THE manager of Cromwell European Real Estate Investment Trust : CWBU 0% (Cromwell E-Reit) on Wednesday (Apr 3) said that it has divested a non-core office property in Poland for 15.9 million euros (S$23.1 million).
The sale consideration represents a premium of 7.5 per cent over the property’s latest valuation, which stood at 14.8 million euros as at Dec 31, 2023.
The deal, which closed on Mar 28, comes despite the “relative illiquidity in the central European real estate markets and record-low transaction activity in Europe”, said the manager’s chief executive Simon Garing.
To facilitate the closing of the deal, a deferred payment mechanism was agreed on with the buyer, Polish real estate developer Solida Capital Europe.
This means it is permitted to delay paying 4.4 million euros out of the total purchase price until end-September 2024, with a premium applied for the deferred period at market rates.
Cromwell E-Reit will retain equivalent first mortgage rights until the final payment is made.
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Net proceeds from the divestment will be deployed to repay the revolving credit facility and other working capital purposes, said the manager.
The manager will also be entitled to a divestment fee of 0.5 per cent of the sale consideration or 100,000 euros.
The eight-storey building, Grojeska 5, is one of the Reit’s six office assets in Poland. It has a net lettable area of 10,864 square metres and is located in the Jerozolimskie office district in Warsaw.
Garing noted that the divestment of Grojeska 5 is in line with the manager’s strategy of reducing exposure to non-core markets and B or C-grade office assets.
This will effectively reduce the portfolio’s exposure to Poland to 7.4 per cent, down from 8.1 per cent, he said.
Since early 2022, the Reit has made 253.3 million euros worth of divestments in non-strategic assets at a “healthy” premium of 14.2 per cent over their latest valuations. This accounts for approximately 63 per cent of the manager’s 400 million euros sales pipeline target that it intends to complete by 2026, said Garing.
Units of Cromwell E-Reit closed 0.7 per cent or S$0.01 lower at S$1.42 on Wednesday, before the announcement.
