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Cromwell European REIT cuts IPO size.

Tuesday, September 19, 2017

UPDATED (15 NOV 17):
After cancelling its IPO after cutting its IPO size, Cromwell European REIT is making another IPO attempt with a much smaller offer of a billion units instead.

"Cromwell European REIT's prospectus Wednesday showed that the company is offering 428.54 million units to institutional and retail investors, and another 581.8 million units to investors who have agreed to take them up ahead of the IPO (at 55 European cents each).

"Cromwell had, in September, offered 1.91 billion units at up to 57 European cents each. The company has also reduced the number of assets that will be in the REIT--down from September's 81 assets."


Source: WSJ





-----------
Earlier this month, when I blogged about Cromwell European REIT, I mentioned that the sponsor, post IPO, would be holding a rather smallish stake in the REIT. 



To me, it seems as if the REIT is a place for the sponsor to dump their rojak portfolio.

"It gives me the feeling that the sponsor wants to dump everything into a pot and be done with it." (See related post at the end of this blog.)






Well, things have changed. 

I don't know why but it seems that they have decided to shrink the size of the IPO and the sponsor will now have a stake of 25.9% to 26.8% in the REIT. 

These are much better numbers.

There will be a better alignment of interests with other investors in the REIT, for sure.


Simply put, if Cromwell European REIT should do badly, the sponsor will hurt much more now compared to when they were going to have just a 12.7% stake. 

So, unless they enjoy pain, with a much larger stake in the REIT, they have a stronger incentive to do better.






Although this is a positive development for retail investors in the REIT, I still cannot help but feel somewhat uneasy with the rojak nature of the portfolio from the get go. 

I understand that they bought these properties from various funds looking for exits but it seems rather hasty to me.

Having said this, all investments are good investments at the right price. 

Trading starts on 28 Sep (Thu).

Related post:
Cromwell European REIT IPO.
Reference:

Cromwell REIT cuts IPO size, ST, 18 Sep 17.




https://www.theedgesingapore.com/negative-view-cromwell-european-reit-down-under

18 comments:

arithmos said...

Thank you for this report. If it goes down after IPO, I may be interested.

I am not sure what to do next after Croesus. I am deciding allocating a fair bit on AIMs even if I am buying at a premium.

AK71 said...

Hi arithmos,

If all the REIT's properties were in Germany, Europe's strongest economy, with its numbers, it would have been a very persuasive proposition.

Having said this, if we should be compensated with a higher distribution yield, it could be worth a bite.

Laurence said...

SINGAPORE (Sept 18): Cromwell European Real Estate Investment Trust (CEREIT) today launched an initial public offering of up to 927 million euros ($1.5 billion) in Singapore.

The REIT is sponsored by Australia’s Cromwell Property Group, an ASX-listed real estate manager which was lately reported to be facing a potential downgrade from Moody’s Investor Service for its high level of debt relative to earnings. Cromwell Property Group also recently entered into new short-term loan facilities to fund its stake in CEREIT.

jojo said...

Hi,
.... food for thought ....

https://www.theedgesingapore.com/negative-view-cromwell-european-reit-down-under

jojo said...

Hi,

... food for thought ....

https://www.theedgesingapore.com/negative-view-cromwell-european-reit-down-under

AK71 said...

Hi Laurence and jojo,

It would explain the rojak nature of the REIT's portfolio.

I guess my feeling that the sponsor seemed rather hasty in their effort to divest is not without merit.

Laurence said...

With AK refusing to take up anchor position in this listing, it has nowhere to go but Down.

redponza said...

Re:
https://www.theedgesingapore.com/negative-view-cromwell-european-reit-down-under

In the article, it is mentioned that "The yield for 2018 would be between 6.3% to 6.9%"
In every other sources I read, the yield is 7.5% to 7.7%, I really doubt the integrity of the article?

AK71 said...

An Australian real-estate company has pulled its plans for an up to EUR1.09 billion (US$1.30 billion) initial public offering in Singapore as demand for its units were tepid, people familiar with the process said Friday.

Cromwell European Real Estate Investment Trust, a unit of Australia-listed Cromwell Property Group, had started taking orders earlier this month in what would have been Singapore's second-largest IPO this year.

It would have also been the first company to offer shares denominated in euros in the city-state, which is one of the sought-after destination for REITs in Asia.

People familiar with the process said that demand from institutional investors wasn't up to the company's expectations as the deal size was too large. Also, some investors were skeptical of the growth prospects in some of its European assets given its unfamiliarity with those markets.

A spokesman for Cromwell Property Group declined to comment. The shelved IPO plan also indicates investors remain wary of new offerings in a volatile global market.

Write to P.R. Venkat at venkat.pr@wsj.com.
(END) Dow Jones Newswires
September 22, 2017 03:40 ET (07:40 GMT)

Laurence said...

They must have got wind that AK refused to subscribe to the IPO. Which means followers of ASSI blog wouldn't even touch it with a 5-foot pole. The only way out for them was to abandon the listing altogether.

AK71 said...

Hi Laurence,

I am sure it has nothing to do with me since I have avoided participating in IPOs for many years by now. :)

redponza said...

The Oracle of Singapore on REIT refuses to touch Cromwell European REIT, sighting weakness in its markets, causing the REIT to not able to float on SGX.

AK showing his magic again ๐Ÿ˜€

Seriously, I plan to buy some lots of the REIT beforehand. Now with the plan abandoned, it is hard time again to source for something worthy of consideration

AK71 said...

Hi redponza,

Rumors aplenty.

I am 100% innocent. -.-"

Laurence said...

Quote: AK showing his magic again ��

That's no magic. It's perfected skill. When AK sneezes, stocks plunge. Lol.

AK71 said...

Hi Laurence,

I am uncomfortable with statements like that. :(

I don't want to be called in by the SGX or MAS for investigation. :(

I appreciate your kindness but not like this. :(

AK71 said...

An Australian real-estate company Wednesday revived plans for an initial public offering in Singapore, seeking to raise 556 million euro ($657 million), two months after pulling the sale due to weak demand.

Cromwell European Real Estate Investment Trust, a unit of Australia-listed Cromwell Property Group, will begin taking orders from investors Thursday.

In a filing with the central bank, Cromwell European REIT said that it will sell up to one billion units at 55 European cents each and the REIT's initial portfolio will comprise 70 assets that include office, retail and industrial properties from five European countries including Denmark, France, Germany and Italy.

In late September, Cromwell had decided against moving with its IPO, citing market conditions. People familiar with the process had said that demand didn't meet the company's expectations, indicating investor caution in a volatile global market.

Cromwell European REIT's prospectus Wednesday showed that the company is offering 428.54 million units to institutional and retail investors, and another 581.8 million units to investors who have agreed to take them up ahead of the IPO.

Cromwell had, in September, offered 1.91 billion units at up to 57 European cents each. The company has also reduced the number of assets that will be in the REIT--down from September's 81 assets.

The company is also offering a higher yield. Cromwell European REIT is now planning to pay a yield of 7.8% in 2018 against the earlier yield of between 7.5% and 7.7%.

Write to P.R. Venkat at venkat.pr@wsj.com.
Dow Jones Newswires

betta man said...

AK, what's your take on this revised offer ? Looks more attractive than the previous offer which they pulled out.

AK71 said...

Hi betta man,

They removed some assets and are trying to lure investors with a slightly higher yield.

I still think it is a Rojak REIT and lacks a clear strategy.

Being a much smaller offering now, it could take off unlike the earlier offer.

Not really interested for now, I will wait and see.

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