Cromwell Property Group announced that it is undertaking an underwritten $375 million institutional placement to fund its growth opportunities across both its Indirect and Direct Property Investment opportunities across Australia and Europe.
Cromwell has identified a number of strategic growth opportunities across both its Indirect and Direct Property Investment segments that will be funded with proceeds from the equity raising, recycling of existing capital and introduction of new capital partners. Some of these opportunities are seeding opportunities for new funds where Cromwell will look to co-invest upfront with capital partners on new acquisitions.
Cromwell have not disclosed to potential investors the specific amounts of capital to be allocated to each investment opportunity nor the risks associated with each investment, instead providing a broad list of projects in their pipeline which may be the beneficiary of the fresh capital. These include;
Victoria Avenue, Chatswood NSW - DA approved in March 2019 to construct c. 3,000sqm office building, 159 room 4.5 Star hotel, F&B retail and other amenity.
700 Collins Street, Melbourne VIC - DA to be submitted July 2019 for an additional 13,000sqm of office, 182 room hotel and c. 280 residential accommodation units with opportunity for ‘Build To Rent’ market
Tuggeranong Office Park, ACT - Construction has commenced converting office buildings to senior’s living, with 35,000sqm capacity for further development
Over A$0.5 billion of Australian office acquisitions
Over A$0.5 billion of European office and retail opportunities where Cromwell will warehouse assets to seed new funds
Market sources are suggesting that Cromwell is also in the final stages of negotiation to acquire the 44,000sq m, A-grade building at 400 George Street, which is being offloaded by US property giant Blackstone and German group HSBC Trinkaus for about $530m.
Cromwell also announces that post reinvestment of proceeds, it expects gearing to move to within its revised target gearing range of 30 – 40% through the cycle. Cromwell will seek to use leverage capacity on a short-term basis to execute on its ‘Invest to Manage’ strategy.
Cromwell CEO Paul Weightman, said: "Cromwell continues to identify value enhancing investment opportunities across both its Indirect and Direct Property Investments that will deliver significant medium term growth in enterprise value for Cromwell and realise significant capital returns for securityholders.”
Cromwell also reaffirmed its FY19 guidance, being:
Operating profit of not less than 8.00 cps; and
Distributions of 7.25 cps.
The capital raising is based on an issue price of $1.15 per unit which represents a:
7.0% discount to the distribution-adjusted last closing price of $1.2375 on 25 June 2019
FY20 operating earnings yield of 7.1% per security
FY20 distribution yield of 6.5% per security
Cromwell also provided guidance for FY20, including the impact of the Placement and assumes partial reinvestment of the Placement proceeds:
Operating profit of 8.1 – 8.3 cps; and
Distributions of not less than 7.5 cps.
On completion of the Placement, pro forma balance sheet gearing reduces to 23.9% prior to funding the identified opportunities. Post reinvestment of proceeds, Cromwell expects gearing to move to within its revised through the cycle target range of 30 – 40%. On completion of the Placement, pro forma NTA will increase to $1.02 per security.