Cromwell E-Reit dips toes into data centres; sponsor, EXS set up new fund

Singapore

CROMWELL European Real Estate Investment Trust (Cromwell E-Reit), whose current portfolio is mostly made up of office and light industrial or logistics properties in Europe, is now planning to make its foray into the data-centre business.

On Monday, its manager said the trust has inked a heads of terms agreement with its sponsor Cromwell Property and Stratus Data Centres, to co-invest directly into 50 per cent stakes in two European data centre projects, subject to various milestones.

The first project is a two-stage, 100 megawatt (MW) data centre serving London. The six-acre (2.4-hectare) site is located on fibre-optic routes in the east of London, and will be powered by renewable energy.

Negotiations with potential tenant operators are "well advanced", and construction is expected to be completed in 2021, the parties said in a joint media statement on Monday.

The second, larger project is on a 34-acre (13.8-hectare) site serving Frankfurt. It is a multi-stage 300MW project with advanced pre-leasing agreements and planning processes underway.

The Frankfurt site will be one of the largest data centre campuses in Germany and Western Europe once completed, the statement noted.

Meanwhile, Australia-listed Cromwell Property Group has entered into a strategic partnership with Stratus to invest in and manage the rollout of a data-centre property platform across Europe and the Asia-Pacific through the new Stratus Cromwell Data Centre Fund.

Stratus is a member of private equity real estate investment group EXS Capital, which has offices in Hong Kong, Singapore and the Cayman Islands.

This partnership is "highly complementary", combining Stratus's data-centre sector specialisation and EXS's Asian network with Cromwell Property's capital, funds management and real estate investment experience, according to their joint statement.

Stratus will be responsible for project development, leasing, design and construction.

Cromwell Property will be a cornerstone investor in the new fund, which is targeting an eventual gross asset value of over US$1 billion, with 25 per cent of the portfolio already identified by the first two strategic sites under exclusivity.

Cromwell Property will also source investment funding and subsequently provide joint fund management and asset management services upon the completion of each project.

Simon Garing, chief executive of Cromwell E-Reit's manager, said: "Data centres are a natural fit with our existing investment strategy and portfolio composition, and we expect to realise attractive risk-adjusted returns for Cromwell E-Reit unitholders from the partnership.

"The platform will also allow us to extract additional value through a number of potential future data-centre opportunities in strategic locations within Cromwell E-Reit's existing 1.4 million square metre portfolio." The trust's portfolio comprises 94 properties in or close to major gateway cities in Denmark, Finland, France, Germany, Italy, the Netherlands and Poland. As at March 31, it had close to 800 tenant-customers.

Rob Percy, chief investment officer of Cromwell Property, said this is an "exciting" investment opportunity that will be in strong demand from both hyperscale data-centre operators and international capital partners.

EXS and Stratus chairman, Eric Solberg, noted that the London and Frankfurt projects are "just the beginning". Further projects have been identified in key gateway cities in Europe, including Dublin and Milan, and in Asia, including Tokyo, Manila, Jakarta and Mumbai, he added.

In the joint statement, the parties said data centres can provide investors with "stable income, downside protection and strong potential upside", with strong real estate asset backing and long-term leases against world-class cloud operators.

Cromwell E-Reit units gained two euro cents or 4.8 per cent to finish Monday at 44 euro cents.