Cromwell joins other property players with $400m equity raising
Listed property manager Cromwell Property Group will add $405 million to a $2.3 billion pool of funds raised from investors in just two months by large property players looking to cash in on their high share values and boost their development profiles and portfolios.
Six days after GPT Group successfully raised $800 million for logistics sites and commercial property investments around Sydney’s Darling Harbour, Cromwell flagged a $375 million placement at a fixed issue price of $1.15 per new security.
The issue was at a 7 per cent discount to its distribution-adjusted last closing price.
Cromwell said it would also raise another $30 million through a non-underwritten security purchase plan from eligible Australian and New Zealand security holders.
The funds will be used to pursue $1 billion in acquisitions, both in Australia and Europe, that are either in exclusive due diligence or in advanced negotiations, and for its $1 billion pipeline of development assets.
“Cromwell has identified a number of strategic growth opportunities across both its indirect and direct property investment segments that will be funded with proceeds from the equity raising, recycling of existing capital and introduction of new capital partners,” chief executive Paul Weightman said.
The raising, by way of institutional placement underwritten by Goldman Sachs, follows a series of other large-scale efforts by real estate trusts to tap investors.
Last month, Dexus raised $900 million to fund its acquisition of 80 Collins Street and Mirvac placed $750 million which it quickly followed with a $333.5 million build-to-rent apartment deal with PDG at Melbourne’s Queen Victoria Market.
“The raisings reflect the very strong share price performance of A-REITs with office and logistics assets since the start of 2019, valuations lifted by collapsing bond yields and future rate cut expectations – both domestically and abroad,” NAB credit analyst Andrew Jones said.
The raising comes amid speculation ARA Asset Management is in a position to make a play for Cromwell after the Singapore-based funds manager lifted its stake beyond 20 per cent.
ARA lifted its holding last month after Cromwell’s takeover over, speculated to be as much as $1.3 billion, for a British-listed RDI REIT fell over.
However, the raising’s form as a “placement” may complicate ARA’s interests. As it is not a rights issue, it doesn’t afford existing shareholders specific entitlements to the new securities.
ARA has not made clear its intentions around the raising.
The new equity will reduce Cromwell’s gearing from around 34 per cent to about 24 per cent, Macquarie analysts said.
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