PenSam, a Danish pension company, and real estate investor and fund manager Cromwell Property Group (ASX:CMW) (Cromwell or Group) have launched a partnership to invest in light-industrial and logistics real estate in Denmark and Sweden.

Cromwell will invest an initial €200 million for PenSam over three years. The strategy will target light-industrial and logistics properties of various size, age, income profile and quality, in established logistics locations in Denmark and Sweden. The strategy has a core plus risk/return profile and the target is to create a portfolio of sustainable logistics properties through active asset management, leveraging Cromwell’s strong local presence and expertise.

PenSam is a labour market pension fund managing occupational pension schemes for people within eldercare, cleaning, technical service and pedagogical care in Danish municipalities, regions and private companies. PenSam manages DKK180 billion (€24 billion) of investments and places a strong emphasis on responsible investments, including the green transition. The investment program has a strategic focus on megatrends, including deglobalisation, sustainability and ecommerce, which are benefiting the Danish and Swedish logistics markets.

Jeppe Starup, Head of Private Capital and Real Assets at PenSam, said: “This strategy and co-operation with Cromwell, who have impressed with their high quality in investment management and strong ESG profile, will strengthen our portfolio with superior properties in strategic locations. The strategy is in line with our sustainability profile and will contribute to ensuring a stable and attractive return for our 500,000 pension customers.”

Pontus Flemme Gärdsell, Head of Northern Europe at Cromwell Property Group, said: “We are delighted to be partnering with PenSam. This is an opportune time to be investing in the Danish and Swedish logistics markets, as there is strong occupier demand and a shortage of modern, sustainable space. Entry pricing is attractive, and the investment market is established and liquid.”

In May, Cromwell entered into a binding agreement with Stoneweg to sell its European fund management platform and associated co-investments, which total €3.8 billion of real estate assets under management, for a total consideration of €280 million, subject to closing adjustments and regulatory approvals, which are anticipated to be in the coming weeks. The transaction will create an €8 billion pan-European real estate management platform, bringing together two highly complementary businesses.

Real estate investor and fund manager Cromwell Property Group (ASX:CMW) (Cromwell or Group) today announced the sale of six retail centres across Poland, held by the Cromwell Polish Retail Fund (CPRF), to Star Capital Finance for €285 million.

The portfolio totals more than 219,000 sq m and includes rights in six shopping centres: Janki in Warsaw, Kometa in Toruń, Korona in Wrocław, Tulipan in Łódź, Ster in Szczecin and Rondo in Bydgoszcz. The occupancy of the portfolio exceeds 95%, with anchor tenants including Auchan, Bi1, LPP Group, Inditex Group, CCC Group, Rossmann, RTV EURO AGD and Cinema City.

Since acquiring the portfolio in 2019, Cromwell has implemented extensive asset management initiatives across the properties, significantly improving occupancy and footfall levels. The Group will continue to act as asset manager of the shopping centres on behalf of Star Capital Finance.

Cromwell has also exercised ambitious sustainability programmes at the assets, with the portfolio achieving a record overall GRESB score of 90 and a five-star rating in November 2023.

Andrew Creighton, Head of Investment Management, Europe at Cromwell Property Group, commented: “This sale concludes our strategy to sell these assets to achieve our strategic target of being a capital-light fund manager, with our asset management programmes successfully boosting the performance of each shopping centre and notably enhancing the sustainability credentials of the portfolio.

“We are looking forward to continuing to execute our ambitious investment strategies across Europe, focusing on strategically located, high-quality assets with excellent sustainability features”.

Josef Malir, Managing Director at Star Capital Finance, commented: “We have bought a high-quality portfolio of shopping centers with a great potential for further development. Entering the Polish market is a milestone and a huge challenge for us, which we intend to take full advantage of. We would like to thank all our partners who assisted us to make one of the largest real estate transactions of the CEE region a reality”.

JLL, BNP Paribas RE, Greenberg Traurig, PwC Polska and CBRE Project Management & Building Consultancy advised Cromwell Property Group on this transaction.

