Cromwell Property Group has abandoned the flotation of a portfolio of European real estate assets on the Singapore stock exchange because of a lack of investor support.
The Australia-headquartered company had hoped to raise up to €1.25bn by floating Cromwell European REIT (CEREIT), but pulled the initial public offering late today after failing to fill its book with institutional subscriptions.
In a statement to the Australian Securities Exchange, Cromwell said: “Despite receiving significant interest from strategic, institutional and retail investors, given the current market conditions, [Cromwell] will not proceed with registration of the prospectus for the Cromwell European REIT in accordance with the timetable previously indicated to the market”.
Paul Weightman, Cromwell’s CEO, said: “Cromwell continues to believe in the quality of CEREIT’s portfolio, its investment thesis, and the exposure it provides to improving European real estate fundamentals.”
He said Cromwell will reassess the situation in conjunction with key stakeholders and strategic partners and provide a further update in due course.
Cromwell ran into a series of roadblocks in its attempt to float its European portfolio, which is made up mostly of assets of the former Valad European business, acquired by Cromwell in 2015.
It had already reduced the size of the free float by 28m units from 1.58bn to 1.3bn, meaning would only raise €739m rather its original target of €1.21bn to €1.25 bn. It also re-priced its units at the bottom end of the price band, and offered a higher yield.
Cromwell had originally priced the units between €0.55 and €0.57 a piece. It also offered to lift the yield from 7.5% to 7.7%.
The sponsor took the unprecedented move, according to brokers in Singapore, of increasing its own stake in the proposed trust three times during this week – from between 8.7% and 12.78% to 13.2% and then 26.8% – but to no avail.
Today was the final day for the institutional book-build, and the retail offering of 5% of securities was to go to market on Monday. CEREIT was due to begin trading on 28 September.
Cromwell has secured two cornerstone investors in Cerberus Singapore, with a 7% stake, and Hillsboro Capital with 8%.
A property securities manager with a global firm based in Singapore questioned Cromwell’s decision to float its European assets in Singapore.
He told IPE Real Estate he did not believe in cross-border listings. “I would not buy into a European REIT listed in Singapore,” he said. “Why would I, when my teams in Europe are able to buy European assets directly?”
Sources told IPE Real Estate that potential investors had become increasingly uneasy with the IPO because Cromwell had to lift the gearing of the vehicle to improve the yield offered.
“It was very aggressive what they hoped to achieve,” one broker said. “It is usual for REITs to increase the yield during the IPO process – which Cromwell has also done by taking more leverage. But when the sponsor rewrote its offer terms three times – that was different.”
Another observer said: “The IPO was doomed from the start. With the sponsor holding such a large proportion of the securities, the overhang would be a negative on its share price from day one even if the vehicle was floated.”
CEREIT would have been the third largest property trust and the first euro-denominated REIT to list in Singapore.
A spokesperson for the Singapore stock exchange said: “We cannot comment on specific companies. Our REITs and business trust cluster is the biggest in Asia outside Japan with a total of 50 listings valued at close to SGD100bn [€62.1bn].
“The most recent such listing, NetLink NBN Trust, received IPO subscriptions of SGD5bn, testifying to robust investor interest. We continue to support a healthy pipeline of companies seeking to list REIT and infrastructure assets from diverse geographies.”
