ARA snaps up Cromwell stake

Cromwell Property Group has secured Singapore-based ARA Asset Management as a major backer.

The listed Cromwell Property Group has won praise from analysts after winning Singapore-based ARA Asset Management as a major backer, with the group’s $405 million investment positioning both groups to expand locally and offshore.

In a dramatic move, ARA last night agreed to buy a 19.5 per cent stake in the Australian property funds manager from the local group’s long-time backer, South African group Redefine Properties.

While ARA’s move is subject to Foreign Investment Review Board approval it removes an overhang over Cromwell’s $11 billion global operation, as the Redefine stake had been quietly sought by the likes of Singapore’s Ascendas-Singbridge and local player Charter Hall.

Both ARA and Cromwell have ambitions to grow their real estate platforms globally and they were quick to identify Europe as a focus for expansion.

Cromwell owns the former Valad platform in Europe and, while funds under management have dipped, the group is flagging a major push in the wake of floating a $2bn portfolio of European assets in Singapore.

Cromwell has about €4bn in assets under management in Europe and took a 35 per cent sponsor stake in Cromwell European REIT last November.

Cromwell chief executive Paul Weightman indicated that both local and offshore investments could be pursued, saying the European platform had the capacity to deploy more than 50 per cent more capital due to its 12 country network.

“We also have some exciting value enhancing projects in our Australian property portfolio,” he said.

“We look forward to working with ARA to explore these, and other, opportunities to drive value and sustainable earnings growth for the benefit of all Cromwell security-holders,” he said.

Locally, Cromwell is emphasising its value-add model as the property cycle peaks. It has identified opportunities at Victoria Avenue in Chatswood, Tuggeranong Office Park in Canberra and Collins Street in Melbourne.

ARA manages 11 public and private real estate investment trusts and nine private real estate funds with assets totalling about $S40bn in the Asia Pacific.

Already well established in the region, ARA recently embarked on its global expansion with the establishment of a European platform and has also increased its presence in Australia through buying buildings, including Melbourne’s $600m Southgate complex.

ARA’s Group chief executive John Lim said the Asia Pacific remained a focus even as the company expands its footprint globally.

“We entered Australia in 2015 and have been steadily increasing our investments in the market over the last three years. Australia continues to offer strong investment and capital raising opportunities to support the growth of our funds platforms,” he said.

Mr Lim cited the strength and depth of Cromwell’s platforms, track record of value enhancing real estate strategies and strong corporate governance. “We believe Cromwell will benefit from our deep network of capital partners,” Mr Lim said.

ARA paid a price of about $1.048 per share, a 3 per cent premium to Cromwell’s last close, and the group’s shares edged up to $1.02.

Redefine will hold a 3.09 per cent interest in Cromwell as a long-term play but said its focus was now on recycling capital and active asset management, with the deal to cut back its gearing.

Cromwell paid tribute to its South African backer, which came on to its register as a strategic investor in 2009 in the wake of the global financial crisis, and then backed its growth as bought local portfolios and grew offshore.

The South African group was mooted as a supporter of Cromwell’s play for the Investa Office Fund, but last year said it was not providing equity to the consortium that was assembled to bid for that $4bn portfolio.

Redefine has previously been mooted as capital partner in some Cromwell-managed deals, including student accommodation and retirement. While these may continue, Redefine is close to selling its half stake in the $600m Northpoint Tower in North Sydney.

Macquarie analysts noted that the relationship with ARA would see Cromwell work towards growing its wholesale investor base and creating new funds in Europe.

“This is an incremental positive outcome for Cromwell with a new strategic shareholder on the register bringing access to a greater network of wholesale investors to grow the wholesale funds management business, in our view,” Macquarie said.