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'Minimal impact' from coronavirus on Europe income: Cromwell E-Reit

THE manager of Cromwell European Real Estate Investment Trust (Cromwell E-Reit) on Friday said the novel coronavirus outbreak has had "minimal impact" so far on its income from properties in Italy and the wider European region.

The manager also expects distribution per unit (DPU) for FY2020 to remain at the FY2019 level, taking into account the current circumstances and having put in place the appropriate risk-mitigation measures. FY2019's DPU came in at 4.08 euro cents, up 8.8 per cent on the year.

"Our portfolio is well-diversified across asset classes, geographies, tenant-customers and tenant-customer trade sectors," said Simon Garing, chief executive officer of the manager, in a bourse filing on Friday.

"Together with its high occupancy rate, significant proportion of government tenants and generally long-leased office and light industrial/logistics assets, this provides resilience against any short-term economic shocks," he added.

In Italy, the Reit's assets make up only 23 per cent of Cromwell E-Reit's entire portfolio by valuation, according to the manager.

Mr Garing said last month that he believed Covid-19's impact on the Reit's Italian properties would be limited, given the long leases locked in at its logistics, industrial and office buildings which would be less affected than retail and hospitality establishments.

On Wednesday, Italy shut all stores except pharmacies and food shops, in a desperate bid to halt the spread of the virus. An existing clampdown on public gatherings and basic travel had already emptied streets and shut everything from churches to restaurants.

As at Thursday, the country has recorded more than 12,000 cases and over 800 deaths – the highest numbers outside of China.

At Cromwell E-Reit's Italian assets, three of its top 10 tenant-customers are Italian and together account for about 16 per cent of its headline rent, the manager said.

The largest contributor is the Italian federal government, accounting for almost two-thirds of the entire Italian portfolio's income. The government is also committed to long-term leases through to 2023.

In total, the Reit has 62 Italian leases, with more than 80 per cent of them being office leases and leases representing less than 70,000 euros (S$110,504) of net property income (NPI) expiring this year, the manager said. The Reit also owns a four-star hotel and an asset with a cinema in Italy. These account for less than 2.5 per cent of the portfolio's NPI.

In Friday's bourse filing, the manager did not disclose whether it has encountered any late or non-payment of rent from its tenants.

The Reit's sponsor, Cromwell Property Group, has made "significant investments" over the last few years in systems and processes to manage market disruptions such as the ongoing Covid-19 situation, Mr Garing said.

"Cromwell E-Reit is benefiting from this early resilience planning and risk-management measures, implemented well ahead of the market and supported by 200 staff in 20 cities across Europe, to assist our tenant-customers," he added.

The Reit invests mainly in office, light industrial/logistics and retail assets. Its 103 properties as at Feb 25 are located in or close to major gateway cities in Denmark, Finland, France, Germany, Italy, the Netherlands and Poland.

Units of Cromwell E-Reit fell 0.5 euro cent or 1.1 per cent to trade at 44.5 cents as at 4.55pm on Friday.