Cromwell European REIT (CEREIT) has reported distributable income of €23.3 million ($34.1 million) for the 1QFY2022 ended March, 7.1% higher y-o-y.
The higher distributable income was partly funded from the issue of $100 million of perpetual securities in the 4QFY2021 to finance the new acquisitions.
Gross revenue for the quarter grew by 8.5% y-o-y to €52.6 million.
Net property income (NPI) grew by 5.4% y-o-y to €32.5 million.
The higher figures were attributable to new acquisitions, higher rental income from consumer price index (CPI) lease indexation and positive rent reversions.
On a like-for-like basis, which excludes new acquisitions, disposals and property under development, the REIT’s NPI fell by 4.4% y-o-y.
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This reflects the 2.1% reduction in overall office occupancy and higher tenant-customer incentives in Poland.
As at end-March, the REIT’s portfolio occupancy stood at 94.8%, 0.2 percentage points lower q-o-q with a weighted average lease expiry (WALE) of 4.6 years.
The REIT also reported positive rent reversions of 4.2% during the period, up by 5.5 percentage points y-o-y.
The REIT’s net asset value (NAV) per unit stood at 2.43 Euro cents as at end-March.
Aggregate leverage stood at 38.6% as at end-March.
“We are pleased to report a record-high occupancy of 96.2% in CEREIT’s light industrial / logistics portfolio and a high rent reversion of 5.8%. The momentum in this sector has continued in the second quarter,” says Simon Garing, CEO of the manager.
“The manager recently announced 25,600 sqm of new leases in the Czech Republic and the commencement of CEREIT’s first greenfield logistics development. Considering long-term structural trends such as the growth of e-commerce, the adoption of ‘just-in-case’ inventory management and on-shoring strategies, as well as the relatively slower recovery of the office market, we will continue to execute CEREIT’s strategy to pivot towards a majority portfolio weighting to the light industrial / logistics segment,” he adds.
“However, in light of the recent rise in interest rates, the ongoing Russian invasion of Ukraine and heightened market volatility, we will adopt a more cautious approach in the short term. CEREIT’s selective acquisition strategy will be complemented by active capital recycling of non-core office and sub-€10-million older warehouses. CEREIT’s major office exposure is to the core Dutch and Milan markets which are performing well, even as the smaller Polish and Finnish office markets continue to underperform. In all, the balance sheet remains in good shape while the on-the-ground Cromwell teams continue to actively manage the portfolio, which remains resilient to these current short-term headwinds.”
In addition, “pent-up consumer demand and investments are expected to drive modest European growth and recovery with Eurozone GDP growth forecast at 2.7%, although risks remain,” says Garing.
“In light of the inflationary environment, rising interest rates and Russia’s invasion of Ukraine, we are closely monitoring and cautiously managing the impact from these external market conditions. Despite the cost pressures in the operating environment and prevailing geopolitical risks, the long-term attractive fundamentals of European commercial real estate remain reasonably intact. We will continue working closely with our local asset management teams, tenant-customers and business partners to maintain occupancy, attain positive rental reversions and continue the pivot towards a majority light industrial / logistics weighting,” he adds.
Units in Cromwell REIT closed 2 cents higher or 0.93% up at €2.17 on May 11.
