Value Partners Buying $30M Half-Stake in Italian Logistics Portfolio From Cromwell

Australia’s Cromwell Property Group has agreed to a joint venture with Value Partners Group that will see the Hong Kong-based asset manager acquire a 50 percent stake in Cromwell’s portfolio of seven logistics assets in northern Italy.

The sale is based on a portfolio asset value of €55.8 million ($60.8 million), marking a 9.4 percent increase on Cromwell’s initial purchase price, the Brisbane-based firm said Monday in a filing with the Australian Securities Exchange. The partial sale of the assets, which form the basis of Cromwell Italy Urban Logistics Fund, will further the group’s goal to reposition itself as a capital-light fund manager, CEO Jonathan Callaghan said in the announcement.

Mingtiandi reported in July 2020 that Cromwell had set up a JV with South Korean investor IGIS Asset Management to buy the set of Italian sheds from express giant DHL for €52.5 million, with the deal later concluding at a €51 million price in October of that year. A PR representative for Cromwell confirmed Monday that IGIS had exited its position in 2021.

“The Italian assets were identified as non-core to Cromwell’s business in 2022 and, as a result, Cromwell actively marketed the assets for sale or co-investment,” Callaghan said.

Still Seeking Sheds

The seven properties, located near Milan, Turin, Bologna and Verona, have a combined net lettable area of 47,466 square metres (510,920 square feet) and are fully let to DHL on long-term leases with a weighted average term of 7.8 years. Cromwell’s European operations team will continue to manage the portfolio after the deal’s expected closing this month.

The sale proceeds are estimated to return €12.5 million in equity that will go towards gearing reduction and future redeployment for Cromwell’s strategic initiatives. The 50:50 joint venture of Cromwell and Value Partners plans to grow the portfolio with selective acquisitions of logistics assets in Italy’s urban hubs and other cities in Europe.

“We will continue to focus on simplification of the business through our non-core asset sale process, including those assets in the Cromwell Polish Retail Fund, as well as some additional non-core assets in Australia, applying proceeds to debt reduction in the first instance to ensure security through an ongoing difficult operating environment,” Callaghan said.

The deal represents the first European investment for Value Partners, the firm led by Malaysian financier Cheah Cheng Hye with assets under management of $5.9 billion.

“This expansion and geographical diversification of our logistics portfolio will deliver exciting opportunities for growth and profitability for our investors,” said Rachel Tong, managing director and head of real estate private equity at Value Partners. “Italy is an important logistics hub in Europe. We are confident of stable returns.”

Milan Office Offloaded

As part of Cromwell’s drive to offload non-core assets, the group’s sponsored Cromwell European REIT last week announced the disposal of a Milan office building for €93.6 million.

The sale of the 1930s-era Piazza Affari 2 to Italian asset manager Kryalos SGR fits the strategy of divesting non-core and non-strategic assets to recycle into redevelopment and asset enhancement programmes, Singapore-listed Cromwell E-REIT’s manager said Friday in a stock filing.

Declining property valuations led Cromwell to report a loss of A$129.5 million (now $86.2 million) for the six months to December 2022, reversing a year-earlier profit of A$132.5 million, as chairman Gary Weiss noted that the group was pursuing “simplification of Cromwell’s operating structure, improved staff engagement and management of the balance sheet through non-core asset sales”.