Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

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<ul>
<li>
Of the REITs listed on SGX, the three REITs with 100% of their assets located in Europe are Cromwell European REIT (CEREIT), IREIT Global and Elite Commercial REIT (ECR), with the trio focused on commercial and/or industrial property segments. Between late July and mid-August, the trio reported their results for the first half ended 30 June 2020. 
	 </li>
	<li>
For 1H2020, CEREIT reported a DPU of EUR1.74 cents, down 14.7% YoY, while IREIT reported a DPU after retention of EUR1.82 cents, down 1.1% YoY.  ECR unveiled a DPU of GBP1.95 pence, up 1.0% from its IPO forecast for the period from 6 Feb 2020 (IPO date ) to 30 June 2020. 
	 </li>
	<li>As of 30 June 2020, the trio averaged an aggregate leverage ratio of 35.3%, with an average interest cover of 7.2 times. IREIT had the highest aggregate leverage of 39.0%, while ECR had the lowest aggregate leverage ratio of 32.6%. </li>
</ul>
 
Of the REITs listed on SGX, the three REITs with 100% of their assets located in Europe are Cromwell European REIT, IREIT Global and Elite Commercial REIT, with the trio focused on commercial and/or industrial property segments. <a href="https://www.cromwelleuropeanreit.com.sg/">Cromwell European REIT</a>’s (CEREIT) portfolio comprises 94 properties as at present date in or close to major gateway cities in Denmark, Finland, France, Germany, Italy, the Netherlands as well as Poland, used primarily for office, light industrial / logistics, and retail purposes. The portfolio has an appraised value of approximately €2.1 billion as at 31 March 2020. <a href="http://ireitglobal.listedcompany.com/">IREIT Global</a> (IREIT) has a portfolio of five freehold office properties in Germany, located in Berlin, Bonn, Darmstadt, Münster and Munich, and four freehold office properties in Spain, located in Madrid and Barcelona. The portfolio has an appraised value of €630.2 million. 
Listed on SGX in February this year, <a href="https://elitecreit.com/">Elite Commercial REIT</a> (ECR) is Singapore’s first and only UK-focused real estate investment trust. Elite’s portfolio comprises 97 commercial buildings, which are primarily occupied by the Department for Work and Pensions (DWP) for job centre, back office and call centre functions. About 40% of its portfolio by gross rental income is situated in London, the South and the Midlands. The portfolio is valued at about £319 million. 
Between late July and mid-August, the trio reported their results for the first half ended 30 June 2020. DPU Highlights 
For the six months ended 30 June 2020, CEREIT reported a distribution per unit (DPU) of EUR1.74 cents, down 14.7% YoY.  Net property income gained 6.6% to EUR57.7 million, while gross revenue rose 13.7% to EUR93.7 million, driven by contributions from properties acquired over the past year. Income from the new assets was, however, partially offset by EUR3.0 million of allowances made for uncollected rents due to COVID-19 and lower income from certain assets. 
For the six-month period, IREIT reported a DPU after retention of EUR1.82 cents, down 1.1% YoY. Net property income rose 1.4% to EUR15.7 million, due to higher gross revenue from the new lease at Münster South Building and positive effects from finalisation of prior year’s service charge reconciliation. Gross revenue increased 2.6% to EUR18.0 euros. 
From its listing date of 6 Feb 2020 to 30 June 2020, ECR unveiled a DPU of GBP1.95 pence, up 1.0% from its IPO forecast. Profit after tax jumped 7.0% vs its forecast to GBP3.9 million, as a result of higher revenue, lower operating expenses, finance costs and tax expenses, while revenue gained 0.3% to GBP9.3 million.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			DPU (cts/pence)
			</td>
			<td>
			YoY Chg (%)
			</td>
			<td>
			Net Property Income (mln)
			</td>
			<td>
			YoY Chg (%)
			</td>
			<td>
			Gross Revenue (mln)
			</td>
			<td>
			YoY Chg (%)
			</td>
		</tr>
<tr>
<td>
			CROMWELL EUROPEAN REIT (€)
			</td>
			<td>
			1.74
			</td>
			<td>
			-14.7
			</td>
			<td>
			57.7
			</td>
			<td>
			6.6
			</td>
			<td>
			93.7
			</td>
			<td>
			13.7
			</td>
		</tr>
<tr>
<td>
			IREIT GLOBAL (€)
			</td>
			<td>
			1.82
			</td>
			<td>
			-1.1
			</td>
			<td>
			15.7
			</td>
			<td>
			1.4
			</td>
			<td>
			18.0
			</td>
			<td>
			2.6
			</td>
		</tr>
<tr>
<td>
			ELITE COMMERCIAL REIT (£)#
			</td>
			<td>
			1.95
			</td>
			<td>
			1.0
			</td>
			<td>
			3.9*
			</td>
			<td>
			7.0^
			</td>
			<td>
			9.3
			</td>
			<td>
			0.3^
			</td>
		</tr>
</tbody></table>
Source: Company data

