Cromwell European REIT - Annual Report 2021

BUSINESS MODEL AND INVESTMENT STRATEGY PURPOSE CEREIT’s purpose is to provide Unitholders with stable and growing distributions and NAV per Unit over the long term, while maintaining an appropriate capital structure. INVESTMENT PROPOSITION CEREIT offers the opportunity to invest in attractive European freehold commercial real estate with a trusted Manager and experienced local Property Manager. STRENGTHS • Resilient portfolio, benefiting from attractive European market fundamentals; • Well-balanced mix of geographies, tenant-customers and trade sectors; • Proven track record in undertaking value-accretive acquisitions, asset management and capital recycling • Strong balance sheet with diverse sources of funding providing financial flexibility; • Responsible capital management supported by investment-grade rating ‘BBB-’ (stable) by Fitch Ratings; and • Aspirational Net Zero operational carbon emissions by 2040 target informs investment and asset management strategy INVESTMENT STRATEGY CEREIT has a principal mandate to invest, directly or indirectly, in income-producing commercial real estate assets across Europe with a minimum portfolio weighting of at least 75% to Western Europe and at least 75% to the light industrial / logistics and office sectors. The Manager currently targets a majority investment weighting to the light industrial / logistics sector while also investing in core office assets in gateway cities. The Manager aims to achieve CEREIT’s objectives through executing on the following key strategies: Active asset management and asset enhancement • Seek to drive organic growth in revenue and income and maintain strong tenant-customer relationships; • Continually monitor each asset’s expected contribution to earnings and NAV growth, utilising the proprietary dynamic portfolio optimisation tool encapsulating 13- risk factors; • Explore selling assets that do not meet the criteria and look to reinvest capital into opportunities that will ultimately increase DPU and NAV per Unit; • Regularly evaluate properties to identify if potential property enhancement or redevelopment opportunities can enhance CEREIT’s returns; and • Unlock value through developments and redevelopments Capital recycling and growth through acquisitions • Adopt rigorous research-backed selection process focused on long-term sector trends and fundamental real estate qualities to ensure investments are focused on the right cities and sectors; • Aim to grow DPU and NAV per Unit through the acquisition of quality income-producing commercial properties across Europe; • Seek assets that can provide attractive cash flows and yields, which fit within CEREIT’s purpose to enhance returns for Unitholders; • Source potential acquisitions that create opportunities for future income and capital growth, leverage extensive on-the-ground teams and participate in both on- and off-market acquisitions; and • Divestment of selected non-core office and light industrial / logistics assets Responsible capital management • Maintain strong balance sheet and employ an appropriate mix of debt and equity with appropriate liquidity; • Secure diversified funding sources considering financial institutions and capital markets; and • Optimise cost of debt financing and utilise interest rate and foreign exchange hedging strategies where appropriate. High ESG standards and disclosures • Aspirational target of Net Zero operational carbon emissions by 2040 set • Employ a rigorous approach to ESG matters to achieve high sustainability standards in the operation and management of CEREIT, consistent with the values of the Sponsor and with guidance from the Board; • Safeguard Unitholders’ interests through robust corporate governance and risk management; • Participate in the annual GRESB assessment to provide a regular measure of CEREIT’s sustainability performance; and • Implement ESG / data analytics / capex / sustainability processes FOCUS ON STRENGTHS PIVOT TO LOGISTICS 16