CROMWELL European Real Estate Investment Trust (Cromwell E-Reit) posted a distribution per unit (DPU) of 7.05 euro cents for the first half ended June 2024, down 9.5 per cent from 7.79 euro cents a year prior.
Unitholders will receive the distribution payment on Sep 27 following the ex-distribution date of Aug 15.
Revenue declined 1.9 per cent year on year to 106.3 million euros (S$153.9 million) from 108.3 million euros, while net property income (NPI) fell 4.4 per cent to 65.5 million euros from 68.5 million euros.
On Wednesday (Aug 7), the manager said that the lower revenue and NPI figures were mainly due to asset sales – particularly Bari Europa, Bari Trieste and Piazza Affari.
Divesting these assets were important in keeping the Reit’s net gearing below the board-approved threshold of 40 per cent, said the manager, though this affected NPI by 5.6 million euros or one euro cent in terms of DPU compared with the previous corresponding period.
It added that excluding these recent divestments and assets under redevelopment, NPI for the latest H1 period would have grown 2.3 per cent on a like-for-like basis.
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Excluding amortised establishment costs, interest expenses for the period grew 14.1 per cent to 16.1 million euros versus 14.1 million euros in H1 FY2023 as a result of higher average interest rates.
The manager’s chief executive officer Simon Garing said that the higher interest costs over the past two years are “nearing the end of the substantial negative cycle”, and that he deemed the Reit’s financial performance resilient and reflective of stable operating and valuation conditions.
“The strategic pivot to logistics/light industrial has served Cromwell E-Reit well, with the portfolio now weighted to a more significant 54 per cent to this sector, underpinning the uplift in overall valuations,” he noted.
The Reit’s portfolio valuation stood at 2.2 billion euros across 107 properties as at end-June 2024, versus a carrying value of about 2.4 billion euros across 112 properties reported in the same period a year earlier.
Cromwell E-Reit’s manager however noted that the total portfolio valuation was up 0.6 per cent compared with end-December 2023, marking the first like-for-like increase in two years.
The portfolio’s initial yield stood at 6.3 per cent, while the reversionary yield was 7.7 per cent, which the manager perceived to reflect valuers’ views of rising rental income over the medium to long term.
Overall portfolio occupancy for H1 stood at 93.6 per cent with 5.8 per cent of the portfolio, or 102,229 square metres, leased out.
The Reit’s weighted average lease expiry remained at 4.8 years as at end-June 2024, while tenant retention was 68.6 per cent or “slightly above” the long-term average of 66 per cent, noted the manager.
It posted a positive rent reversion of 5.2 per cent with an average 3.3 per cent inflation indexation across signed and renewed leases, including new leases at Nervesa21.
The manager said this was “still well above” the current annual eurozone inflation of 2.4 per cent, and reflects Cromwell E-Reit’s overall under-renting of 6.1 per cent versus market rents and the low vacancies in many of the Reit’s markets.
Garing noted that the Reit had weathered a “perfect storm” of high inflation, rising interest rates, slow economic growth and heightened geopolitical risks over the past 2.5 years.
“With the storm largely behind us, we can now take a more balanced approach and look to take advantage of opportunities over the next 12 months with more confidence,” he added.
Units of Cromwell E-Reit ended Tuesday flat at 1.37 euros.