#Period under review covers 6 Feb 2020 listing date to 30 June 2020

^% change computed against IPO Forecast as ECR was listed in Feb 2020

*Profit after tax disclosed instead of net property income

 

Debt Profiles

 

As of 30 June 2020, the trio averaged an aggregate leverage ratio of 35.3%, with an average interest cover of 7.2 times. IREIT had the highest aggregate leverage ratio of 39.0% vs 39.3% as at 31 December 2019, while ECR had the lowest aggregate leverage ratio of 32.6%. No comparative data is available as ECR was listed in February 2020.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 30 June 2020
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 31 Dec 2019
			</td>
			<td>
			Interest Coverage Ratio (x) as at 30 June 2020
			</td>
			<td>
			Interest Coverage Ratio (x) as at 31 Dec 2019
			</td>
		</tr>
<tr>
<td>
			CROMWELL EUROPEAN REIT
			</td>
			<td>
			34.4
			</td>
			<td>
			34.5
			</td>
			<td>
			6.7
			</td>
			<td>
			6.7
			</td>
		</tr>
<tr>
<td>
			IREIT GLOBAL
			</td>
			<td>
			39.0
			</td>
			<td>
			39.3
			</td>
			<td>
			7.4
			</td>
			<td>
			8.7
			</td>
		</tr>
<tr>
<td>
			ELITE COMMERCIAL REIT
			</td>
			<td>
			32.6
			</td>
			<td>
			NA
			</td>
			<td>
			7.4
			</td>
			<td>
			NA
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			35.3
			</td>
			<td>
			 
			</td>
			<td>
			7.2
			</td>
			<td>
			 
			</td>
		</tr>
</tbody></table>
 Source: Company data

NA: Not available as ECR was listed in Feb 2020

 

