26 June 2019
The Cromwell Direct Property Fund (Fund) has secured its sixth direct commercial property asset, the Altitude Corporate Centre, located at 163-175 O’Riordan Street, Mascot, Sydney (Altitude Corporate Centre or the Property) for an acquisition price of $113.28 million, reflecting a passing yield of 5.7%.
Altitude Corporate Centre is a 4,733-square metre (sqm) site comprising an A-Grade 11-storey commercial office building with approximately 13,459 sqms of net lettable area (NLA) and 355 car parks. The property has a 5 Star NABERS Energy Rating and a 5 Star Green Star rating.
The Property’s major leases are to blue chip office supply retailing corporation, Winc Australia Pty Ltd (Winc) and Swedish Nasdaq OMX-listed multinational home appliance company, Electrolux. Winc occupies 5,254 sqm of the building with nine (9) years remaining on their lease and Electrolux occupies 2,836 sqm with 10 years remaining on their lease. The remaining 40% of the Property’s NLA comprises a variety of smaller office tenancies and a small retail holding.
The Property has a Weighted Average Lease Expiry (WALE) of 6.8 years, and after acquisition the Fund’s overall WALE will be 8.2 years.
With strong fixed annual rental growth of between 3% and 4% and 100% occupancy, Altitude Corporate Centre brings greater stability and diversification to the Fund’s income, tenancy and geographic profile. The acquisition is accretive to Fund earnings and takes the Fund’s direct property portfolio to $297.35 million and the look-through property exposure to 10 assets, with a total investment value of $394.7 million.
The acquisition is due to settle on 28 June 2019.
In anticipation of the acquisition of Altitude Corporate Centre, Cromwell Funds Management Limited (CFM) has finalised a new $146.5 million debt facility for the Fund with an Australian bank (Facility), replacing the Fund’s existing $55 million debt facility; the Facility has an expiry date of June 2022. The Facility will be drawn, together with existing cash reserves, to fund the acquisition of Altitude Corporate Centre.
Following settlement of Altitude Corporate Centre, the loan to value ratio (LVR) of the Fund (which is equal to the LVR under the Facility) will increase from 21.8% to 47.7%, with look through LVR increasing from 26.3% to 44.6%.
Gearing as per ASIC Regulatory Guide 46 (RG46) increases from 14.8% to 38.6% with look through gearing as per RG46 increasing from 24.0% to 42.8%.
To provide a line of sight to reducing the Fund’s direct LVR, CFM as responsible entity for the Fund has entered a Subscription Agreement with Cromwell Property Securities Limited as responsible entity for the Cromwell Diversified Property Trust (Cromwell).
Under the Subscription Agreement, Cromwell will apply for ordinary units in the Fund to the extent required to reduce the direct LVR to 40% at 31 December 2019 (the subscription amount is limited to $25 million). A fee equivalent to 1.5% of funds utilised under the Subscription Agreement will be payable by the Fund to Cromwell.
If you have any questions or would like to know more about the Cromwell Direct Property Fund, please visit www.cromwell.com.au/DPF or contact Cromwell’s Investor Services Team on 1300 268 078 or email firstname.lastname@example.org.
Cromwell Funds Management Limited ABN 63 114 782 777 AFSL 333214 (CFM) has prepared this update and is the responsible entity of, and the issuer of units in, the Cromwell Direct Property Fund ARSN 165 011 905 (Fund). In making an investment decision in relation to the Fund, it is important that you read the product disclosure statement dated 29 September 2017 (PDS). The PDS is issued by CFM and is available from www.cromwell.com.au/dpf or by calling Cromwell’s Investor Services Team on 1300 268 078. Applications for units in the Fund can only be made on the application form accompanying the PDS. This update has been prepared without taking into account your objectives, financial situation or needs. Before making an investment decision, you should consider the PDS and assess, with or without your financial or tax adviser, whether the Fund fits your objectives, financial situation or needs. CFM and its related bodies corporate, and their associates, do not receive any remuneration or benefits for the general advice given in this update. If you acquire units in the Fund, CFM and certain related parties may receive fees from the Fund and these fees are disclosed in the PDS.
Please note: Any investment, including an investment in the Fund, is subject to risk. If a risk eventuates, it may result in reduced distributions and/or a loss of some or all of the capital value of your investment. See the PDS for examples of key risks. Past performance is not indicative of future performance. Forward-looking statements in this update are provided as a general guide only. Capital growth, distributions and tax consequences cannot be guaranteed. Forward-looking statements and the performance of the Fund are subject to the risks and assumptions set out in the PDS.