Overview

• Statutory loss of $271.4 million (HY23 $129.5 million loss), impacted by a $240.2 million decline in property valuations
• Operating profit of $83.7 million (HY23 $87.1 million), equivalent to 3.2 cents per security, was marginally down as a result of asset sales
• On a like-for-like basis, Net Operating Income of the Australian Investment Portfolio was up 1%
• HY24 distributions of 1.58 cents per security, reflects a payout ratio on adjusted funds from operations (‘AFFO’) of 62.6%
• Net Tangible Assets per security of $0.72 (FY23 $0.84), with gearing at 44.7% (FY23 42.6%)
• Total assets under management of $11.4 billion (FY23 $11.5 billion)
• Investment portfolio occupancy of 93.4%, with a WALE of 5.3 years
• Leasing markets remain active, with key leasing initiatives keeping occupancy strong

Continued focus on debt reduction and delivering stable income returns.

Cromwell Property Group (ASX:CMW) (Cromwell), today announces its results for the half-year ending 31 December 2023.

Persistent pressure on valuations both locally and in Europe was the major contributor to the statutory performance of the business and the decline in net tangible assets. In the six months to 31 December 2023, there were unrealised fair value reductions of $195.7 million (-7.5%) across the Australian Investment Portfolio and $44.5 million (-8.1%) for the Cromwell Polish Retail Fund (CPRF) Sale Portfolio¹.

Cromwell commenced its asset sale programme in late 2021, prior to the expansion of capitalisation rates. Since then, we have completed or contracted over $584 million of asset sales, largely at or above book value, with a further $528 million anticipated to complete by June 2024, totalling $1.1 billion.

At the commencement of Cromwell’s asset sale programme, gearing was outside target range at 41.8%. The $584 million of completed or contracted assets sales has mitigated the impact of market valuation declines, however gearing still sits outside target range at 44.7%. On completion of the sale of CPRF, gearing is expected to return to within target range at 34.1%.

Dr Gary Weiss, Cromwell Chair, commented: “The current operating environment continues to be challenging with higher interest rates impacting the real estate sector. We remain focused on strengthening our balance sheet through prudent capital management and lowering our net debt position.

Despite the challenges, we continue to drive positive like-for-like net operating income growth and maintain solid occupancy rates across Cromwell’s Australian Investment Portfolio. In Europe, the funds management business contributed to earnings growth through mandate investments, notwithstanding restrained transaction volumes.”

The Australian Investment Portfolio

Like-for-like net operating income in the Australian Investment Portfolio was up 1%, reinforcing the ongoing income stability of the portfolio through the current market cycle. Operating earnings were down 3.2% on the prior corresponding period to $78.0 million, driven by asset sales, which was partially offset by an uplift in rental income.

Occupancy and weighted average lease expiry remained healthy at 93.4% and 5.3 years respectively. This high-quality portfolio offers attractive sustainability credentials and strong tenant relationships, which resulted in continued leasing success with approximately 12,000 sqm leased over the period.

While the trend towards flexible working arrangements has presented a challenge for landlords of office property, the market shows signs of stabilising, with evidence of stronger leasing demand from small to medium-sized occupiers, who made up the bulk of the new leases signed throughout the period.

Fund and Asset Management

Third party assets under management were $8.3 billion made up of $5.9 billion assets under management in Europe and $2.4 billion in Australia and New Zealand.

In Europe, earnings were up 36.2% on HY2023 due to higher leasing fees and positive foreign exchange impacts. Cromwell remains an active buyer, with new mandates from institutional capital partners for logistics assets, while the Cromwell European REIT (CEREIT) continues its pivot to owning majority logistics assets, leveraging continued tenant demand for this asset class.

Locally, Australian and New Zealand fund management activities slowed somewhat, with more limited inflows and valuation declines impacting Cromwell’s fund management fees.

Co-investments

The Cromwell Direct Property Fund has been impacted by 8.4% valuation headwinds, with Cromwell’s 4.2% position in the fund valued at $13.6 million. Distributions for the period remained consistent at $0.5 million.

