On 17 December 2020, Cromwell Funds Management (CFM) held a Meeting for unitholders in the Cromwell Property Trust 12 (Trust) to decide on the future of the Trust, which reached the end of its initial seven-year term on 31 October 2020.
The Meeting provided a good result for Unitholders looking for long-term income, with votes overwhelmingly in support of a proposed extension of the Trust.
84.18% of Unitholders in the register who were eligible to vote did so, with 82.82% of those who voted, voting in favour of the term extension. The Trust now continues for a further five years, with maturity extended to 31 October 2025.
Similarly, the Matching Facility proposal also achieved overwhelming support, with 98.57% of the total votes cast by eligible unitholders voting in favour, setting in motion the matching of buyers and sellers of units in the Trust.
Income from quality assets a priority
Cromwell’s Head of Retail Funds Management, Hamish Wehl, said the result endorsed CFM’s view that regular, reliable income from quality assets is a high priority for many investors, with few willing to wind up the Trust in an environment where similar secure income streams are difficult to obtain.
“Unitholders have been very supportive of the Trust, which has provided security and stability over the initial seven-year term by generating consistently high yields, at a time when interest rates have been reducing,” Mr Wehl said.
By including a Matching Facility in the proposal, CFM was able to provide investors who wished to exit the Trust with an opportunity to sell their units to unitholders wishing to buy more.
Investors were originally attracted to the ‘back to basics’ format of the Trust, with blue-chip tenants and lengthy lease terms across three assets; the smallest of which, Dorcas Street, South Melbourne, was sold in August 2015.
Unitholders receive Special Distribution as second term commences
With the proposal including the sale of the Rand Distribution Centre on 14 December 2020, and a $0.6184 per unit special distribution for Unitholders, the Trust now continues into its second term holding one asset - the Australian Tax Office Building at 19 George Street in Dandenong, Victoria.
“Our approach and expertise in identifying and managing quality assets has proven highly successful for unitholders in Cromwell trusts, and I am not surprised at both the appetite to roll over and the appetite to buy more” Mr Wehl added.
Quality assets a buffer from volatility
19 George Street is 93% leased to the Australian Taxation Office until September 2030 and has a 5.5-Star NABERS Energy Rating, a 5.5-Star NABERS Water Rating, and a 6-Star Green Star Office As Built v3 rating. As of 31 October 2020, the asset was independently valued at $107 million, a 52% increase in less than seven years.
With the ATO’s lease continuing until September 2030, the asset is insulated from COVID-19 induced market volatility, with the ATO not exposed to the same market conditions as a private enterprise.
For Unitholders remaining in the single asset Trust, distributions are forecast to be 5.75 cents per unit p.a. from 1 July 2021, increasing at a rate of 0.25 cents per unit each July over the Further Term. This reflects a distribution yield of 6.2% on the Matching Price of $0.9349.
Access to the Trust is only available through the Cromwell Direct Property Fund, which is a unitholder in the Cromwell Property Trust 12.