This article is from the Australian Property Journal archive
FUND manager Cromwell posted a heavier first-half loss as it was hit by rampant property valuation declines, and is on the brink of sealing a half-a-billion-dollar sale of portfolio of its Polish malls.
Cromwell’s $271.4 million loss followed last year’s first-half loss of $129.5 million.
“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,” it said.
Over the period, revaluations results into fair value reductions of $195.7 million, or 7.5%, across its Australian portfolio, and another $44.5 million (or 8.1%) for the Cromwell Polish Retail Fund (CPRF) that is up for grabs.
Cromwell commenced an asset sale programme in late 2021, prior to the expansion of capitalisation rates, as it sought to bring gearing – then 41.8% – back to within its target range.
“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,” it said.
“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%.”
Cromwell CEO, Jonathan Callaghan said, “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”.
Cromwell did post a first-half operating profit of $83.7 million, slightly down on the prior corresponding period as a result of asset sales. It is equivalent to 3.2c per security.
On a like-for-like basis, net operating income of the Australian investment portfolio was up 1%. Operating earnings were down 3.2% to $78.0 million, driven by asset sales, which was partially offset by an uplift in rental income.
Investment portfolio occupancy is 93.4%, with a weighted average lease expiry of 5.3 years
“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,” Callaghan said.
Net tangible assets per security was $0.72, down from $0.84.
First-half distributions of 1.58c per security reflected a payout ratio of 62.6%.
