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Cromwell E-Reit to buy six European office properties for 246.9m euros
CROMWELL European Real Estate Investment Trust (Cromwell E-Reit) will buy six European freehold office properties - three in France and three in Poland - for 246.9 million euros (S$378.2 million), to be financed with a mix of debt and equity via a private placement.
The acquisitions will strengthen the Reit’s portfolio, its manager said on Friday morning before the market opened.
For illustrative purposes, the manager also said the acquisitions are expected to increase the Reit’s 12-month distribution per unit (DPU) for calendar 2018 from 3.75 euro cents to 3.99 euro cents.
Based on the independent valuation of each property, the purchase price for the three French assets is 78.1 million euros while that of the Polish assets is 168.8 million euros.
The total cost of the acquisitions, including acquisition fees, real estate transfer tax and professional and other fees, is around 248.7 million euros.
To fund the acquisitions, the manager intends to draw down loans from new debt facilities that are currently being established.
It will also issue new units in Cromwell E-Reit via a private placement to raise gross proceeds of 100 million euros, which may be upsized by up to 50 million euros, the manager announced in a separate filing on Friday.
Under the private placement, some 217 million new units will be issued to institutional and other investors, at between 46 euro cents and 47 euro cents per apiece.
The issue price range represents a discount of 3.8-5.9 per cent to the adjusted volume weighted average price of 48.86 euro cents for trades in the units done on the Singapore Exchange on June 20.
The placement is fully underwritten by the joint lead managers and underwriters, which are Credit Suisse (Singapore) and UBS AG, Singapore Branch.
Cromwell E-Reit’s manager said the acquisitions mark its entry into the office property market in Greater Paris, a tier-one European capital city.
The properties in France comprise three offices located in or near major business districts, such as Ivry-sur-Seine, La Défense, and Charles de Gaulle Étoile. In aggregate, they have a total net lettable floor area (NLA) of 33,786 square metres (sq m) and a 95.9 per cent occupancy rate as at end-May. Their key tenants include Accenture, Interforum, and Regus.
The Polish office acquisitions will increase its exposure to the country to 11.8 per cent by value. The Reit had earlier acquired two predominantly office properties in Warsaw in February 2019.
The new properties comprise two offices in Kraków, the second-largest city in Poland, and an office property in Poznań. The Kraków sites have an aggregate NLA of 34,295 sq m and a 100 per cent occupancy rate as at March 1. Their key tenants include BGŻ BNP Paribas, Motorola Solutions Systems, and UBS Kraków.
Together, the six assets are valued at 248.1 million euros. Their total purchase price of 246.9 million euros translates to 2,238 euros per sq m including land value, well below their estimated replacement cost, said the Ret's manager.
They have a total NLA of 110,348 sq m, a 98.7 per cent occupancy rate, and a 4.8-year weighted average lease expiry (WALE) profile as at March 31.
They will be acquired at a net initial yield of 7.4 per cent, compared to the 5.8 per cent net initial yield of Cromwell E-Reit’s existing office assets.
The Reit’s portfolio after the acquisitions will increase from 97 properties with an appraised value of 1.8 billion euros, to 103 properties with an appraised value of around 2 billion euros.
Also, office properties will account for 62.1 per cent of the Reit's portfolio’s value, and the proportion of freehold and ongoing leasehold assets in the portfolio will increase from 90.4 per cent to 91.6 per cent by valuation.
The manager on Friday morning requested for a trading halt for Cromwell E-Reit, pending the release of the announcements.
Units in Cromwell E-Reit last traded at 50.5 euro cents on Thursday, down 3.8 per cent, or two cents.