Cromwell European REIT - Annual Report 2021

The Cromwell transactions team continued its “truffle-hunting” in FY 2021, enabling us to complete €212.6 million in light industrial / logistics acquisitions at a favourable blended NOI yield of 6.3% in FY 2021. Our operational preparedness and proactive asset management helped maintain CEREIT portfolio’s occupancy at or above 95% for a second year in a row, with more than 12% of the portfolio or almost 220,000 sqm in new and renewed leases at a positive rent reversion of 5% signed throughout the year. Notably, the impact of COVID-19 on CEREIT’s portfolio has also been negligible, with the financial impact from rent reductions without any lease renewals amounting to less than €500,000. INVESTMENT PORTFOLIO PERFORMANCE As at 31 December 2021, CEREIT owned a portfolio of 112 properties, valued at €2,443 million. Overall, CEREIT’s portfolio registered 2.4% like-for-like increase in valuation y-o-y, with a strong €56.2 million valuation gain in the light industrial / logistics sector and a slight decline of €4.2 million in office and other sectors. This further validates the pivot to logistics that the Manager started for CEREIT two years ago. The transactions team continued its “truffle-hunting” in FY 2021, enabling us the Manager to complete €212.6 million in light industrial / logistics acquisitions for CEREIT at a favourable blended NOI yield of 6.3% in FY 2021. Europe’s very liquid real estate market and attractive fundamentals remained appealing. We entered FY 2022 with a well-advanced ~€100 million pipeline, giving us a line of sight to reaching majority logistics weighting in CEREIT’s portfolio in the medium term. CAPITAL MANAGEMENT We continued on CEREIT’s capital transformation journey in FY 2021, further optimising its capital structure and seeking opportunities to diversify funding sources. I am pleased that we were able to tap into the debt markets during the last couple of years’ low-interest rate environment, extending CEREIT’s WADE to 3.4 years at an all-in interest cost of ~1.72%, while retaining it’s gearing at 36.6%, well within the Board-approved range of 35-40%. As we sought to optimise CEREIT’s capital structure to enhance Unitholder returns, in the past 15 months we have raised close to €700 million in bonds, equity, and the recent perpetual securities issue. Following the one-year extension of the €157 million bank debt facility, CEREIT’s first major debt expiry is due only in November 2023. The net proceeds from the November 2021 issue of S$100 million five-year perpetual securities were used for financing and refinancing CEREIT’s acquisitions. Notably, we arranged Singapore’s first sustainability-linked cross currency-swap with OCBC, which allowed CEREIT to lock in more favourable S$ to € rates for the duration of the swap with an effective perpetual securities coupon rate of 3.55% for five years. Perpetual securities are treated as equity in the balance sheet and present an attractive source of capital that we will look to tap into when the opportunity arises, while retaining flexibility for further debt financed acquisitions. All these capital management initiatives are expected to reduce CEREIT’s weighted average cost of capital, enabling us to acquire lower-yielding but higher-quality properties and achieving distribution accretion. Importantly, as part of CEREIT’s DRP that we introduced in FY 2021, existing Unitholders now also have the option of acquiring new Units at a preferential price without incurring transaction costs. I am especially pleased that CEREIT is one of the very few REITs in Singapore that adjusts the discount to the 10-day CROMWELL EUROPEAN REIT 5 ANNUAL REPORT 2021