The manager of Cromwell European REIT (CEREIT) has announced the proposed consolidation of every five existing units in CEREIT, at a date to be determined.

In a filing to SGX dated March 17, the manager states that the number of consolidated units that unitholders will be entitled to will be rounded down, with any fractions of consolidated units to be disregarded.

According to the filing, the rationale for the proposed consolidation includes to “increase market interest and attractiveness of CEREIT and its consolidated units”.

The proposed consolidation will reduce the number of units in issue from 2.79 billion existing units as of March 17 to a maximum of 557.73 million consolidated units post-completion.

Based on proforma financials, assuming the transaction was completed December 31, 2020, distribution per unit (DPU) for FY2020 ended December 2020 would increase from EUR3.48 ($5.58) to EUR17.42, while NAV per unit would increase from 50.9 Euro cents to EUR2.55.

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The manager also expects the trading price for the units to increase post-transaction. Units in CEREIT have traded between 42.5 Euro cents and 51 Euro cents in the last six months as of March 17. Based on an illustrative historical price of 43.5 Euro cents per existing unit, the manager assumes that the theoretical trading price of each consolidated unit will increase to EUR2.18 per consolidated unit.

Based on the REIT’s 6-month volume weighted average price (VWAP) of 46.52 euro cents as of March 17, the consolidation would result in an adjusted VWAP of EUR2.33.

In addition, the manager anticipates a potential reduction of percentage transaction cost for trading in each board lot of consolidated units (with a savings of EUR6 per every EUR1,000), as well as lower brokerage trading costs to investors.

As at 12.36pm, units in CEREIT are up 0.5 Euro cents or 0.71% at 71 Euro cents.