Cromwell Property Group was a net seller in FY16
Global Real Estate Investment Manager Cromwell Property Group today reported operating profit boosted by transactional income of $164.5 million for the year to 30 June 2016.
Cromwell Chief Executive Officer Paul Weightman said Cromwell’s strategy of realising gains and recycling capital, and its internal management model, created value from active management of assets, generated performance fees, allowed it to act opportunistically and enabled it to effectively manage downside risk.
“FY16 was a year in which we benefitted from a number of one-off transactions,” said Mr. Weightman.
Portfolio valuations increased by $250.3 million during the year net of property improvements, lease costs and incentives.
Net property earnings, on a like for like basis, increased 1.6 percent with increases in rental income being offset by some vacancy in Brisbane and Canberra. Overall tenant quality remains strong with Government and government related entities contributing 46 percent of gross income.
As at 30 June 2016, the portfolio had a Weighted Average Lease Expiry (WALE) of 6.3 years and a vacancy rate of 10.6 percent compared to the national CBD office average of 11.9 percent (JLL).
“Our NSW and VIC assets continue to perform well and we are actively managing the vacancy in our Queensland and Canberra assets”, Mr Weightman said.
Cromwell expects tenant demand, outside of Sydney, to remain weak resulting in subdued growth in like for like property income in FY17 and FY18.
Cromwell was a net seller in FY16 selling $209 million of assets with a net gain of $19.4 million (1.1 cps) including:
Asset Sale ValueDate Disposed
43 Bridge Street, Hurstville, NSW$37 millionJuly 2015
4 Bligh Street, Sydney, NSW$68 millionAugust 2015
Terrace Office Park, Brisbane, QLD$31 millionSeptember 2015
100 Waymouth Street, Adelaide, SA$73 millionDecember 2015
A proportion of the proceeds were used to repay debt with the balance being held as cash.
“Given the heightened competition for assets in all markets, Cromwell’s preference is to recycle capital from disposals to value adding opportunities in its existing portfolio. We are investing $300 million for the future with the redevelopment of Northpoint Tower in North Sydney and the development of the new Department of Social Services national headquarters at Tuggeranong Office Park in ACT,” Mr Weightman said.
“Both projects are on track and will contribute earnings growth and valuation uplifts to the Group in the near future. Demolition works have just finished, and construction will begin next month, at Northpoint, while construction will finish shortly at Tuggeranong,” he added.