The share of operating profit from Cromwell’s 27.8% holding in CEREIT was marginally up at $20.3 million. Over the 6 months, the value of CEREIT’s portfolio was down marginally to €2.3 billion
(-1.5%). Income grew 4.1% over the prior corresponding period on a like-for-like basis and leasing renewals drove a 5.7% increase in total portfolio rent reversion.

The Cromwell Italy Urban Logistics Fund continues to provide stable returns from the sole tenant, DHL, returning a $1.0 million share of earnings for the half-year, following the completion of a 50% sale to a joint venture partner.

CPRF portfolio income was up 31.3%, underpinned by higher rental income and positive foreign exchange movements over the six months. The sale of the CPRF Sale Portfolio² is ongoing with a letter of intent signed and the purchaser having made a binding commitment to complete the deal on agreed terms subject to finance and no material adverse changes, backed by a material deposit. Cromwell anticipates completion on agreed terms in fourth quarter of financial year ended 30 June 2024.

Outlook

Commenting on the outlook Jonathan Callaghan, Cromwell Chief Executive Officer, said: “The remainder of the financial year will focus on business simplification and completing the current stage of our asset sale programme, including the sale of CPRF.

“We remain committed to preserving and growing securityholder value over time. Our core priority is to have a strong balance sheet by continuing to reduce debt to alleviate gearing pressures, along with ensuring we can continue to deliver stable income from our investments.

“As the market starts to recover, we anticipate being in a position to explore value accretive opportunities to provide longer term growth for our securityholders,” he said.

To view the HY24 Results Presentation, click here.

^{1 Represents CPRF assets for sale, excluding Ursynów.
2 Represents Cromwell Polish Retail Fund assets for sale, excluding Ursynów.}

Real estate investor and fund manager Cromwell Property Group (ASX:CMW) (Cromwell or Group) has been appointed manager of a portfolio of five logistics assets in Finland acquired by Goldman Sachs from Inmark Asset Management.

Leased to Posti Group Corporation, the state-owned delivery and fulfilment company with operations in Finland, Sweden and the broader Baltic region, the assets comprise at total of 134,000 sqm of space located in the dominant cities of Tuusula (part of the Helsinki metropolitan area), Tampere, Pirkkala, Oulu and Kuopio.

Commenting on the acquisitions, Pontus Flemme Gärdsell, Head of Northern Europe at Cromwell Property Group, said: “Leased to a strong covenant, these assets provide an excellent investment opportunity in the Nordic logistics market. We anticipate more transactional activity this year in Finland as inflation continues to come down and we have a better understanding of the impact of the ongoing war in Ukraine.”

Over the past 12 months, we have seen a heightened interest from overseas investors in well located assets in this sector across Finland.”

The Nordics represents one of Europe’s most established markets for logistics assets and is supported by strong operating fundamentals, including resilient demand, limited supply, and low vacancy rates. Cromwell manages more than €350 million of assets across Finland, Sweden and Denmark.

Real estate investor and fund manager Cromwell Property Group (ASX:CMW) (Cromwell or Group) has, on behalf of CEREIT, pre-let 70% of available space at the Nervesa21 office development in Milan, leaving only 3,000 sq m of space remaining.

Anchor tenant Universal Music Group, a world leader in music-based entertainment, pre-leased eight floors a year before completion. Scalapay, the first Italian “unicorn” and one of the biggest European BNPL (“buy now, pay later”) providers, signed a pre-lease for two floors and Edelman, an award-winning global communications consultancy firm, pre-leased one floor.

The redevelopment works are largely finished, with the premises successfully delivered to tenants pending some final minor works to be completed in January 2024.

Nervesa21 was re-configured to offer 14 modern floors, a modular flexible layout, premium amenities, two rooftop terraces and four panoramic elevators.

