Cromwell European REIT - Annual Report 2021

While the vacancy rates have risen throughout the pandemic, availability is expected to tighten throughout 2022. Occupiers’ preference is for prime assets in core locations, with greater availability for secondary space in most markets and limited supply in gateway cities. CEREIT’s office portfolio has good exposure to the office market in the Netherlands, which is seeing demand from recovery due to flight to quality and core office locations. Overall, we intend to selectively divest some of the non-core office assets that CEREIT owns, retain exposure to some of the strategic Eurpoean core office markets and unlock value for Unitholders through redevelopments in prime locations. 6. WHAT CAN WE EXPECT FROM CEREIT IN THE NEXT TWO YEARS? CEREIT’s portfolio income will continue to be underpinned by active asset management, CPI indexation and rent reversions. We will continue to increase CEREIT portfolio’s long-term light industrial / logistics exposure through a mix of acquisitions, divestments and developments on existing sites, while also acquiring greenfield opportunities. Alpha generation through acquisitions and developments will be an essential differentiator for CEREIT amongst the S-REITs in a rising interest rate environment. This will offset some near-term downside risks from COVID-19, where the non-core office assets and SME exposure continue to affect performance. In the €15 to €50 million light industrial / logistic sectors, the Manager will continue to “truffle hunt”, benefiting from Cromwell’s on-the-ground transaction teams advantage. Large portfolios are trading at substantial premiums to valuations in this real estate cycle, so we will build CEREIT’s portfolio across the 10 countries, rather gradually than competing on price. This way, we put investor interests ahead of AUM growth for growth’s sake. Divestments of higher yield / higher risk assets are also targeted for this year, with some embedded profits to realise on some smaller logistic assets. We have announced a medium-term development pipeline of ~€250 million in CEREIT’s portfolio, in addition to Parc Des Docks in Paris, France. At the same time, we have also commenced negotiations with the Italian government on releasing, divesting or developing part of its portfolio over 2022. The redevelopment of Via Nervesa 21 in Milan will add grade A office asset to the portfolio, but income will be affected through the development phase. In all, notwithstanding inflation and geopolitical risks from prolonged effects from Russia’s invasion of Ukraine, we expect the CEREIT portfolio to emerge stronger in 2023. We will continue to add to the portfolio’s long-term logistics exposure through a mix of acquisitions, divestments and developments on both existing sites while also acquiring greenfield opportunities. CROMWELL EUROPEAN REIT 15 ANNUAL REPORT 2021