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Cromwell Suspends CEREIT’s IPO

by: Tam Ging Wien

2nd Largest IPO in Singapore for 2017 On-Hold

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In a surprising turn of events, Australian real estate investment manager Cromwell Property Group (Cromwell) has put on-hold the listing of Cromwell European REIT (SGX; CEREIT). The IPO would have been the first REIT to be denominated in Euros (€) and the second largest IPO in Singapore this year.

Cromwell in a regulatory filing on the Australian Stock Exchange dated 22-Sep-2017 entitled Cromwell Elects Not to Register Prospectus has stated that Cromwell has decided not to proceed with the registration of the prospectus for CEREIT. The reason stated is due to "current market conditions" without further elaboration.

The opening time for application of the public offering would have been on 21-Sep-2017 at 9pm according to the original schedule indicated in the draft prospectus

The announcement further mentions that this decision is "despite receiving significant interest from strategic, institutional and retail investors".

Cromwell will re-assess the situation and provide a market update in due course.

CEREIT is a Real Estate Investment Trust (REIT) which draws rental income from various real estate classes across Europe; mainly in Poland, Netherlands, Italy and France with limited assets in Germany and Denmark. The nature of the real state are a mix of offices (35.0%), light industrial/logistics (31.1%), retail (27.3%) and others. There is a total of 1,583,955,000 (1.584bil) units on offer at a price of between €0.55 and €0.57 per unit.

ProButterflyTM has covered the analysis of the IPO fairly extensively in our post entitled Analysis of Cromwell European REIT IPO.

From our analysis we think that the IPO while having a high yield may not provide significant growth opportunities to investors. We further mentioned that in the original offer, CEREIT had the lowest sponsor interest of 12.7% compared to the REITs in our comparators. This shows lack of weak alignment of interest of the sponsor and unitholders.

CEREIT’s occupancy rate in the Light Industrial/Logistics segment was also particularly low at 82.9%. Being a significant portion of the portfolio, it dragged down the overall occupancy rate of the REIT to 89.3%.

CEREIT’s price range of between €0.55 and €0.57 per unit also fairly values the REIT and leaves investors with limited growth in capital appreciation.

The large initial offering of 1.584bil shares was also significantly large. We anticipate that this would successfully fulfil the demand for the IPO leading to low secondary demand when publicly traded. This would weaken the retail demand removing a catalyst for price appreciation.

Finally, a report entitled A Negative View of Cromwell European REIT from Down Under (<>) may have played a part in the lack of interest for this IPO among Singapore and regional investors.

It would be reasonable to speculate that that the book building exercise to attract institutional investors likely saw weak demand. This speculation is supported by Cromwell’s action to cut the original offer from 1.58bil to 1.3bil and take a larger stake.

This announcement would put on-hold Cromwell's plans for the CEREIT IPO. We will need to await for further information from Cromwell.

Whatever the reasons for this suspension in the IPO, we are positively hopeful that in Cromwell would have learnt the lessons from the course of events and offer a more compelling IPO the next round. We at ProButterflyTM will be closely following the future developments of this IPO.

If you have missed our earlier analysis on CEREIT, do catch it here: Analysis of Cromwell European REIT IPO.


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Disclosure Statement

The views and opinions expressed herein are those of Tam Ging Wien (“the author”) and do not necessarily reflect the official policy, position or view of the author’s employer, organization, committee, Unicorn Financial Services or other group(s) or individual(s).

The author does not intend to subscribe to the Singapore Public Offer of Cromwell European REIT based on the latest preliminary prospectus as of the date of this posting.

The author at time of writing does not hold any stake in Cromwell Property Group.


Positioning to Ride the Recovery

Opportunities and Risk Post-COVID-19 Pandemic in the various S-REIT Sectors

The COVID-19 crisis has brought about an unprecedented economic shock to many sectors, and yet it has also generated opportunities in others.

The tech sector has been a major beneficiary and along with that, S-REITs exposed to the Data Centre sector such as Keppel DC REIT and Mapletree Industrial Trust gained phenomenally.

But are the investment opportunities in REITs now gone? Personally, we do not think so. There are still many REITs below their pre-COVID-19 levels poise to recover strongly in the coming quarters – and now it is the best time to prepare to capture the post-COVID recovery.

Join us as we discuss the opportunities and risk in the S-REIT space sector-by-sector as we try to uncover recovery opportunities for FY2021 and beyond. Real estate sectors that we will be covering include the Retail, Hospitality, Offices, Healthcare, Industrial and Data Centres.

Our speaker Tam Ging Wien will be sharing his knowledge and experience including:

  • Part 1: A Survey of the REITs Landscape Around The World
  • Part 2: Key Metrics in Identifying Strong REITs
  • Part 3: Real Estate Sector Review Amidst the COVID Crisis
  • Part 4: Screening for Opportunities
  • Part 5: Q&A

Some key highlights that will be covered includes:

  • Real estate sector-by-sector review on COVID-19 impact and recovery opportunities. Sectors covered include the Retail, Hospitality, Offices, Healthcare, Industrial and Data Centres.
  • Opinion on which sector will continue to stay resilient and which are poised to recover quickly post-pandemic
  • The right metric to use when screening for high quality REITs
  • Case studies of REITs which are considered high quality
  • Step-by-step demo of how to screen for high quality REITs on your own

During the sharing session, various Singapore-listed REIT examples will be used.

There will also be a Q&A so that members of the investing community may engage in open dialog and discussions in order to deepen their understanding of REITs. Do prepare your writing materials for note taking.

Please note that the duration of the on-site seminar is 7pm to 9:45pm Singapore Time (GMT +8).

The details of the event are as follows:

  • Seminar: Positioning To Ride The Recovery
  • Date: 5th May 2021 (Wed)
  • Time: 7:00pm to 9:45pm
  • Venue: RNN Conference Centre - Kyoto Training Room (Level 4), 137 Cecil Street, Cecil Building #04-01, Singapore 069537
  • Fees: S$10.00
  • Sign-up Link:

To learn more about REITs, we recommend the article: What are REITs?


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