Polish move changes Cromwell Property risk profile: analysts
It’s results day at Cromwell Property Group and fund managers have been asked to think about the company’s changing risk profile.
Cromwell has exercised its pre-emptive right to buy out third party investors in the Cromwell Polish Retail Fund, which is made up of seven shopping centres with close to a $1 billion gross asset value.
Cromwell boss Paul Weightman told investors Poland was “Europe’s success story”, with gross domestic product up 4.2 per cent a year on average over the past 25 years.
Macquarie analysts were a little more cautious in a flash note sent to fund managers.
“While greater retention of AUM is a positive, we note the risk profile of the business has increased with balance sheet exposure to new asset classes (Polish retail),” Macquarie told clients.
“Medium term, we note European FUM is still under pressure as the EDF mandate expires. There is limited evidence of net inflows into asset classes that the European business is exposed to.”
Cromwell plans to roll the acquired interests over into a new fund, which will be offered to other investors. Macquarie said Cromwell was likely to have a 20 per cent to 30 per cent stake in the Polish fund.
And with Cromwell shares trading at less than a 6 per cent distribution yield, Macquarie retained its “underperform” call on the stock.
Cromwell shares were down 1.6 per cent to $1.22 on Thursday afternoon.
It comes after a busy and at times tumultuous few months for Cromwell. The company walked away from a proposed UK acquisition in the first half of this year, before turning around and raising $375 million in an institutional placement.
In doing so, it picked a fight with its biggest investor ARA Real Estate, which is backed by private equity firm Warburg Pincus, by not allocating it any new shares. ARA’s local chief David Blight resigned from Cromwell’s board soon after.
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