Developed with a strong focus on ESG, the redevelopment includes 5,300 sqm of external green garden leisure space, end-of-trip bicycle facilities and 230 parking spaces – some of which will have electric vehicle charging stations and will be powered by a combination of on-site renewable energy from solar panels and energy sourced from 100% renewable energy suppliers. Up to 50% of the façade is composed of low-carbon glass that, thanks to its integrated value chain, is expected to achieve up to 40% reduction of the embodied carbon footprint of the glass. Upon completion, the redevelopment is expected to attain LEED Platinum and WELL Gold certifications, making it one of the most advanced Grade-A offices in terms of ESG and energy efficiency, with reduced energy consumption of up to 40% compared to similar buildings.

Nervesa21 is strategically located in the Porta Romana district of Milan, south-east of Milan’s city centre. The asset is near Corso Lodi and has direct access to the A1 highway, the Linate Airport and the Central Station.

Commenting on the lettings, Michael Bohde, Head of Southern Europe at Cromwell Property Group, said: “To have pre-let 70% of the space at Nervesa21 is a fantastic endorsement of the office development’s credentials. As our new occupiers commence fit-out work, we are experiencing a strong level of interest in the remaining space from businesses attracted by the building’s ‘oasis-like’ location close to Milan’s bustling city centre.

“The successful execution of this project provides further evidence that occupiers are increasingly focused on ESG criteria when selecting an office location, seeking the best quality space with modern staff facilities, good access to public transport, parking and high energy efficiency. Office buildings with these features are in undersupply across Europe’s major cities.”

Cromwell was advised by CBRE and DILS on the lettings, the general contractors Nessi & Majocchi and the architects at DEGW / Lombardini 22.

Real estate investor and fund manager Cromwell Property Group (ASX:CMW) has today released for the first time its full scope 3 emissions inventory, becoming one of the few Australian commercial property organisations to publish its emissions footprint across 100% of its global network and supply chain.

The inventory release covers all Cromwell scope 3 emissions across upstream and downstream activities, covering its entire supply chain of tenant activities; funds under management; joint ventures; and embodied carbon sources. It goes further than general sector reporting practices, where disclosure is often limited to scope 3 emissions where a company possesses operational control.

Alongside the disclosure of its scope 3 emissions inventory, Cromwell has today also released new short and long-term emission reduction targets which will help underpin future decarbonisation efforts.

This includes a net zero target across Cromwell’s entire portfolio for scope 1, 2, and 3 emissions by 2045, which includes tenant emissions and embodied carbon. In addition, Cromwell has also set a short-term target of a 42% reduction in scope 1, 2 and 3 emissions by 2030, along with a net zero target for new developments by 2030 and 2035 for all assets under Cromwell’s operational control.

Group Head of ESG, Lara Young, said: “Developing a full scope 3 inventory provides us with an accurate and meaningful picture of all emissions across our supply chain for the first time. It enables us to make more informed investment decisions on decarbonisation activities, working with our partners.

“Specifically, we have now shifted our focus to asset-level decarbonisation. In the last year, we have started to undertake assessments at specific sites to identify emissions sources and create bespoke plans to reduce these emissions, which we will do working in partnership with our service providers. We’ll continue this process going forward.”

ESG Report

The information above has been released today as part of Cromwell’s FY23 ESG Report. The full report can be found here.
In summary, the ESG Report highlights Cromwell’s long-term targets which include:

• Achieve net zero operational emissions (scope 1 & 2) by 2035.
• Achieve net zero operational emissions for the entire portfolio (scopes 1, 2, & 3) including tenant and embodied carbon by 2045.
• Significantly reduce our gender pay gap year on year.
• Achieve 40:40:20 workplace gender diversity at all levels.
• Integrate ESG into risk registers and business strategy, including objectives and key results.

“Cromwell recognises the challenges that the property industry faces; however, we also recognise the opportunity to deliver tangible positive impacts. The Group has a global in-house ESG team and dedicated Australian and European teams that support all Cromwell activities,” said Ms. Young.

