01 July 2020

The first full liquidity event for the Cromwell Direct Property Fund (the Fund) commenced on 1 July 2020.

The Product Disclosure Statement (PDS) for the Fund explained (in section 7.4) that after expiry of the Initial Term in July 2020, Cromwell Funds Management Limited (CFM) would give all investors an opportunity to withdraw from the Fund (the “Liquidity Event”). The purpose of this update is to notify investors of the Liquidity Event and the period they have to make a withdrawal request under it (the “notice period”).

The notice period commenced on 1 July 2020 and will conclude at 5pm AEST on 31 July 2020, as illustrated in the timetable below1. Withdrawal requests must be received within the notice period.

In accordance with the process set out in the Fund’s Constitution, if all withdrawal requests received during the notice period cannot be satisfied by 31 January 2021, or if withdrawal requests received total more than 50% of the units on issue on the first business day after the close of the notice period, then CFM will take steps to wind up the Fund and distribute the net proceeds to investors.

Subject to the level of withdrawal requests received, CFM expects to distribute redemption proceeds on or around 17 August 2020. If all withdrawal requests cannot be satisfied, then they will be paid or partly paid on a pro-rata basis monthly thereafter on or about the 20th of each month subject to available liquidity in the Fund.

CFM will suspend the Limited Monthly Withdrawal Facility during the notice period and any unsatisfied withdrawal requests will not be processed under that Facility for the month of July. Any investors with an unsatisfied withdrawal request wishing to participate in the Liquidity Event must either-

    (a) advise CFM of their intention in writing during the notice period, or
    (b) submit the Liquidity Event Withdrawal Form enclosed.

If an investor confirms by written notice to participate in the Liquidity Event, then any existing unfulfilled withdrawal request under the Limited Monthly Withdrawal Facility will be cancelled and included in the Liquidity Event, together with the other requests received in the notice period, all of which will be treated equally.

If an investor with an unsatisfied withdrawal request under the Limited Withdrawal Facility at 30 June 2020 elects not to participate in the Liquidity Event, then their unsatisfied withdrawal request will be carried forward and be deemed to have been made when the Limited Monthly Withdrawal Facility re-opens in August 2020.

Monthly distributions (currently 7.25 cents per unit per annum) will continue to be paid based on investors’ unitholding balances on the last day of each month.

Withdrawal requests under the Liquidity Event may be funded from cash, undrawn debt facilities, the sale of assets, or the issue of new units, or in accordance with the Constitution, CFM may also seek to facilitate unit transfers between those wishing to withdraw and those wishing to acquire units.

As at 23 June 2020, the most recently available unit price is $1.1892, which excludes the upcoming independent re-valuation of all properties held by the Fund at 30 June 2020. Updated unit pricing, including the impact of the upcoming 30 June 2020 independent revaluations will be available on the Fund’s webpage at www.cromwell.com.au/dpf in early July.

The withdrawal price payable for requests under the Liquidity Event will be calculated on the day before the withdrawal payment is made, in accordance with the Fund’s Constitution and unit pricing policy.

If all withdrawal requests under the Liquidity Event can be satisfied by 31 January 2021, then the Fund’s next full Liquidity Event will be in a further five years, being July 2025, and then each subsequent five years thereafter.

Liquidity Event Timetable

DateEvent
24 June 2020 Record date
1 July 2020 Initial Term expires
1 July 2020 Liquidity Event notice period commences (any withdrawal requests must be lodged within the notice period)
31 July 2020 – 5pm AEST Liquidity Event notice period concludes*
Approximately 17 August 2020 Withdrawals paid (depending upon level of withdrawal requests received)

*  CFM reserves the right to extend the notice period at its discretion

The Fund continues to be very well received by investors. We consider its attributes are attractive in the current uncertain economic climate. As at 31 May 2020, the key statistics as per the Fund’s management accounts were as follows:

  • Cash and undrawn bank debt: $100.9 million
  • Look Through Gearing (total bank debt / total assets): 24.5%
  • Look Through Gearing LVR: 26.7%
  • Current distribution yield 6.1% based on unit price of $1.18922 and distributions of 7.25 cents per unit per annum
  • Weighted average lease term – 7.4 Years as at 31 May 2020
  • 42.6% income from government tenants
  • 68.7% income from government and listed tenants

A Liquidity Event Withdrawal Form can be found here. As an investor, you can elect to withdraw partially or in full. If you would like to participate in the Liquidity Event, the Withdrawal Form must be completed and received by us 5pm AEST on 31 July 2020 (subject to any extension of the notice period advised by CFM).

Completed Withdrawal Forms are to be returned to Boardroom Pty Limited via one of the following methods:

Returning a Withdrawal Form in this way will constitute notice to CFM of your withdrawal request. It is your responsibility to return their completed Withdrawal Form to allow sufficient time to meet the closing time of 5pm on 31 July 2020, as the Withdrawal Form will only be accepted if it is received by Boardroom by that time.

If you have any questions regarding the Fund or the Liquidity Event, please contact your financial adviser or Cromwell’s Investor Services Team directly on: 1300 268 078 or invest@cromwell.com.au

Cromwell Funds Management Limited
Phone: 1300 268 078
Email: invest@cromwell.com.au

Footnotes
1CFM reserves the right to extend the notice period at its discretion.
2Price as at 23 June 2020