The manager of Cromwell European REIT (CEREIT), on Oct 18, announced that it has completed the acquisition of an asset in Brøndby, Copenhagen, Denmark (Sognevej 25) for DKK117.4 million (approximately €15.8 million or $22.3 million).
The consideration is said to be 7% below independent valuation and 46% below replacement cost.
Including the acquisition fee and other fees, the total purchase cost is estimated to be at €16.3 million or $22.9 million.
Sognevej 25 is a freehold, light industrial/logistics complex that sits on a site of 41,649 square metres (448,306.105 sq ft). The complex comprises five buildings with 196 parking spaces on site and has a total lettable area of 22,224 sqm.
The three large buildings are predominantly for warehouse use with up to three levels of supporting office and cafeteria space, while the two medium-sized buildings are suited for use as clinics, workshops, and administrative purposes.
The property is located in Priorparken, a well-established business park within the capital region of Denmark.
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This is the REIT’s first logistics acquisition in Denmark since its listing, points out Simon Garing, CEO of the REIT manager.
“Strategically, this new asset is located adjacent to CEREIT’s existing assets in Priorparken [in Denmarl] and will add value and scale to CEREIT’s portfolio of Danish assets,” he says. “Notably, this off-market transaction was completed within days of the divestment of two much older, non-core assets in Germany at above valuation, validating the capabilities of our experienced on-the-ground asset management teams in Europe.”
At the time of acquisition, Sognevej 25’s occupancy stood at 29%, which the REIT manager expects that the asset’s occupancy levels will increase to 80% in the next 12 to 18 months with its “experienced on-the-ground asset management team” stepping up leasing efforts.
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The expectation was supported by the recent leasing successes at the REIT’s adjacent Priorparken 700 and 800 warehouses. In its statement, the REIT manager noted that the warehouses’ occupancy levels were uplifted to 86% following the addition of new, quality tenant-customers who took over the space vacated by an anchor tenant-customer.
“We have conviction in the strength of the light industrial / logistics market in Denmark, where vacancy rates for warehouse and logistics spaces in Copenhagen reached 1.4% in 2QFY2022 – the lowest since 2018 – underpinning high rent growth,” says Garing.
“With the completion of the Sognevej 25 acquisition and the German divestments, CEREIT’s portfolio weighting to the light industrial / logistics sector is now 46%, supporting the manager’s active efforts to pivot towards a majority weighting in this sector, while also recycling out of non-core assets to upgrade the portfolio,” he adds.
“Denmark is one of the most vibrant and modern economies in Europe, underpinned by its strength in cleantech, life sciences, food and maritime sectors and having a well-educated labour market. For having a stable economic and political system and high standards of living, Denmark continues to be seen as an attractive market for both domestic and foreign investors,” says the REIT manager in its statement.
The country recorded a high GDP growth rate of 4.9% in 2021, in line with rates registered in other areas within the European Union. However, due to rising energy costs and tightening financial conditions, similar to most of the economies in Europe, the country is now expected to enter a shallow recession in the third quarter of 2022 that is projected to end in the first quarter of 2023.
Further to its statement, the manager of CEREIT announced that it has completed the divestment of two light industrial / logistics assets in Germany on Oct 7. The divestment was first announced on Sept 9.
As at 12.55pm, units in CEREIT are trading 2 Euro cents higher or 1.28% up at €1.58.
