UPDATE: Cromwell European REIT prices S$100M fixed-rate perpetual securities

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This item was originally published on Wednesday, 17 November 2021 at 22:06 SGT; it has since been updated with a comment from Cromwell European REIT. 

Cromwell European REIT has priced S$100 million fixed-rate subordinated perpetual securities at 5.0 percent, the REIT said in a filing to SGX Wednesday.

According to a client note seen by Shenton Wire, the initial price guidance is for notes had been in the 5.125 percent area, but with an indicative range of 4.9 percent to 5.0 percent.

A spokesperson for the REIT told Shenton Wire via email that the REIT was “pleased” with the tightening from the initial price guidance.

“We had good demand from private wealth, as typical for perpetual securities,” the spokes person said.

The first reset date for the distribution will be 24 November 2026, with the reset distribution rate equivalent to SORA-OIS, plus the initial spread of 3.615 percent, the REIT said.

Along with the issuance, the REIT will enter two five-year cross-currency swaps (CCS) to convert the Singapore dollar proceeds to euro and the Singapore dollar coupon into a fixed rate in euro of 3.55 percent, the filing said. The CCS will have a total notional value of S$100 million, with a euro equivalent of around 65.1 million euro, and a termination date set to the securities’ first reset date, the REIT said.

Green components

The CCS includes some green ESG initiatives which could reduce the euro coupon slightly on a notional amount of S$50 million, if certain targets are met, the filing said.

Simon Garing, CEO of Cromwell European REIT’s manager, said the issuance was a value-add initiative in the REIT’s capital management program, which is aiming to diversify capital sources so it can fund new acquisitions on an accretive basis.

“CEREIT’s pipeline of ‘New Economy’ opportunities are well-advanced in Western Europe, including Germany, the Netherlands, Italy and the U.K., which provide opportunities to acquire assets at net property income yields well in excess of the euro equivalent coupon of the perpetual securities issue,” Garing said. “The coupon in euro provides attractive funding.”

Targeting more acquisitions

Garing said that if the acquisitions come through, the REIT would advance on its target of a 50 percent portfolio weighting for the light industrial / logistics sector.

“We are also pleased that part of our hedging construct includes a green component, which if the targets are met annually will see a small reduction in interest costs,” Garing said.

The net proceeds will be used for financing or refinancing acquisitions and/or investments, financing any asset enhancement works, refinancing existing borrowings and general corporate purposes, Cromwell European REIT said.

The securities will be series 001 and will be issued under the REIT’s S$750 million multicurrency perpetual securities program, which was established on 5 November, the filing said.

The securities are expected to be issued on 24 November, and to be listed on SGX on or around that date, the filing said. The distributions will be paid on 24 May and 24 November every year, the filing said.

Perpetual (Asia), as trustee of Cromwell European REIT, will be the issuer, the filing said.

DBS Bank, OCBC and Credit Suisse (Singapore) were the joint lead managers of the offering, the filing said.

Cromwell European REIT’s portfolio has 109 properties with an appraised value of around 2.37 billion euro as of 3 November, located in or close to major gateway cities in the Netherlands, Italy, France, Poland, Germany, Finland, Denmark, the Czech Republic, Slovakia and the U.K.