Outlook 
Cromwell European REIT

<ul>
<li>In the European office sector, the uncertainty brought on by the COVID-19 pandemic has led to a small rise in vacancy rates across most European office markets
	<ul>
<li>Vacancy rates are still around historical lows, with CEREIT’s key Paris and Dutch market vacancies well below the average of 6.47%, based on data from CBRE</li>
		<li>Occupier demand is expected to be weak over the next 12 months due to the pandemic’s impact on corporate profits</li>
		<li>In the medium term, the effect of working from home on a large scale may also have an uncertain impact on the amount of office space that occupiers wish to lease, which may lead to a further increase of vacancy rates, albeit partially offset by the likely scaling back of speculative development</li>
	</ul>
</li>
	<li>In the European logistics sector, occupier demand for logistics properties has largely remained strong in 1H 2020, with online retailers and supermarket chains continuing to drive healthy take-up levels
	<ul>
<li>The high level of leasing activity thus far is expected to continue into the second half of the year, which will keep vacancy rates low at the current levels of ~4.1%, according to data from CBRE</li>
	</ul>
</li>
	<li>Prime rents are forecast to see positive growth over the next two years, supporting development activity, with a number of schemes set to be completed over the next 12 months
	<ul>
<li>Majority of these new spaces are expected to be leased quickly, meaning that a sharp rise in vacancy rates is not expected</li>
	</ul>
</li>
</ul>
<ul>
<li>The weight of capital from European and global investors is expected to keep prime yields stable over the next 12 months</li>
</ul>
<ul>
<li>The Manager is currently focusing on acquiring attractive assets in Germany and neighbouring markets, increasing CEREIT’s exposure to logistics properties, as well as the potential divestment of a number of office assets</li>
	<li>Key redevelopment opportunities continue to exist in Paris, Amsterdam, as well as Milan, and could allow the Manager to attract new high-quality tenant-customers and enhance CEREIT’s income streams over the long term.</li>
	<li>On 13 July 2020, CEREIT entered into an agreement with its sponsor Cromwell Property Group and Stratus Data Centres, a member of the EXS Capital Group, to appoint Stratus as Data Centre Development Manager and to potentially acquire 50% stakes in two data centre projects in London and Frankfurt, subject to various milestones.
	<ul>
<li>The sponsor is also partnering with Stratus to invest in and manage the rollout of a private data centre investment fund across Europe and Asia Pacific</li>
		<li>CEREIT has “first look” rights for 50% stakes in the fund’s European pipeline, providing it with possible opportunities to leverage the unprecedented demand for data centres to further generate stable income and deliver potential upside</li>
	</ul>
</li>
</ul>
Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/8K8EAXZGE4GLIA5F/CEREIT_1H2020_Results_Media%20Release_14_Aug_2020.pdf">here</a> for the full results release.

 IREIT Global 

 Macro Economy

<ul>
<li>The COVID-19 pandemic and ongoing geopolitical tensions, particularly that between US and China, have taken a toll on the business activity in Europe, with major economies in the region expected to fall into recession in 2020</li>
	<li>This has led to a number of measures taken by the EU, including the approval of the historic €750 billion pandemic recovery fund and new budget of nearly €1.1 trillion over seven years to support the European economy</li>
</ul>
Real Estate Market

<ul>
<li>Amid the looming recession, the take-up in office space and investment activity in Europe is expected to slow down in 2020</li>
	<li>However, office rents where IREIT’s properties are located are not expected to be significantly affected due to their good quality and strong local fundamentals eg. low vacancy rates and lack of supply</li>
	<li>IREIT’s portfolio has remained resilient with a majority of the leases supported by a blue-chip tenant base. Portfolio occupancy rate has improved by 1ppt QoQ to 95.7% as at 30 Jun 2020 as a result of major new lease with ÁREAS at the Il∙lumina property in Spain</li>
</ul>
 

 Key Focus

<ul>
<li>To deepen its strategic presence in Spain and increase its portfolio strength through enhanced scale and diversification, IREIT has today exercised the call option to acquire the remaining 60% stake in the Spanish portfolio from Tikehau Capital
	<ul>
<li>The proposed acquisition will  be funded by a rights issue whereby part of the proceeds will also be used to repay the €32 million term loan facility granted by City Strategic Equity Pte Ltd</li>
		<li>The Proposed Acquisition is expected to be completed in 4Q 2020, subject to approval from unit holders of IREIT for the proposed acquisition at an EGM to be convened 
		 </li>
	</ul>
</li>
</ul>
Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/B64K2XCYVCEJYM42/IREIT_1H2020_Results_Announcement.pdf">here</a> for the full results release. Elite Commercial REIT 
 

