SINGAPORE (Oct 31): Cromwell European REIT (CEREIT) is acquiring 23 properties across five countries in Europe for about EUR 384.4 million ($605 million).

The manager plans to partially fund the acquisitions via a EUR 224.1 million underwritten and renounceable rights issue.

It will issue 600.8 million new units on the basis of 38 rights units for every 100 units in CEREIT at an issue price of EUR 0.373 per rights unit.

This represents a discount of 31.6% to the closing price of EUR 0.545 per unit on the Singapore Exchange on Tuesday and a discount of 25% to the theoretical ex-rights price of EUR 0.498 per unit.

The three target portfolios consist of 16 properties in the Netherlands, Finland and Poland, two properties in Italy as well as five properties in France.

The new properties have an aggregate net lettable floor area of 150,235 sqm and an average occupancy rate that stands at 84.5%, with a 4.7-year weighted average lease expiry (WALE) as at Aug 31.

The European properties are collectively valued at EUR 390.1 million.

Cromwell EREIT Management, CEREIT’s manager, says the acquisitions will provide the REIT with access to the attractive office markets in Finland and Poland, both of which are experiencing robust growth, while strengthening its positions in the Dutch and Italian office markets as well as the French logistics market.

In addition, the acquisitions are accretive. Based on the pro forma effects of the acquisitions, CEREIT’s net property income and distributable income for the financial period from Nov 30 2017 -- which is the date of CEREIT’s listing -- to June 30 would have been higher by around 29.6% and 28.9% respectively, while its DPU yield for the same period would have been 8.13% instead of 7.97%.

In a show of support for the acquisition, substantial unitholders Gordon Tang, his wife Celine Tang and Hillsboro Capital will sub-underwrite 245.42 million rights units, while the REIT’s sponsor Cromwell Property Group will subscribe to 35.31% of the rights issue, its full entitlement.

The manager will seek unitholders’ approval for the new acquisition at an EGM on Nov 15.

As at 4.13pm, units of CEREIT are trading at EUR 0.53 and $0.84 respectively.