This article is from the Australian Property Journal archive
CROMWELL Property Group has again bluntly rebuffed major shareholder ARA’s takeover attempts, as it posted healthy full year results despite the pandemic.
The group reported a full year operating profit increase of 27.0% to $221.2 million, ahead of its own guidance, and a 13.3% increase in statutory profit to $181.1 million.
Full year distributions lifted 3.4% to 7.50 cents per security. Chief executive Paul Weightman said the group has enough confidence in its strategy to maintain distributions for the 2021 financial year.
“We have a strong balance sheet with substantial liquidity and rent collection has been resilient for both the domestic Australian portfolio and CPRF during COVID-19 so far. 45% of gross passing income is sourced from government entities and our cashflows more than sufficient to service debt.”
Rent collection was relatively unimpacted by COVID-19, Cromwell said, given the strong tenancy skew towards government and larger ASX-listed entities. Only $9.6 million – about 4.2% of all rent – was waived or deferred from March through to the end of June.
Cromwell said ARA’s “intention to seize control of Cromwell has now been revealed and, just as Cromwell has stated all along, ARA’s intentions equate to an attempt to takeover by stealth via a hostile and opportunistic proportional offer”.
“The offer undervalues Cromwell and denies securityholders any control premium.”
ARA proposed a sweetened proportional takeover bid earlier this month, lifting lifted its proposal from 88.125 cps to 92 cps, hoping to take its share to 26.69%. Should it acquire any shares at that price, it would need to then match that for its takeover offer made in June. The Singaporean investment house has claimed Cromwell has a poor investment track record, particularly its investment in a near $1 billion portfolio of “high risk Polish retail assets” that have taken a valuation hit.
The stoush has been playing out publicly since last year after Cromwell froze the group out of an equity raising, diluting its stake. ARA then sought to appoint its representative Gary Weiss to the Cromwell board. In March Weiss failed to secure a seat on the boast for the second time, after narrowly missing out in November last year.
Cromwell previously argued that Weiss was not a suitable candidate to join its board because of his involvement with Ardent Leisure and Estia Health, both ASX-listed companies facing their own unique challenges.
ARA has nominated ABC board member and investment banker Joe Gersh to the board, alongside Weiss, ahead of an extraordinary general meeting on 18th September.
Cromwell said it does not believe ARA’s actions are “in anyone’s interests except its own”.
“ARA is a competitor to Cromwell and competes with Cromwell for assets and for capital.”
The groups had competed over the last two years for the acquisition of Brisbane towers 133 Mary St, which ARA picked up for $96.5 million in April, and 400 George St which Cromwell bought for $524.75 million.
Cromwell segments deliver profits
Cromwell’s direct property investment segment profit grew 26.5% to $172.2 million, driven by development profit at Northpoint and strong like-for-like net operating income.
Cromwell’s portfolio of Polish malls saw 64% of rent collected and is in ongoing negotiations with tenants. It will recommence the sell-down of the Cromwell Polish Retail Fund once the negotiations complete and the COVID-19 situation settles down further, it said. The indirect property segment delivered a $55.9 million profit, up 23.1%, driven by CPRF as well as the Cromwell European REIT.
Funds and asset management profit lifted 43.2% to $40.8 million. Total funds under management was $8.2 billion, split into $2.2 billion of retail FUM and $6.0 billion of wholesale FUM.
