Geneva-headquartered manager Stoneweg, which invests in real estate across the US, Southern Europe and Switzerland, is set to almost double its assets under management with the acquisition of the European business of Australian manager Cromwell Property Group.
Upon completion of the transaction, announced last week, Stoneweg will acquire 100 percent of Cromwell Europe Limited, 100 percent of the managing entity of the Singapore-listed Cromwell European Real Estate Investment Trust (CEREIT), a 27.8 percent unitholding in CEREIT and 50 percent of the Cromwell Urban Italy Logistics Fund. The parties have agreed a total consideration of €280 million subject to regulatory approval.
The acquisition will add €3.9 billion of real estate to Stoneweg’s current AUM of €4 billion and will constitute a significant expansion in terms of both jurisdictions and property types for the Swiss firm. Stoneweg will also absorb all of the 200-plus employees for Cromwell Europe located across Europe and Singapore. The new entity will operate as Stoneweg and employ more than 300 professionals.
Cromwell’s European platform comprises more than 160 assets across 12 countries in Europe. The majority of the platform’s AUM is held in the Benelux countries and Central and Eastern Europe, followed by Italy, France, the Nordics, the UK and Germany. The firm has 14 offices across the region.
Stoneweg, on the other hand, has 44 percent of its assets under management in the US, followed by 28 percent in Spain, 13 percent in Switzerland, 9 percent in Italy and the remainder across Ireland, the UK and Andorra.
The geographic expansion afforded by the acquisition was one of the key drivers for Stoneweg, according to founder and CEO Jaume Sabater. He told PERE the combined platform will allow the firm to offer its existing investor clients a broader market exposure.
“Previously, if a client asked us to develop a residential strategy across Europe, we were not able to provide them with the same service as we can in Southern Europe, because we did not have a local presence and had to rely on third parties to identify and manage assets in other European jurisdictions,” he explained.
“Now, with this combined platform, existing clients that are exposed to certain geographical areas will be able to work with us on a pan-European level. We now have local presence in all markets and group knowhow in all sectors, and the combination of the two is a huge benefit.”
Sabater added the expanded footprint will allow Stoneweg to offer investors a “wider variety” of funds in future, which could include pan-European vehicles in some sectors, such as hospitality.
Sector stretch
Outside of this geographic expansion, the Cromwell acquisition will provide Stoneweg with exposure to a significantly wider range of property types and risk-return strategies.
Indeed, the majority of Cromwell’s European assets are held in core/core-plus funds and mandates, with limited value-add, whereas Stoneweg invests predominantly via value-add strategies and also has around 7 percent of its AUM in real estate debt, distressed debt and special situations.
Approximately 67 percent of Stoneweg’s current portfolio is held in residential assets, which the firm develops and also acquires and manages. Stoneweg also has a unique focus on the hospitality sector, which accounts for 11 percent of AUM, and is currently investing through Stoneweg InfraSport, a strategy dedicated to developing wave parks across Europe. Most recently, the firm invested £50 million ($64 million; €59 million) in partnership with Teras Capital to develop the UK’s largest surf park in Birmingham – this was also Stoneweg’s first investment in the country.
In contrast, Cromwell’s European platform focuses primarily on industrial and logistics, which currently account for only 14 percent of Stoneweg’s AUM. Around 38 percent of Cromwell Europe’s portfolio is invested in office and 12 percent in retail, both sectors to which Stoneweg’s exposure is limited.
“By adding to our asset class exposure not only geographies but also skills and capabilities in these other sectors across Europe, our group will have a strong presence in the four main real estate sectors,” said Sabater, noting the limited overlap between both firms’ existing exposures.
Taken together, “we saw great opportunities between both businesses to build a one-stop shop for institutional real estate investors in Europe.”
Around 60 percent of Stoneweg’s investments are made through commingled funds, with the remainder through joint ventures and club deals. The firm declined to disclose information on any of its previous fundraises.
Asian attraction
Stoneweg’s ownership of CEREIT, which manages a European property portfolio worth €2.2 billion, will also give the firm access to the REIT’s network of Asian investor clients. This was another key attraction for Stoneweg, which has a predominantly European and American investor base at present.
“Cromwell has a longstanding presence in and relationships with investors from the Asian region, and we want to continue serving these clients and investors over time. Through this transaction we will be able to have a much, much stronger link with Asian institutional investors,” said Sabater.
Sabater said Stoneweg will continue to manage CEREIT through the team in Singapore and will look to grow the platform further. The firm has no plan to expand its activity into Asia, however.
At press time, CEREIT was trading at a market cap of €804 million, at €1.43 per share, on the Singapore Stock Exchange. CEREIT is reporting a total return of 4.99 percent over one year and -9.07 percent over three years.
For more on why Cromwell sold its European business to Stoneweg, read our coverage here