Cromwell European REIT - Annual Report 2021

CHAIR’S LETTER TO UNITHOLDERS volume-weighted average price for DRP for the amount of distributions to be paid. This gives further benefit to Unitholders, who ordinarily are not able to participate in institutional placements per SGX-ST rules. CEREIT’s liquidity remains strong, with the €200 million revolving credit facility maturing in 2024 providing greater short-term flexibility. CEREIT remains well within its loan and bond covenants, with Fitch reaffirming CEREIT’s “BBB- (Stable Outlook)” investment-grade rating. The Board’s decision to table a 5:1 Unit consolidation resolution at an EGM in April 2021 has also delivered benefits to Unitholders. With more than 99% of Unitholders approving the resolution, the Unit consolidation was completed in May 2021. As a result, CEREIT’s Units enjoyed a doubling of trading liquidity and a ~20% reduction in Unit price volatility as compared to six months prior, thus improving its risk- to-return attributes for investors. CEREIT’s investment philosophy is to acquire and manage a well-balanced portfolio of European investment properties with an emphasis on sustainable income and capital growth. CEREIT aims to generate superior risk-adjusted returns for Unitholders by owning, buying and actively managing such properties in line with its investment strategy, while continuously optimising the portfolio by divesting properties that no longer enhance portfolio returns. Our analysis has led us to move towards a majority weighting in the light industrial / logistics sector while maintaining the current exposure of at least 85% to Western Europe. This strategy also includes potentially divesting a number of office and other non-core assets. We are also progressing on ~€250 million of redevelopment / new developments (excluding the longer-dated Parc Des Docks 10 hectares estate in Paris), to unlock value and to generate an attractive yield on development cost. We continue to use proven quantifiable metrics in the execution of our strategy, adopting both a top-down and bottom-up approach to fine-tune the construction of the optimal portfolio. In light of increasing sustainability requirements, we have modified the portfolio risk factors to give more prominence to ESG. Only properties that can meet industry benchmarks for environmental and sustainable performance and that can deliver risk-adjusted returns above CEREIT’s current cost of capital will be pursued. As the Manager of CEREIT, we focused on continuous improvement in our ESG initiatives and we were humbled to receive the prestigious investor-centric SIAS Corporate Governance award in the REITs and Business Trusts category in 2021. To reinforce our commitment and to add emphasis to our ESG obligations, the Board has established for CEREIT one of the first Board-level sustainability committee in Singapore. The committee’s first task was confirming the aspirational Net Zero operational carbon emissions by 2040 target, which now guides our investment and asset management processes. We will take a measured approach to sustainability capex, to align with asset plans and minimise tenant-customer disruption, while ensuring CEREIT’s assets are future-proofed and remain compliant with the increasing regulations. OUTLOOK As we progress into FY 2022, the European economies are facing increasing disruption from the ongoing Russian invasion of Ukraine. Notwithstanding a prolonged conflict, from a business perspective CEREIT is currently seeing no immediate impact to its assets, tenant-customers or finances. Only two of CEREIT’s 10 investment countries - Poland and Slovakia - share a border with Ukraine and they represent ~13% of CEREIT’s portfolio. Only 2% of CEREIT’s leases in these two countries are expiring in the near term. RISK-RETURN CHART LONG-TERM INVESTMENT STRATEGY AND OBJECTIVES Medium BUY Light industrial Medium High Low Low Risk Return (%) Non-core light industrial Existing portfolio High Non-core office Logistics Target portfolio Core office SELL HOLD Light industrial / logistics FOCUS ON STRENGTHS PIVOT TO LOGISTICS 6