Cromwell bullish on Poland

Cromwell bullish on Poland

29 August 2019

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

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.

Cromwell is among the few ASX-listed property players with a European exposure. Mr Weightman noted that while growth overall across the Eurozone is slowing as Brexit looms – 2019 GDP growth is anticipated to be 1.2 per cent – there was considerable variance.

Within Europe though countries such as Poland, where GDP has grown by 4.2 per cent on average over the last 25 years, as well as the Czech Republic, Netherlands and Sweden are all expected to out-perform other European countries, and Australia.

“We track 120 cities and we’ve got about 34 cities that we focus on. That’s where we see the growth opportunities,” Mr Weightman said.

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.

Cromwell’s total assets under management has risen to $11.9 billion.  Its funds under management within Europe was steady at €3.8 billion, much that held through a recently floated Singapore-listed fund that holds European assets, the Cromwell European REIT, known as CEREIT.

Cromwell’s 2019 financial year operating profit was up 11.1 per cent to $174.2 million while statutory profit fell to $159.9 million from $204.1 million after the previous year’s result was boosted by booking a larger profit share of equity accounted investments.

Its 2019 distributions per security met guidance at 7.25¢.