Cromwell European REIT - OCBC Investment 2024-09-09: High Quality Asset At A Discount

• Currently managed by Cromwell property Group, Cromwell European REIT (SGX:CWBU) is to be managed by Stoneweg once the ongoing acquisition is finalised.
• Stoneweg is a global multi-strategy real estate experienced adviser and asset manager with EUR4b in assets based in Geneva, Switzerland. It has significant real estate investments and funds that it manages in Switzerland, Spain and the US, including managing a listed Swiss real estate company valued at ~EUR1.5b.

Portfolio

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Cromwell European REIT is one of three Singapore real estate investment trusts (S-REIT) to have an ESG rating of 'AA' by MSCI.

High quality assets with a well-diversified tenant mix

• Through its portfolio of high-quality grade A offices, many of which are green certified, and its strategically positioned L&I assets, Cromwell European REIT has successfully navigated the challenges posed by the COVID-19 pandemic and the energy crisis in Europe.
• While the economy is showing signs of recovery, it is still expected to experience periods of slow growth and moderate inflation. However, given the growing flight-to-quality trends and the sustained demand for last mile logistics, we believe that Cromwell European REIT’s strong asset base provides a solid foundation for future growth despite expectation of a temporary decline in distributions from increase interest costs and divestments.
• Additionally, the portfolio is well defended from tenant concentration risk, the top tenants contributed less than 23% of the total headline rents. As of 30 Jun 2024, Cromwell European REIT’s portfolio occupancy is healthy at 93.6%, with a weighted average lease expiry (WALE) of 4.8 years. For 1H24, both its office and L&I portfolio reported positive rental reversion averaging at 5.2% and they are still under rented versus market rents.

Time for a reset

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Donavan Tan OCBC Investment Research | https://www.iocbc.com/ 2024-09-09 SGinvestors.io

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