Pockets of office assets still valuable

5 June 2020

Despite the uncertainty around the COVID-19 and its impact on markets for the foreseeable future, the quality office assets offering secure income streams will continue to attract capital, Cromwell Property Group said in the announcement made to the Australian Securities Exchange (ASX). 

In its strategic review update, the firm stressed there was still some hope for the office markets as businesses might be looking to extend leases in the short term to avoid additional relocations costs. 

Also, the recent trend of densification which saw occupancy ratios contract by 30% over the last decade would be likely to unwind in the medium term because companies would need to provide employees with more space which in turn would  help offset the number of employees working from home. 

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“Slow economic growth and high unemployment will provide short-term headwinds. Markets will continue to be volatile and the nature of the recovery, when it comes, is uncertain,” Cromwell’s chief executive Paul Weightman said. 

Cromwell said that the top 10 assets in its Australian portfolio accounted for 92% of the portfolio by value while 44% of gross passing income was related to government and government owned authorities. Just 10% small and medium enterprises (SMEs) were covered by the National Cabinet’s Commercial Code of Conduct which applied to SME tenants whose turnover was under $50 million and who were eligible for the JobKeeper program. 

Source: Cromwell Property Group 

The firm said that it would continue to focus on those 95 SME tenant-customers and that, to date, the Cromwell Diversified Property Trust received a total of 79 rent-relief requests from these tenant customers of which 22 were finalised and 57 are in various stages of consideration. 

With regards to its operations in Europe, the company expected on the back on market dynamics together with travel restrictions, there would be “some uncertainty on the levels of transactional activity and subsequently income that can be generated for the rest of the calendar year 

At the same time, the company said it would pay a distribution for the June 2020 quarter of 1.875 cents per security, as originally forecast and the distribution payment would be covered by earnings and cashflow. 

Performance of Cromwell Direct Property fund and Cromwell Property Trust versus Australia direct property sector average over one year to 29 May, 2020 

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