Cromwell’s European expansion grows with McLaughlin promotion

The appointment backs the Australian investment manager’s ambition to grow its business on the continent before turning to Asia.

Brisbane-based Cromwell Property Group has continued its assault on Europe with the appointment of Mark McLaughlin to lead its real estate activities in the region.

McLaughlin, previously Cromwell’s head of European property and head of the Benelux region, replaced former managing director David Kirkby who moved into an executive director role. McLaughlin will report to chief executive Paul Weightman and have operational responsibility for running the European business, the company said.

Weightman said his firm’s aim was to turn Cromwell’s European real estate business into a “market-leading” investment management platform.

“The depth and diversity of Europe’s market makes it a compelling opportunity for overseas capital seeking real estate returns,” he added.

Cromwell’s European expansion began two years ago when it acquired fellow investment manager Valad Europe, of which Kirkby was chief executive, for €145 million. The investment provided the firm, which was relatively unknown in the region, with a substantial European asset management platform, as well as 22 offices in 13 countries.

Speaking to PERE in June, Weightman said: “Europe is going through a recovery. That has taken quantitative easing and a lot of de-risking at a political level, but probably for the first time since we acquired [Valad Europe], we have genuine interest in Europe as a growth story.”

The investment manager intends to build up its portfolio in the region by using its asset management capability to transform value-add real estate into stabilized core and core-plus properties that can be placed into open-ended funds, thereby attracting capital from across the risk spectrum.

Cromwell’s pan-European value-add funds typically produce a cash-on-cash return of 8 percent and a total rate of return of around 11-12 percent. At the highest end of the risk and return spectrum, it has generated returns of up to 34 percent on portfolios of distressed assets.

The first such vehicle, Cromwell European Cities Income Fund, was launched last November with an initial investment target of €2 billion. Denmark’s largest private pension fund, PFA Pension, was an early investor.

Last month, Cromwell sought to list its European real estate platform on the Singapore Stock Exchange before pulling the initial public offering due to a reported lack of institutional support. The firm aimed to raise up to €1.25 billion through the listing but fell around €500 million short.

The firm also indicated that it was looking at Asia as an investment market, with Singapore and Japan first in the queue. Weightman said there were concerns about governance and transparency elsewhere in the region. However, he added, the firm would not be expanding into the US market any time soon because of the depth of competition there.

As of June 30, Cromwell had total assets under management of €6.8 billion across Australia, New Zealand and Europe in a range of sectors with office representing 60 percent, retail 17 percent, logistics 13 percent and property securities and other investment types 10 percent.