Cromwell Eyes €1.5 Billion European Pipeline

Brisbane-based property investor Cromwell is eyeing a €1.5 billion (A$2.4bn) European pipeline after expanding its international portfolio by more than 50 per cent since its initial public offering in 2017.

Cromwell has grown its portfolio to more than 100 properties across seven European countries and has executed two multi-asset transactions totalling $775 million for its Cromwell European REIT this year.

Cromwell chief executive Paul Weightman said that he cannot predict how much of the €1.5 billion pipeline will proceed but that the vast majority will be executed with capital partners.

The group revealed that it had exercised its pre-emptive right last month to acquire third party investor interests in its Polish retail fund, which comprises a portfolio of seven shopping centres in Poland with a gross asset value of $990 million (€600 million).

Cromwell chief executive Paul Weightman said the group is very positive about Poland, which he called “Europe’s success story”.

“Poland’s gross domestic product has grown by 4.2 per cent on average over the last 25 years, [and] it has one of the highest expected rates of growth in disposable income, consumer spending and retail sales globally,” Weightman said.

“Europe remains the most liquid real estate market in the world for foreign capital and one that is significantly larger than Australia.”

Cromwell said it would roll the assets into a new Polish fund, retaining a 20 per cent to 30 per cent stake co-investment stake.

Macquarie analysts said the European move changes the group’s risk profile.

“While greater retention of assets under management is a positive, we note the risk profile of the business has increased with balance sheet exposure to new asset classes,” Macquarie analysts said in a note.

“Medium term, we note European funds under management is still under pressure as the EDF mandate expires. There is limited evidence of net inflows into asset classes that the European business is exposed to.”

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In its results, Cromwell flagged the potential sell down of a half stake in the recently acquired 400 George Street in Brisbane’s north quarter, which it acquired for $524 million on a 5.9 per cent yield.

Weightman said that the sell down of any interests in 400 George will be used to fund opportunities in line with its “invest to manage” strategy.

“Simply put, the strategy is to invest capital to acquire or improve assets, create new funds and to attract new investment from capital partners,” Weightman said.

In June, Cromwell said it was accelerating its billion-dollar value-add and acquisition pipeline, after issuing a $375 million institutional placement.

The group also lodged plans for a 55-storey skyscraper at 700 Collins Street in Melbourne’s CBD in July.

Cromwell’s operating profit for the 2019 fiscal year was up 11.1 per cent to $174.2 million while its statutory profit fell to $159.9 million from $204.1 million. Its distributions met guidance at 7.25 cents per security.