The investment is equivalent to a 4%-8% stake in the fund, depending on the final quantum of investment made by other investors.
The sites have a secured or reserved 1,116MW of power with “very good visibility” for an additional 563MW, according to the REIT manager.
The investment “complements” SERT’s stable income generation from its core logistics and light industrial portfolio, say Lock and Li in a June 24 note, and adds to the REIT’s existing data centre holdings in Denmark and Poland.
“Given SERT’s involvement in the early development stage of these projects, we believe SERT could also benefit from [the] portfolio value enhancement process during the development cycle,” they add.
In addition to potential net asset value (NAV) accretion, increasing exposure to the data centre segment could also allow SERT to enjoy “premium valuation multiples” as well as potential stronger investor interest, write the analysts.
Hence, the CGSI analysts are maintaining “add” on SERT with an unchanged target price of EUR1.93.
Longer-term value enhancement
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While no investment return details were shared, SERT’s management indicated the current estimated gross development value (GDV) of the projects over the next 15 years is EUR29.5 billion, based on a 100% interest in all four projects, according to valuations by JLL.
“There is also likely to be minimal impact on SERT’s distribution per unit (DPU) during the development phase of IDC, with material cash distributions to be made at redemption of the fund,” say Lock and Li, citing management’s comments.
The CGSI analysts like SERT’s “clear divestment/redevelopment strategies” to rebalance its portfolio to a 60%/40% industrial/Grade A office composition. Lock and Li say this allows SERT to capture leasing tailwinds.
SERT was renamed from Cromwell European REIT on Jan 2, after London- and Luxembourg-based alternative investment group Icona Capital and Geneva-headquartered real estate investment group Stoneweg paid EUR280 million to take over a 27.9% stake in the REIT.
Icona Capital and Stoneweg announced in March that they now operate under the newly formed SWI Group brand, with more than EUR10 billion of assets under management.
SERT was converted into a trust from its former REIT structure earlier this year. Each unit of Stoneweg European REIT was stapled to a unit in Stoneweg European Business Trust, and the stapled securities began trading on the Singapore Exchangeon June 16.
As at 1.50am, the stapled securities in SERT are trading EUR0.01 lower, or 0.65% down, at EUR1.54.
