Thank you. Good morning, everyone, and welcome to Cromwell Property Group's Financial Results Presentation for the Half Year Ended 31 December 2021. I begin by acknowledging the traditional custodians of the lands on which we meet today and pay my respects to the elders past, present, and emerging. While the global operating environment continued to be challenging due to the ongoing COVID-19 pandemic, Cromwell has achieved a satisfactory half year result, which reflects the stability and resilience of our platform. Our global team continues to provide on-the-ground operations so that our security holders and investors can benefit from our depth of experience and local knowledge across a range of key property sectors. During the period, good progress was made on a number of fronts, most notably the appointment of Jonathan Callaghan as Managing Director and Chief Executive Officer of the group.
Jonathan is an outstanding executive with deep experience in property and capital markets. In addition, we have undertaken a strategic review of the business. In November 2021, we outlined our proposed strategy to simplify the group structure by using our existing portfolio of assets to create new funds and accelerate the growth in our fund management and development businesses. This is well progressed, and Jonathan will comment further on this shortly. This refreshed vision for the group has the full support of the board, and we look forward to progressing this initiative, which the board believes will drive long-term value for security holders. I'll now pass over to Jonathan.
Good morning to everyone on the line, and thank you for dialing in. Good evening to our European investors. Welcome to everyone. As we move into 2022, we have high hopes that we're moving into a period of recovery from the impacts of COVID-19 and the beginning of a new world of learning to live with COVID. It has been a hard time for the business and staff. While things will never return to the way they were, we are hopeful that 2022 will welcome an improving business environment. This has been a period of change for our business with a changed board of directors and key changes to the senior management team. On that, I'd like to echo Gary's remarks and extend my appreciation to the Cromwell staff who have stuck by the business and supported the board of directors and myself through this period of change.
We're pleased to be able to share Cromwell Property Group's half year results with you today, which is reflective of the resilience of not just our business, but our people, the people who drive our strategies. Together with the board, management has spent the last period reviewing the business model of Cromwell in an effort to define a clear strategic direction for Cromwell, which will be easily understood by investors and deliver on Cromwell's inherent value. We have a clear vision to build a simplified and more capital efficient model with a strategic emphasis on the major opportunities to grow our global funds and asset management business. We will talk about this and progress on related initiatives later in the presentation. There are, however, a number of initiatives that have been progressed to support this renewed vision of the business.
We are committed to the sale of non-core assets that don't align with the group's strategy, including the group's interest in LDK, its cinema assets, and the TGA complex. We are focused on the growth of our European platform and are excited about the possible launch of new funds, which we will talk about later. We have a renewed focus on the Australian funds management business with BPS, our flagship unlisted retail fund, acquiring two new assets in the period. We have introduced a program of key initiatives which aim to retain and support our valuable people and attract new talent to the business to help underpin the renewed clear strategy. We're also conducting a review of our group structure, policies, and processes to optimize all business functions, including group ESG, which is a key focus of growth globally.
Some grading issues are ongoing in both Europe and locally. I would like to hand over to CFO, Michael Wilde, who will take us through the financial results in more detail, as well as capital management.
Thanks, Jonathan. Operating profit for the half year was AUD 96.4 million, equivalent to AUD 0.0368 per security. This was a 2.7% decrease on the prior corresponding period, but an increase of 3.5% on the prior six months, largely driven by better results from the Polish retail assets. Looking at each segment in turn, Cromwell's investment portfolio consists of 17 Australian office assets with a strong weighting to government and listed tenants. Rent collection within the portfolio was largely unimpacted from COVID-19 during the half year. Segment profit was AUD 72.7 million, a 3.5% decrease from the prior corresponding period. This was largely the result of the sale of non-core assets and impacts of key leasing activities at HQ North.
Property valuations saw fair value gains of AUD 61.1 million for the half year, and this also contributed to the NTA increasing to AUD 1.03. Fund and asset management segment profit of AUD 22.7 million was equivalent to the AUD 22.8 million in the prior corresponding period. The prior period included a AUD 9.7 million performance fee for the rollover of the Cromwell Property Trust 12. Exclusive of all performance fees, the current half year segment profit for funds management in Australia and Europe was a 44% increase over the prior period. Co-investments include Cromwell's holdings in CEREIT, CPRF, and the Italian logistics portfolio. Segment profit of AUD 28.4 million was an increase of 18% over the prior period. The Italian logistics portfolio continues to be unimpacted by COVID-19.
