Cromwell European REIT sells office asset in Finland, buys logistics property in UK

Cromwell European REIT sells office asset in Finland, buys logistics asset in UK
The Cube at Whitehouse Industrial Estate, Preston Brook, UK

Cromwell European Real Estate Inves­tment Trust (CEREIT) has acquired a freehold logistics asset from a third-party vendor in the United Kingdom and sold Kiinteistö Oy Opus 1 office asset in Herttoniemi, Helsinki, Finland.

The UK logistics asset (Runcorn Asset) was acquired at a 5.2% net operating income yield for £18.9 million (approximately €22.1 million or S$31.8 million), 14.7% below independent valuation and 31.0% discount to replacement cost.

The Runcorn Asset is 100% let on a 10-year triple net lease to a UK national 3PL Kammac Ltd and is situated in a well-established logistics location in Cheshire, close to major cities Liverpool and Manchester, with good connectivity to major motorway networks, two airports and a deep-sea port.

Opus 1 office asset in Finland was divested for €16.2 million (approximately S$23.3 million) to a local investor, 6.4% above 31 December 2021 independent valuation and at a 20% premium to purchase price €13.5 million (approximately S$19.4 million), effectively reducing CEREIT’s portfolio exposure to Finland by 15% to 3.6% (down from 4.4% as at 31 December 2021).

The Manager’s Chief Executive Officer, Mr. Simon Garing, said: “I am pleased to announce CEREIT’s third acquisition in the UK – a high-quality freehold logistics property fully-let for a 10-year lease with an RPI-linked rent review at year five to Kammac Ltd, a national reputable 3PL tenant-customer. Our experienced, on-the-ground team sourced and secured the investment at a very competitive yield for this type of property in the UK market, approximately 14.74% below independent valuation and more than 30% below replacement cost5. The asset is located in a well-established logistics hub where demand is outstripping supply with vacancy a low 3.1%, complements CEREIT’s portfolio well on a risk-adjusted basis and further builds up scale in the UK. 

Concurrently, as the Manager of CEREIT we are making progress on the recently announced non-strategic asset divestment pipeline with the sale of CEREIT’s largest office asset in Finland. The divestment, which is at a 20% premium to the 2018 purchase price and a 6.4% premium to the latest valuation7, reflects the local asset management team’s success in business plan execution, leasing the building to 90% and our ability to realise value and recycle capital effectively.

These two transactions further demonstrate our transaction capabilities even in the midst of the current turbulent financial market environment, where CEREIT is a cautious strategic buyer and selective vendor. I am pleased to see CEREIT’s exposure to light industrial / logistics properties increase to ~44%, while its portfolio allocation to the Finnish office market is effectively reduced to 3.6% (from 4.4%)”.