Real estate investor and fund manager Cromwell Property Group (ASX:CMW) (Cromwell or Group) today announced the reorganisation of its European operations to be more aligned with its investors’ strategies, and to improve efficiency in the current challenging market environment.

The reorganisation involves the creation of a regional structure comprising two European regions, which will be headed by Pontus Flemme Gärdsell for Northern Europe, and by Michael Bohde for Southern Europe, both reporting directly to Andy Creighton, Head of Investment Management, Europe. These two regions will replace the former structure, where each country had its own country head.

Pontus will be responsible for managing Cromwell’s investment and asset management activities in the Nordics, the Netherlands, the UK and CEE while Michael will be responsible for managing Germany, France and Italy.

Commenting on the changes, Pertti Vanhanen, Managing Director, Europe at Cromwell Property Group, said: “By streamlining our European business, we will be able to provide a greater focus on the countries our investors are showing most interest in. It will also enable us to improve operational efficiencies in the current challenging macro-economic environment, providing our clients with more integrated cross-border investment and asset management services”.

In the past 18 months, Cromwell has been active across Europe and the UK servicing longstanding mandates with clients such as CEREIT, the Singapore-listed REIT, as well as several new international mandates and marketing new strategies to investors.

Vanhanen, added: “Since the onset of higher interest rates, the market has changed significantly as investors and managers adjust strategies to cope with the higher cost of finance and structural changes impacting the sector. Foremost among these are how we improve the sustainability and carbon footprint of real estate assets and how we reposition buildings in sectors like offices where behaviours have changed”.

Cromwell has made significant progress in these areas, implementing a sustainable finance framework to support the transition to more sustainable borrowing across its portfolio and is currently premarketing a value-add office repositioning strategy in the UK.

Real estate investor and fund manager Cromwell Property Group (ASX:CMW) (Cromwell or Group) has secured a €66 million green loan for the 61,000 sq m Janki shopping centre in Warsaw, Poland.

Arranged under Cromwell’s new Sustainable Finance Framework, this is the second green loan the company has secured, having transitioned an existing A$130 million bilateral loan on the Cromwell Riverpark Trust in Australia earlier this year.

The loan was provided by the Polish branch of HSBC Continental Europe. Under the terms of the agreement, Cromwell will need to report on a number of sustainability measures, including renewable energy usage, annual greenhouse gas emissions and ensure that in any given reporting year at least 50% of new leases include green clauses that cover scope 3 emissions.

One of six retail assets in Cromwell’s Polish retail fund, Janki shopping centre is certified BREEAM In-use Excellent. The fund scored 85 in the GRESB index in 2022 and won the BREEAM-GRESB Award for Corporate Investment in Responsible Real Estate in March 2017.

Afraz Ahmed, Cromwell’s Head of Treasury for Europe, commented: “The second green loan that Cromwell has agreed since launching our Sustainable Finance Framework earlier in the year, this transaction demonstrates our continuing commitment to achieving a more sustainable financing structure across the assets we manage in Europe and Australia.

“Throughout this process, we’ve noted a strong alignment of interest with our network of issuers and financial institutions, who are equally committed to achieving more sustainable ways to finance real estate assets.”

Lara Young, Cromwell’s Group Head of ESG, said: “Cromwell’s Sustainable Finance Framework is a critical part of our pathway to achieving net zero by 2045, making it possible to measure and account for scope 1,2 and 3 emissions in our portfolio.

“This is an excellent example of cross-team collaboration at Cromwell, drawing on expertise from our in-house ESG, Treasury and CEE teams. We’ve added a new dimension to our strategy by proving that we can match debt funding needs with sustainability outcomes across Cromwell assets.”

Wioletta Bratoszewska, Director, Real Estate Finance, HSBC Continental Europe Poland, added: “It was a pleasure to support Cromwell with this financing as Sustainability Coordinator and Lender. As the corporate real estate industry drives towards more sustainable ways of financing we are thrilled to have played a part in Cromwell’s sustainability agenda which aligns with our own focus on helping to deliver a net-zero global economy”.