<ul>
<li>The UK economy is expected to contract by 20% in 1H 2020, and more than 10% in 2020 due to the pandemic</li>
	<li>Analysts forecast a decline in UK real GDP by 7.8% in 2020, and unemployment rate to peak at slightly below 8% in 3Q 2020, averaging 7% in 2020</li>
	<li>Unemployment claims rose to ~3 million since the lockdown with ~9 million people on the UK Government’s furlough scheme, with various other support measures introduced such as the Coronavirus Job Retention Scheme (CJRS) and self-employed income support scheme</li>
	<li>Elite Commercial REIT continues to provide stable income to its unit holders as COVID-19 has minimal impact on business and rent collection</li>
	<li>The Manager remains focused on strengthening the portfolio and will closely monitor the market to explore opportunities for growth via yield-accretive acquisitions
	<ul>
<li>Granted a right of first refusal to acquire properties in Sponsor’s pipeline, most of which have been leased long-term by various ministries of the government 
		 </li>
	</ul>
</li>
</ul>
Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/KRI6SUUPGOPZ2HDE/Elite-Results%20Press%20Release%20for%20Reporting%20Period%20from%20Listing%20Date%20to%2030%20June%202020.pdf">here</a> for the full results release.
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Of the REITs listed on SGX, the three REITs with 100% of their assets located in Europe are Cromwell European REIT (CEREIT), IREIT Global and Elite Commercial REIT (ECR), with the trio focused on commercial and/or industrial property segments. Between late July and mid-August, the trio reported their results for the first half ended 30 June 2020. 
	 
	
For 1H2020, CEREIT reported a DPU of EUR1.74 cents, down 14.7% YoY, while IREIT reported a DPU after retention of EUR1.82 cents, down 1.1% YoY.  ECR unveiled a DPU of GBP1.95 pence, up 1.0% from its IPO forecast for the period from 6 Feb 2020 (IPO date ) to 30 June 2020. 
	 
	As of 30 June 2020, the trio averaged an aggregate leverage ratio of 35.3%, with an average interest cover of 7.2 times. IREIT had the highest aggregate leverage of 39.0%, while ECR had the lowest aggregate leverage ratio of 32.6%. 

 
Of the REITs listed on SGX, the three REITs with 100% of their assets located in Europe are Cromwell European REIT, IREIT Global and Elite Commercial REIT, with the trio focused on commercial and/or industrial property segments.  Cromwell European REIT’s (CEREIT) portfolio comprises 94 properties as at present date in or close to major gateway cities in Denmark, Finland, France, Germany, Italy, the Netherlands as well as Poland, used primarily for office, light industrial / logistics, and retail purposes. The portfolio has an appraised value of approximately €2.1 billion as at 31 March 2020.  IREIT Global (IREIT) has a portfolio of five freehold office properties in Germany, located in Berlin, Bonn, Darmstadt, Münster and Munich, and four freehold office properties in Spain, located in Madrid and Barcelona. The portfolio has an appraised value of €630.2 million.  
Listed on SGX in February this year, Elite Commercial REIT (ECR) is Singapore’s first and only UK-focused real estate investment trust. Elite’s portfolio comprises 97 commercial buildings, which are primarily occupied by the Department for Work and Pensions (DWP) for job centre, back office and call centre functions. About 40% of its portfolio by gross rental income is situated in London, the South and the Midlands. The portfolio is valued at about £319 million.  
Between late July and mid-August, the trio reported their results for the first half ended 30 June 2020.  DPU Highlights  
For the six months ended 30 June 2020, CEREIT reported a distribution per unit (DPU) of EUR1.74 cents, down 14.7% YoY.  Net property income gained 6.6% to EUR57.7 million, while gross revenue rose 13.7% to EUR93.7 million, driven by contributions from properties acquired over the past year. Income from the new assets was, however, partially offset by EUR3.0 million of allowances made for uncollected rents due to COVID-19 and lower income from certain assets.  
For the six-month period, IREIT reported a DPU after retention of EUR1.82 cents, down 1.1% YoY. Net property income rose 1.4% to EUR15.7 million, due to higher gross revenue from the new lease at Münster South Building and positive effects from finalisation of prior year’s service charge reconciliation. Gross revenue increased 2.6% to EUR18.0 euros.  
From its listing date of 6 Feb 2020 to 30 June 2020, ECR unveiled a DPU of GBP1.95 pence, up 1.0% from its IPO forecast. Profit after tax jumped 7.0% vs its forecast to GBP3.9 million, as a result of higher revenue, lower operating expenses, finance costs and tax expenses, while revenue gained 0.3% to GBP9.3 million.




