RECURRING income from its portfolio of investment properties has secured Cromwell Property Group (CMW) first half operating earnings of $32.9 million.
CEO of the property trust and funds manager company Paul Weightman (pictured) says FY11 was a period of consolidation as the group steadily worked to improve the quality of its investment property portfolio by acquiring premium assets and selling smaller properties.
“During this period, we’ve pursued a strategy of rebalancing our property portfolio towards assets with long lease profiles, which we believe will offer the highest risk-weighted return while improving the value of those assets through development and refurbishment,” he says.
“The reward for this hard work can be seen in our exceptional leasing profile – we have an average of just 5.4 per cent leasing expiry in each of the next five years and one of the longest weighted average lease terms in the sector.”
Weightman says the company started the year positively after securing a tenant for its distribution centre at Hoppers Crossing in Victoria on a 10-year lease.
The lessee is a joint venture between Woolworths and US home improvement retailer Lowes and the lease covers 52,600sqm and follows the completion of stage two of a three stage refurbishment of the property.
“The distribution centre was the largest vacancy for Cromwell’s property portfolio for the 2011 financial year, so securing the new lease reduces the amount of vacant or expiring income in FY11 down to 5.3 per cent,” says Weightman.
“To complete major building works on an asset of this size and secure a new tenant within two months of a property being vacated is a rarity and speaks volumes about Cromwell’s in-house property management competitive advantage.”
Weightman says the group will continue its disciplined approach to growth, focusing on improving the quality of its portfolio.
“We aim to achieve this through selected further acquisitions, whilst supplementing property earnings with increasing contributions from funds management and opportunistic transactions as the economy and confidence continue to recover,” he says.
“We’ll continue to look at opportunities for corporate or property transactions, which protect or enhance our operating earnings and NTA per security.”
Weightman outlines earnings growth as a focus for the company in FY11.
“Irrespective of any future transaction, the group remains well placed to return to earnings growth in FY12 through continued growth in underlying property earnings, supplemented by likely improving contributions from the group’s funds management activities,” he says.
The company recently re-branded to Cromwell Property Group from Cromwell Group to better reflect the nature of the business as a property trust and property funds manager.
“This action is part of a company-wide brand revitalisation aimed at driving improved customer experiences and creating a consistent and recognisable brand platform in preparation for future growth,” says Weightman.
“Last year also saw the restructure of the unlisted Cromwell Property Fund, with the group acquiring two assets from the funds.”
During December 2010, the company announced it had agreed with Centro, to extend Cromwell’s exclusive dealing period for the acquisition of the Centro MCS direct property syndicate funds management business.
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