Cromwell Update on Invest to Manage
Cromwell continues to pursue its "Invest to Manage" strategy via value-add and asset recycling initiatives, use of existing investment capacity, the proceeds from recycling and cash from operating earnings to invest in opportunities that create new recurring revenue.
In Australia, a Development Approval (DA) was received in Chatswood for a new 157-room hotel, with associated conference, guest, restaurant and other amenities plus a new office building of 2,800 sqm. Cromwell expect work to start on the opportunity later this year.
Cromwell also expect to submit a DA for a mixed-use development at 700 Collins Street in Melbourne which will likely consist of 13,000 sqm of additional office space, a hotel with 182 rooms, plus consideration is being given to an independent living/build-to-rent opportunity.
Tenant demand remains strong as evidenced in recent leasing outcomes in Sydney over the last few months with nearly 10,000 sqm being leased or renewed across our multi-tenanted assets at Kent Street, Northpoint and Chatswood.
The conversion of Tuggeranong Office Park to a 500-resident Seniors Living village, through a the LDK Healthcare joint venture. LDK has also taken management control of ‘The Landings at Turramurra’ and is on course for over 800 residents in the two villages by the end of 2020. Cromwell see the retirement sector as a new recurring revenue stream for the business.
United Kingdom (UK)
In the UK, Cromwell engaged in preliminary confidential discussions with RDI REIT P.L.C. which were subsequently reported in the media. Following a short period of due diligence, a conditional proposal was submitted subject to a short extension and RDI Board approval. The RDI Board did not approve the extension, and pursuant to Rule 2.8 of the UK’s City Code on Takeovers and Mergers, Cromwell confirmed it would not make an offer within the proscribed timeframe.
In Europe, Cromwell acquired the 21,688 sqm Pirelli Tyre Research & Development Facility in Milan, Italy on behalf of a new Korean capital partner. The asset was acquired for €88 million. Cromwell is subsequently investigating a range of other opportunities with this capital partner, and others, in a few different European countries.
Approximately 50% of funds under management (FUM) in the Europe business is of a longer dated nature and Cromwell are confident this will create substantial value going forward.
In Singapore, the Cromwell European REIT (CEREIT) had its first annual general meeting last week. Cromwell estimate its 35% stake, is currently valued at more than $400 million.
Following the AGM in August, Cromwell traded well below it's peers, perhaps as a reaction to its intention to hold and reinvest capital as it pursued the new strategy. Announcements of equity raisings and acquisitions in Europe are also likely to have been considered cautious by the market. The potential take over of RDI REIT and the more recent strategic investment by ARA Asset Management has lifted the REIT over the course of 2019 and so far Cromwell is currently trading back on par with the overall market, up 8.9% over the past 12 months.
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