			Name
			
			
			DPU (cts/pence)
			
			
			YoY Chg (%)
			
			
			Net Property Income (mln)
			
			
			YoY Chg (%)
			
			
			Gross Revenue (mln)
			
			
			YoY Chg (%)
			
		


			CROMWELL EUROPEAN REIT (€)
			
			
			1.74
			
			
			-14.7
			
			
			57.7
			
			
			6.6
			
			
			93.7
			
			
			13.7
			
		


			IREIT GLOBAL (€)
			
			
			1.82
			
			
			-1.1
			
			
			15.7
			
			
			1.4
			
			
			18.0
			
			
			2.6
			
		


			ELITE COMMERCIAL REIT (£)#
			
			
			1.95
			
			
			1.0
			
			
			3.9*
			
			
			7.0^
			
			
			9.3
			
			
			0.3^
			
		

Source: Company data

#Period under review covers 6 Feb 2020 listing date to 30 June 2020

^% change computed against IPO Forecast as ECR was listed in Feb 2020

*Profit after tax disclosed instead of net property income

 

Debt Profiles

 

As of 30 June 2020, the trio averaged an aggregate leverage ratio of 35.3%, with an average interest cover of 7.2 times. IREIT had the highest aggregate leverage ratio of 39.0% vs 39.3% as at 31 December 2019, while ECR had the lowest aggregate leverage ratio of 32.6%. No comparative data is available as ECR was listed in February 2020.




			Name
			
			
			Aggregate Leverage Ratio (%) as at 30 June 2020
			
			
			Aggregate Leverage Ratio (%) as at 31 Dec 2019
			
			
			Interest Coverage Ratio (x) as at 30 June 2020
			
			
			Interest Coverage Ratio (x) as at 31 Dec 2019
			
		


			CROMWELL EUROPEAN REIT
			
			
			34.4
			
			
			34.5
			
			
			6.7
			
			
			6.7
			
		


			IREIT GLOBAL
			
			
			39.0
			
			
			39.3
			
			
			7.4
			
			
			8.7
			
		


			ELITE COMMERCIAL REIT
			
			
			32.6
			
			
			NA
			
			
			7.4
			
			
			NA
			
		


			Average
			
			
			35.3
			
			
			 
			
			
			7.2
			
			
			 
			
		

 Source: Company data

NA: Not available as ECR was listed in Feb 2020

 

Outlook  
Cromwell European REIT


In the European office sector, the uncertainty brought on by the COVID-19 pandemic has led to a small rise in vacancy rates across most European office markets
	
Vacancy rates are still around historical lows, with CEREIT’s key Paris and Dutch market vacancies well below the average of 6.47%, based on data from CBRE
		Occupier demand is expected to be weak over the next 12 months due to the pandemic’s impact on corporate profits
		In the medium term, the effect of working from home on a large scale may also have an uncertain impact on the amount of office space that occupiers wish to lease, which may lead to a further increase of vacancy rates, albeit partially offset by the likely scaling back of speculative development
	

	In the European logistics sector, occupier demand for logistics properties has largely remained strong in 1H 2020, with online retailers and supermarket chains continuing to drive healthy take-up levels
	
The high level of leasing activity thus far is expected to continue into the second half of the year, which will keep vacancy rates low at the current levels of ~4.1%, according to data from CBRE
	

