Cromwell European REIT has completed the divestment of Viale Europa 95 for EUR94.0 million ($135.4 million).
The sale consideration is 13.1% above the property’s purchase price of EUR83.1 million on Nov 30, 2017.
“I am pleased to announce that we have completed the divestment of this large and bespoke Italian government campus asset at a healthy premium to the December 2022 valuation,” says Simon Garing, CEO of the manager.
“The divestment is consistent with our previously stated strategy of targeted asset sales, reducing exposure to the office and ‘other’ sectors and focusing more on the logistics/light industrial asset class. We have so far completed EUR187.6 million of divestments in 2023, at a healthy EUR17.4 million or average 10.2% premium to December 2022 valuations, representing almost half of our targeted EUR400 million divestment programme to 2026,” he adds.
Viale Europa 95, a 22-year-old campus spanning 123,260 sqm (1.33 million sq ft), is one of the REIT’s largest non-core “other” assets. The “other” assets make up 5.9% of the REIT’s net asset value (NAV) as at June 30. Following the divestment, the proportion of “other” assets within the REIT’s portfolio is now at 2.0%.
The divestment will also lower the REIT’s portfolio weighting to Italy from 21.1% to 17.8% based on its valuations as at June 30. The total proforma rent collected from the Italian government will drop to 4.0% from 8.5% as a proportion of total headline rent.
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On a pro forma basis, if the divestment was completed on Jan 1, 2022, the REIT would have seen a negative distribution per unit (DPU) accretion of 2.7% or 16.73 Euro cents. This was acknowledged by Garing, who noted that the decline was for the short term only until the REIT completes the new projects and they become income-producing again.
If the divestment was completed on Dec 31, 2022, the REIT’s net tangible assets (NTA) per unit would have been at EUR2.452, from EUR2.416 previously.
“Cromwell European REIT’s units currently trade at a 50% discount to NAV / unit and a high 13% 12-month trailing DPU yield, at levels like those of far more troubled ‘foreign’ S-REITs. I believe that Cromwell European REIT’s track record of high cash generation, investor-aligned strategy and stronger market fundamentals as compared to the US and China merit greater recognition,” Garing continues. “For example, European Grade A office market fundamentals and current market vacancy rates are less than 3% for pan-European logistics and less than 4% for CEREIT’s gateway grade A office markets,” he says, citing a report from CBRE.
Units in Cromwell European REIT closed 2 Euro cents lower or 1.55% down at EUR1.27 on Oct 6.
