Cromwell to refocus on the Australian market after Europe unit sale

The firm will shift to being a local manager given the difficulties of being global without vast scale, according to Cromwell’s CEO.

Brisbane-headquartered Cromwell Property Group looks to refocus on its home market after offloading its European business.

The Australian firm has agreed to sell its European fund management platform and interests, including Cromwell European REIT, to Swiss investment firm Stoneweg for €280 million. Following the transaction, the group will have no overseas assets left, and its assets under management will be reduced from A$11.4 billion ($7.6 billion; €7 billion) to A$4.8 billion.

Going forward, the group will focus on growing the fund management business in Australia and New Zealand through the creation of new products and acquiring real estate operating platforms, according to Jonathan Callaghan, CEO of Cromwell Property Group. Currently, the firm’s A$4.8 billion AUM is composed of A$2.4 billion of balance sheet investments and A$2.4 billion of funds under management in Australia and New Zealand. It invests in both listed and unlisted properties.

In Australia, Cromwell currently has four funds in market, according to its website. Among the four, only Cromwell Direct Property Fund and Cromwell Healthcare Property Fund are focused on investments in unlisted real estate. The former is an open-end fund with an AUM of A$580.2 million as of December 2023. It has generated a 4.9 percent annualized total return since its inception in September 2013, the website stated. Launched in 2024, Cromwell Healthcare Property Fund is a closed-end fund with a forecast distribution yield starting at 7 percent.

“We are shifting from a global manager to a local one. It’s difficult to be a global fund manager because you need a vast scale to be successful at it,” said Callaghan.

Cromwell Property Group expanded its business into Europe in 2015 via the acquisition of Valad Europe from Blackstone. Valad Europe was a pan-European property funds manager with assets of approximately €5.3 billion assets under management.

As a “small” manager, Callaghan thought Cromwell was not in the best position to run a European business from Australia. “It is a very good business. I just wasn’t convinced that we were the right people to own it. And so I think a more local owner, as in Stoneweg, will have a better chance of driving performance,” he explained.

The latest transaction also will conclude Cromwell’s A$1.6 billion debt reduction program, which began in December 2021. The completion of the deal will lower the group’s gearing ratio from 45 percent to 25 percent.

Cromwell is also backed by ESR, which became a 30 percent stakeholder in the Australian firm via the acquisition of ARA Asset Management in 2021. ARA became a shareholder of Cromwell in 2018 and launched a hostile takeover of the group in 2020. In 2023, ESR announced its plan to divest its stakes in Cromwell as it looks to redeploy capital into its core business.

ESR remains a shareholder at Cromwell but did not participate in the latter firm’s sale of its European platform, according to Callaghan. The Hong Kong-based industrial manager itself received a buyout proposal from industry heavyweight Starwood Capital Group in late April.

For more on how Stoneweg will evolve following the acquisition of Cromwell’s European business, check out the story here.