	Prime rents are forecast to see positive growth over the next two years, supporting development activity, with a number of schemes set to be completed over the next 12 months
	
Majority of these new spaces are expected to be leased quickly, meaning that a sharp rise in vacancy rates is not expected
	



The weight of capital from European and global investors is expected to keep prime yields stable over the next 12 months


The Manager is currently focusing on acquiring attractive assets in Germany and neighbouring markets, increasing CEREIT’s exposure to logistics properties, as well as the potential divestment of a number of office assets
	Key redevelopment opportunities continue to exist in Paris, Amsterdam, as well as Milan, and could allow the Manager to attract new high-quality tenant-customers and enhance CEREIT’s income streams over the long term.
	On 13 July 2020, CEREIT entered into an agreement with its sponsor Cromwell Property Group and Stratus Data Centres, a member of the EXS Capital Group, to appoint Stratus as Data Centre Development Manager and to potentially acquire 50% stakes in two data centre projects in London and Frankfurt, subject to various milestones.
	
The sponsor is also partnering with Stratus to invest in and manage the rollout of a private data centre investment fund across Europe and Asia Pacific
		CEREIT has “first look” rights for 50% stakes in the fund’s European pipeline, providing it with possible opportunities to leverage the unprecedented demand for data centres to further generate stable income and deliver potential upside
	


Click here for the full results release.

 IREIT Global 

 Macro Economy


The COVID-19 pandemic and ongoing geopolitical tensions, particularly that between US and China, have taken a toll on the business activity in Europe, with major economies in the region expected to fall into recession in 2020
	This has led to a number of measures taken by the EU, including the approval of the historic €750 billion pandemic recovery fund and new budget of nearly €1.1 trillion over seven years to support the European economy

Real Estate Market


Amid the looming recession, the take-up in office space and investment activity in Europe is expected to slow down in 2020
	However, office rents where IREIT’s properties are located are not expected to be significantly affected due to their good quality and strong local fundamentals eg. low vacancy rates and lack of supply
	IREIT’s portfolio has remained resilient with a majority of the leases supported by a blue-chip tenant base. Portfolio occupancy rate has improved by 1ppt QoQ to 95.7% as at 30 Jun 2020 as a result of major new lease with ÁREAS at the Il∙lumina property in Spain

 

 Key Focus


To deepen its strategic presence in Spain and increase its portfolio strength through enhanced scale and diversification, IREIT has today exercised the call option to acquire the remaining 60% stake in the Spanish portfolio from Tikehau Capital
	
The proposed acquisition will  be funded by a rights issue whereby part of the proceeds will also be used to repay the €32 million term loan facility granted by City Strategic Equity Pte Ltd
		The Proposed Acquisition is expected to be completed in 4Q 2020, subject to approval from unit holders of IREIT for the proposed acquisition at an EGM to be convened 
		 
	


Click here for the full results release.   Elite Commercial REIT 
 


The UK economy is expected to contract by 20% in 1H 2020, and more than 10% in 2020 due to the pandemic
	Analysts forecast a decline in UK real GDP by 7.8% in 2020, and unemployment rate to peak at slightly below 8% in 3Q 2020, averaging 7% in 2020
	Unemployment claims rose to ~3 million since the lockdown with ~9 million people on the UK Government’s furlough scheme, with various other support measures introduced such as the Coronavirus Job Retention Scheme (CJRS) and self-employed income support scheme
	Elite Commercial REIT continues to provide stable income to its unit holders as COVID-19 has minimal impact on business and rent collection
	The Manager remains focused on strengthening the portfolio and will closely monitor the market to explore opportunities for growth via yield-accretive acquisitions
	
Granted a right of first refusal to acquire properties in Sponsor’s pipeline, most of which have been leased long-term by various ministries of the government 
		 
	


Click here for the full results release.



1H2020 Earnings of SGX’s Three European REITs