The manager of Cromwell European REIT (CEREIT) announced on August 14 that it has declared a distribution per unit (DPU) of 1.74 Euro cents (2.824 Singapore cents) for 1H20 ended June.
The DPU for the period represents a 14.7% decline from the 2.04 Euro cents declared in 1H19.
The 1H20 DPU is based on the manager’s base fee and property management fee being paid fully in cash, instead of partially via an issuance of units at a deep discount to net asset value (NAV) per unit.
On a like-for-like basis, 1H20 DPU would have been 1.97 Euro cents, representing a 3.4% decline from the DPU in 1H19.
The REIT reported 13.7% y-o-y increase in gross revenue to €93.7 million mainly driven by contributions from properties acquired over the course of the past year.
Property expense for 1H20 rose 27.3% y-o-y to €35.9 million due to an increase in service charge expenses and non-recoverable expenses, and property management fees.
Consequently, net property income (NPI) rose 6.6% y-o-y to €57.7 million.
Income from the new assets was, however, partially offset by €3.0 million of allowances made for uncollected rents due to the COVID-19 pandemic, as well as lower income from certain assets, such as the UCI cinema-anchored property in Italy and Central Plaza in the Netherlands.
Income available for distribution to unitholders amounted to €44.6 million, a slight 0.6% dip y-o-y.
The income available for distribution also includes a €2.8 million distribution of realised capital gains from recent divestments.
Simon Garing, CEO of CEREIT says, “CEREIT’s portfolio has demonstrated its resilience amid the second-quarter lockdowns in Europe, benefitting from Cromwell’s active asset management and its diversified exposure to close to 800 predominantly office and light industrial / logistics tenant-customers from myriad trade sectors across seven countries”.
“Tenant-customers from the retail and hospitality sectors have understandably been more seriously affected; however, following recent successful divestments, these tenant-customers now account for just 3% of CEREIT's headline rent and we have been actively engaging them to re-profile their leases by way of new lease extensions,” he adds.
During the half-year period, CEREIT secured 81 new and renewed leases spanning 43,484 sq m of space at a 6.4% blended rent reversion rate.
The manager says only 3.3% of CEREIT’s leases by headline rent subject to an expiry or break up to December 31 remain to be de-risked in 2H20.
It adds that the Covid-19 pandemic has had a negligible impact on CEREIT’s property valuations.
External valuations as at 30 June 2020 were conducted for 22 properties representing around 50% of CEREIT’s portfolio by value at Dec 31, 2019, with their net valuation falling by only 2.0% or €17.7 million. Most of the decline was attributed to the impact of the pandemic on the hotel and the cinema-anchored asset in Italy.
As at June 30, occupancy for the half-year period stood at 94.7%, and a weighted-average lease expiry (WALE) of 5.1 years. For the same period, CEREIT’s portfolio comprised 94 properties with a value of €2.06 billion.
Following the completion today of its fourth freehold logistics property acquisition in Germany since its IPO, CEREIT now has 95 properties with a total portfolio valuation of €2.08 billion as at August 14.
Looking ahead, CEREIT foresees that the effect of working from home on a large scale may lead to a further increase of vacancy rates, albeit partially offset by the likely scaling back of speculative development.
In the European logistics sector, occupier demand for logistics properties has largely remained strong in 1H 2020, with online retailers and supermarket chains continuing to drive healthy take-up levels. The high level of leasing activity thus far is expected to continue into the second half of the year, which will keep vacancy rates low at the current levels of around 4.1%, according to data from CBRE.
Garing concludes, “CEREIT’s steady 1H20 performance has proven that our efforts to protect income streams, conserve cash and preserve values have paid off”.
“We will continue building on that success, while also resuming our pan-European acquisition and disposal plans, including a potential transformational entry into the data centre asset class, which would collectively further diversify and make CEREIT’s portfolio even more resilient and future-ready.”
Units in CEREIT closed 44 Euro cents on August 14.
