Pan-European Reit takes Singapore IPO leap

Singapore

THE initial public offering (IPO) of what would be Singapore's first euro-denominated real estate investment trust is now set for the coming fortnight, though with the Reit shorn of some of its original portfolio.

Australia-listed Cromwell Property Group on Wednesday lodged an amended prospectus to list Cromwell European Reit (Cereit), after having previously cited "market conditions" when it put the brakes on the process.

The delay of the IPO and the axing of certain properties in Poland came amid what The Business Times understands was investor concern over the lack of familiarity with that market.

Cereit is now gunning for gross proceeds of 865.7 million euros (S$1.39 billion) - down from an initial target of 1.2 billion euros - at an issue price of 0.55 euro for each unit.

A total of 428.54 million units will be offered to public and institutional investors - a combined interest of 27.1 per cent, assuming that the over-allotment option is not exercised. This tranche of units will raise about 235.7 million euros.

Meanwhile, the two original cornerstone investors - Cerberus Singapore and Hillsboro Capital, each with an 11.6 per cent stake - have been joined by Gordon and Celine Tang, the couple behind property company SingHaiyi Group, who are jointly taking a 13.9 per cent interest.

Assuming the over-allotment option is not exercised, Cromwell Property Group's subsidiary Cromwell Singapore Holdings Pte Ltd will hold 551.7 million shares, or 35 per cent, while the manager will hold another 11.9 million, or 0.8 per cent. In all, the sponsor will have a 35.8 per cent interest.

Seven retail properties in Poland have been dropped from the planned portfolio. The appraised value of these assets was about 480 million euros.

This leaves 74 properties, largely office or light industrial and logistics buildings, which are together worth an estimated 1.35 billion euros. Of these assets, 60 are now held by funds that the sponsor group manages; the other 14 will be acquired from a third party.

A good chunk of the IPO proceeds will go towards buying these properties. The rest will be used for tax, working capital and other net asset value adjustments.

The Reit's portfolio is now spread across Denmark, France, Germany, Italy and the Netherlands - and the medium- to long-term target portfolio, according to the prospectus, will have a geographic focus on western Europe.

That part of the continent will house at least 75 per cent of assets, with the rest to come from other areas in Europe. But market sources said this strategy does not indicate a pathway to the immediate re-introduction of the Polish assets.

The prospectus has forecast a distribution yield of 7.8 per cent for the coming year, against the 5.9 per cent yield for the FTSE Straits Times Reit Index.

The Cereit IPO is expected to open next Wednesday, according to the indicative timetable in the prospectus, and will close on Nov 28.

Trading is slated to start two days after that, on Nov 30.