Cromwell Property Group has flagged plans to carve out and spin off a $3 billion portfolio of Australian office towers into a separate, managed property trust as part of its broader transition into a “capital light” fund manager.
The move to demerge and float its Australian office assets – the mooted trust could hit a market capitalisation of close to $2 billion – comes as the Brisbane-based player accelerates plans to shift its efforts into funds management, while holding co-investment stakes in the vehicles it manages.
The strategy has taken shape since the appointment of a new chief executive, former Investa head Jonathan Callaghan, who was appointed to the top post last year after a period of corporate turmoil at the $2.3 billion company.
Cromwell’s existing portfolio includes more than $12 billion of assets, with interests in Australia, Asia and Europe. That put Cromwell in a good position to become “a capital efficient global real estate fund manager”, Mr Callaghan told shareholders, handing down the 2022 interim results.
“Over the past 10 years funds management security prices have significantly outperformed REITs (real estate investment trusts),” he said.
“Central to our future strategy is the aim for Cromwell to transition to a capital light funds management business model.
“The new externally managed REIT is the first step in furthering this strategic ambition, while giving investors the option to invest in two different vehicles with different risk return and growth profiles.”
The new REIT, which will be created out of the 17-asset portfolio Cromwell holds locally, forms part of a broader strategy Mr Callaghan outlined which includes simplifying the business, extending its existing funds management platform in Europe and Australia, and developing more capital partner relationships.
Mr Callaghan, a former lawyer, was appointed to lead Cromwell after his predecessor Paul Weightman effectively walked the plank, in an effort to stave off further ructions with its Cromwell’s major investor, Singapore’s ARA Asset Management, which has since been taken over by ESR. In the fallout from the upheaval renowned corporate raider Gary Weiss took over as Cromwell chairman.
On Thursday, Cromwell reported a 2022 interim statutory profit of $132.5 million, which takes into account changes in portfolio valuations includes, down from $145.2 million a year earlier.
Operating profit rose to $96.4 million, compared to the 2021 interim result of $99.1 million. It has paid 3.25¢ in distributions over the 2022 first half and flagged a 1.625¢ payment for the March quarter.
Article Source: www.afr.com
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