Cromwell European REIT (CEREIT) has reported a 6.5% y-o-y decline in income available for distribution to unitholders to EUR21.7 million ($34.9 million) in its 1QFY2021 ended March business update.
Distribution per unit (DPU) for the 1QFY2021 stood at 0.83 euro cents, down 9.1% y-o-y in tandem with the lower distributable income as well as the timing of the investment of private placement proceeds raised in March to offset the additional weighted average units on issue.
0.58 euro cents per unit for the period from Jan 1 to March 4 has already been paid out in the cumulative distribution to CEREIT unitholders on March 31, prior to the issue of the new units.
The lower distributable income follows gross revenue which remained relatively flat, dipping 0.1% y-o-y to EUR48.5 million, as well as higher interest expense.
The manager of CEREIT attributes the lower revenue to Covid-19, which had not significantly impacted the previous year’s quarter. In contrast, prolonged lockdowns in most of CEREIT’s countries of operations impacted 1QFY2021 gross revenue, driven primarily by lower car park income in the mixed-use Central Plaza in Rotterdam and vacancies in certain light industrial and logistics assets in France and Denmark.
In addition, the disposal of 12 assets in the Netherlands, France and Denmark also affected gross revenue, though the manager notes this was partially offset by new income from recently completed acquisitions in Italy, Germany, the Czech Republic and Slovakia.
Net property income (NPI) also remained relatively flat, dipping 0.4% y-o-y to EUR30.8 million.
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CEREIT’s portfolio occupancy as of the 1QFY2021 stood at 94.6%, while rent reversion for the period was -1.3%. The weighted average lease to expiry stands at 4.8 years.
The REIT also reported an operating cash flow of EUR23.5 million for the quarter. Its cash position stood at EUR75.8 million as at March 31.
In addition to the private placement exercise conducted in February, the REIT also completed a 5:1 unit consolidation in May 2021, with the consolidated units commencing trading on May 5.
In addition to its quarterly business update, the manager also announced the completion of its acquisition of a portfolio of 11 modern logistics assets in the Czech Republic and Slovakia for EUR113.2 million, at a net operating income yield of 6.7%, 2.1% below valuation.
The acquisition marks CEREIT’s first foray into the two countries. With the acquisition, CEREIT’s portfolio now comprises 38% of logistics assets and 57% office assets, spanning across nine countries.
In terms of its market outlook, the manager notes that short-term prospects for the euro area remain weak, given the ongoing Covid-19-related restrictions in several countries. However, the manager notes “green shoots in recovery” for economic activity are anticipated in the 2Q2021, which will grow as vaccinations get rolled out and restrictions ease.
“We are mindful that there will also be inevitable business casualties due to the lingering pandemic as European governments scale down the support provided to certain industries, but I remain confident that Cromwell’s on-the-ground teams are well-positioned to manage these risks. The longterm value proposition of European commercial real estate remains intact,” says Simon Garing, the manager’s CEO.
As at 9.23am, units in CEREIT are trading flat at EUR2.35.
