) on Tuesday (Oct 18) announced its acquisition of a logistics asset in Copenhagen for 117.4 million Danish kroner (S$22.3 million). 

The acquisition consideration represents a discount of 7 per cent to the asset’s independent valuation of 126.2 million kroner as at end-September 2022. Cromwell E-Reit’s manager does not expect the transaction to have a material effect on the Reit’s net tangible assets.

Named Sognevej 25, the asset is a freehold, five-building light industrial complex occupying 41,649 square metres in a business park in Brondby, Copenhagen. It is located adjacent to two other Cromwell E-Reit assets, Prioparken 700 and 800. 

Given “relatively limited space” within the neighbourhood of these properties, Cromwell E-Reit’s manager said it sees a potential influx of tenant-customers to the Prioparken site – which is designated for long-term industrial use. It also believes there is a low likelihood of new warehouse land supply in the area around Sognevej 25.

“The close proximity of these assets provides long-term strategic value as competing industrial parks further west have been earmarked for rezoning into residential spaces in the next 10 years, potentially reducing the supply of well-located last mile delivery hubs in Copenhagen,” said the manager. 

The asset’s net operating yield is 9.1 per cent, underpinned by a one-year vendor rental guarantee on the recent departure of cleaning equipment manufacturer Nilfisk, whose headquarters previously occupied the space. 

Looking ahead, the manager intends to step up leasing efforts for Sognevej 25 and expects to raise its occupancy levels to 80 per cent, from 29 per cent at the time of acquisition.

Cromwell E-Reit also intends to enhance the ESG (environmental, social and governance) credentials of the asset, through initiatives such as creating bio farms, installing solar panels, and attaining green building certifications.

The total purchase cost of the acquisition is estimated to come in at around 16.3 million euros (S$22.9 million). 

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The transactions were largely funded by the proceeds of Cromwell E-Reit’s divestment of two of its non-core, light industrial assets in Germany at above valuation for a total consideration of 11 million euros. A combination of the company’s existing cash balances and the revolving credit facility was used to bridge the timing difference for the latest acquisition of Sognevej 25. 

The recently-completed divestment of Cromwell E-Reit’s two German assets comes as part of the Reit manager’s divestment plans announced in September. 

Simon Garing, chief executive of the manager, said Sognevej 25 marks the Reit’s first logistics acquisition in Denmark since its listing – and takes place “within days” of completion of its German asset divestment.

As at 2.28 pm, Cromwell E-Reit units were trading 6 per cent lower, or 0.1 euro, at 1.56 euros.