No lockdowns in Poland during the current half year, so the returns from the Polish retail assets increased compared with the same period last year. CEREIT continues to move its portfolio weighting from office assets to logistics assets, and its property valuations increased during the half year, with minimal impact to rent collections on the back of less COVID-19 lockdowns in Europe. Non-segment specific corporate costs, which pertain to group level functions, increased in total for the half year by 16.8%. This was the result of an 89% increase in insurance costs. Excluding insurance costs, corporate costs decreased by 1% compared with the same period last year. Turning to capital management. Gearing for the group sits at 42%, which is above our target of 30%-40%.
Bringing this level below 40% is a key focus for the group, which will be achieved upon the sale of our stake in LDK and the creation of new European funds with co-investors. The average interest rate across the group remains relatively low at 2.3%, with weighted average debt maturity of just under three years. The convertible bond has an investor put option date of 1 August 2022. Given the current market conditions, there is a heightened probability this put could be exercised. Cromwell holds sufficient liquidity to manage such an event. We also continue to have covenant headroom with a strong interest cover ratio of 6.6 x. 58.6% of borrowings on 31 December 2021 are either fixed or hedged through interest rate swaps and caps.
Our preference for interest rate swap caps has seen Cromwell benefit from the current low interest rate environment. I'll now hand back to Jonathan to go through the investment portfolio.
Our Australian investment portfolio performed well over the six months to 31 December 2021. The investment portfolio shows strong and stable returns, which are underpinned by heavy weighting to government and listed tenants who are largely not impacted by COVID-19 lockdowns. The weighted average lease expiry of the portfolio remains high at 5.85 years, with no material leases expiring for the next three years. Valuations were up 2.6% across the portfolio. In the near term, we're ensuring that our assets are well-positioned to support the movement to what the new normal will be for office occupancy. While the bulk of our tenants have experienced some form of work from home, we're aware of how critical the office space is for teams to engage, to collaborate, and provide a hybrid work environment with amenities to suit.
Now, turning to our fund and asset management business. Across the global platform, growth of assets under management grew more than 1.8% for the six months from 30 June 2021, driven by ongoing demand for our unlisted retail funds. Operating profit for the period was steady, though is reported lower than the prior corresponding period, which is due to performance fees from the Australian retail funds management business in the previous period. Excluding performance fees, operating profit increased 44% over the prior half year. Turning to the Australian and New Zealand funds management business. Currently, assets under management through our local Australian platform is AUD 2.7 billion.
In Australia, we have appointed a new Head of Retail Funds Management, Peta Tilse, who has a clear priority to capitalize on our strong brand in the retail investor base to grow funds. Peta brings over 25 years' experience in both the retail and institutional markets, and she will be responsible for continuing to grow our retail funds business. The Cromwell Direct Property Fund had retail growth equity inflows of approximately AUD 75 million over the six months to 31 December 2021. Cromwell invested AUD 20 million or 4.6% in the fund to support the fund's initiatives and align the interests of the group with the unitholders. Lonsec and Zenith both have a recommended rating for this fund. Cromwell Riverpark Trust has commenced the sale process on Energex House.
This asset was developed by our in-house development team with the latest book value of AUD 358.8 million. Positive initial inquiry on the back of a strongly rated ESG asset developed by our in-house development team is very positive, and we're looking forward to a strong result on that process. Cromwell Property Trust 12 had a single remaining asset in Dandenong, Victoria, with the sole tenant being the Australian Taxation Office. This asset continues to perform extremely well, reflected by a 16% valuation uplift in October 2021, now valued at AUD 124 million. The fund has a distribution yield of 5% based on a distribution rate of AUD 0.029 per unit and a unit price of AUD 1.16 as at 31 December 2021.
The primary growth initiative, however, for the Australian business is the creation of an externally managed listed REIT using a portfolio of existing Cromwell assets, which we'll talk about shortly. I now wanna hand over to Pertti, who will talk to the European business and its co-investments.
Thank you, Jonathan, and good morning, everyone. Funds under management in our European business grew to AUD 1.5 billion.
