CROMWELL European Real Estate Investment Trust (Cromwell E-Reit) will not be providing a capital distribution top-up for the first half ended June.

This resulted in a 10.4 per cent decline in H1 distribution per unit (DPU) to 0.07790 euro from 0.08695 euro the year before, when a 1.1 million euro capital distribution top-up was made.

The Reit manager on Monday (Aug 14) said its board decided to preserve capital gains and not declare the top-up, given weaker macro fundamentals and tighter credit markets.

Gross revenue for the half year grew 0.9 per cent to 108.3 million euros (S$160.4 million) from 107.4 million euros the year earlier.

Net property income grew 1.8 per cent to 68.5 million euros from 67.3 million euros in H1 FY2022. This comes as higher income from market rent growth and annual inflation indexation were slightly affected by the absence of income from sold assets, as well as two Italian Central Business District office properties undergoing redevelopment – Nervesa 21 in Milan and Maxima, formerly known as Via dell’Amba Aradam 5, in Rome.

The lower DPU was further attributable to a spike in interest expenses, which widened to 16.4 million euros from 9.1 million euros the year before because of higher interest rates.

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For this period, the Reit reported a total loss of 15.6 million euros compared to a 53.1 million euro total return in the prior year. This was largely due to a fair value loss of 57.6 million euros in the period under review, compared with a 4.7 million euro fair value gain on investment in H1 FY2022.

Excluding redevelopment projects, the Reit’s portfolio occupancy as at end-June stood at a lower 95.4 per cent from 96 per cent as at end-2022, with weighted average lease expiry (Wale) by headline rent dropping to 4.4 years from 4.6 years.

The light industrial and logistics portfolio’s occupancy stood at 97.9 per cent as at end-June. However, the Reit manager expects a temporary decline in occupancy towards the end of the year as some assets are still undergoing asset enhancement initiatives (AEIs), and may take some time to be fully leased out once completed. Its Wale for the sector stood at 4.9 years.

The office portfolio’s occupancy was 87.7 per cent, with an overall Wale of 3.6 years.

Its manager separately announced that it entered into a new four-year sustainability-linked loan facility for 157.5 million euros to refinance the last of its debt for FY2024 – leaving the Reit with no debt expiring until November 2025.

Cromwell E-Reit’s weighted debt maturity stood at 2.5 years as at Jun 30, 2023. Its manager said this would increase to close to three years, assuming that new facilities signed have been fully drawn.

Highlighting the Reit’s “conservative” gearing of 39.5 per cent on Monday, the manager’s chief executive Simon Garing said it now has 500 million euros of headroom to the Monetary Authority of Singapore’s limits.

“We continue to progress further divestments to guard against the potential impact to valuations from slowing economic growth and rising interest rates and to enable the funding of our ongoing AEI and asset rejuvenation programme,” said Garing. “While these may have a short-term impact on DPU, the risk-return profile of Cromwell E-Reit’s portfolio is expected to continue to improve and provide a more sustainable footing over the medium to long term.”

Units of Cromwell E-Reit : CWBU 0%ended Friday flat at 1.55 euros.