Cromwell asset base grows as statutory profit suffers

Cromwell asset base grows as statutory profit suffers

While Cromwell Property Group (ASX: CMW) may have increased its assets under management (AUM) over the past year, its statutory profits have dwindled.

The real estate investor achieved a statutory profit of $204.1 million, down 26.5 per cent, impacted most heavily by $76.1 million worth of net decreases in recoverable amounts on its assets.

Other factors which have weighted on the company's bottom line in FY18 include a $13.7 million loss on derivative financial instruments, a $17.8 million expense on lease incentive amortisation and $21.2 million in amortisation of finance costs.

Total assets under management increased by 14 per cent to $11.5 billion, a positive turn which CEO and managing director Paul Weightman says is largely due to growth in its Cromwell European REIT (CEREIT) arm, a division focused on the European office, light industrial and logistics sectors.

"The success of CEREIT, the growth in our funds management platform, the support we have from a range of new capital partners and the opportunities we have identified give us the confidence to invest further in the future growth of the platform," says Weightman.

Cromwell's property investment segment reported an operating profit of $115 million, a 7.8 decrease on the prior year due partly to $154 million in asset sales.

The property portfolio is valued at $2.45 billion and includes the recent addition of Soward Way and Northpoint Tower, assets representing a combined investment of $300 million which reached practical completion during FY18.

"We have talked a lot about both of these assets, but I think they are a great testament to Cromwell's ability to reposition and add value to properties," says Weightman.

Over the coming financial year and beyond, Cromwell will begin to execute its new 'invest to manage' strategy, which aims to reinvest distributable cash back into the business.

Weightman says this strategy will help the business tap into a wider range of capital sources and connect them to investment opportunities in Europe, Australia and New Zealand.

"Where appropriate, we will look to fund the seeding and warehousing of some of these upcoming opportunities and co-investment in funds to further accelerate AUM growth," he says.

CMW shares are currently trading down 1.5 per cent at $1.13 at the time of writing (10:34am AEST).

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