In Europe, a key focus remains to transition our business to a leading funds manager and on the expansion of product offerings targeted towards institutional investors across a range of real estate sectors. Cromwell's 28% equity-accounted share of CEREIT's operating profit for the half year was AUD 21.6 million. Down on half year 2021 which was AUD 22.4 million. CEREIT paid a dividend of AUD 14.1 million to us. Our equity stake is valued at AUD 617.3 million as at 31st December 2021. CEREIT recently released full year 2021 results, showing strong portfolio occupancy of 95%. New and renewed leases of 12.2% of the portfolio included a positive rent in reversion of 5% across the portfolio for the full year.
The portfolio of retail assets in Poland that form CBRF was valued at AUD 784 million, which is inclusive of our 50% interest in AUD 165 million Ursynów asset with Unibail-Rodamco. These centers are anchored by large French grocery giant Auchan, representing 30% of cross-portfolio rent. Total rental invoice collections were 91% for the year, which were impacted by multiple COVID lockdowns. The collection rates are expected to continue to improve as the effects of COVID-19 dissipate and taking into account the usual lag in collections. CELF, a portfolio of Italian logistics remained resilient, valued at AUD 90.7 million, up 5.1%. These seven logistic assets are tenanted solely by DHL, who maintained strong operations through COVID-19 on the back of increased demand for logistics globally.
Our European business has undertaken a lot of work to ensure we are well-positioned and in line with the global Cromwell strategy. We have assessed processes and operations at our local platform to ensure we are set for ongoing success as an integrated investment manager to drive value and efficiencies for our capital partners. We have established a dedicated ESG team and framework to implement pan-European and regional initiatives. While there has been rapidly increased demand for a strong ESG investment products from our capital partners for quite some time. This was heightened by the introduction of SFDR, which came into full effect in March 2021.
The European Union's Sustainable Finance Disclosure Regulation, or SFDR, is designed to help institutional asset owners and retail clients understand, compare, and monitor the sustainability characteristics of investment funds. Tom Duncan has been appointed as Head of Research and Investment Strategy. He adds significant value to our investment strategies by underpinning opportunities with sector and regional outlooks. A new Head of Development with extensive logistics experience has been appointed for the European platform, Florian Hoyndorf. His primary focus is to build further value add capabilities across the region to support anticipated ongoing demand for value add strategies. The platform in Europe supports the ongoing series success through asset management, property management, and transactions. During the period, we have acquired or exchanged over EUR 130 million in assets and over EUR 250 million in exclusivity or undergoing detailed due diligence.
This includes CEREIT's first and second investment in the United Kingdom. Active ongoing discussions remain with capital partners who are sourcing country-based mandates with new mandates secured in Germany, Italy, and Nordics. 10 assets are approaching completion or in exclusivity for these mandates. We are progressing with a pipeline of investment opportunities in Europe at varying stages of development for our institutional capital partners. The first is Cromwell European Logistics Fund which will be a closed-ended fund. The seed portfolio of seven assets is currently warehoused on our balance sheet.
Investment opportunity exists to get exposure to a core asset sector, as well as being an ideal low risk start to build a portfolio while offering attractive yields compared with other target countries. Following the appointment of Knight Frank Capital Advisory, cornerstone investors are currently undergoing due diligence. Polish retail is a sector which we are seeking an uptick in sentiment and activity. This investment offers value add potential in a sector still experiencing a strong initial recovery from COVID-19. Portfolio anchored by a large key tenant. In Germany, we have received approval from BaFin, who are the local financial regulator, to launch an investment vehicle focused on light industrial assets with a secondary focus on logistics. These assets have long-term tenant demand due to a strong network requirement in Germany and has received strong investor feedback so far.
The final opportunity I'll address this morning is what we are calling Cromwell Dasos Wooden Building Fund. This will be managed jointly with Dasos Capital and will focus on sustainable investment in wooden buildings across a range of diversified sectors in Europe. This fund will target the highest SFDR rating of nine, and represents that the funds invests in sustainable buildings which either produce no carbon emissions or reduces them. Since last April, when we set new strategic targets, we have won new mandates, progressed well with new product launches, and improved our corporate profile. Our local teams and people have been able to add value, not only for our investors, but also to Cromwell security holders. All this to support Cromwell Property Group's overall strategy. Now I hand back to Jonathan.
Thanks, Pertti. Now moving on to the Group strategy. With the board refresh in early 2021 and my subsequent commencement in October, we have been hard at work reviewing the business. Central to this review have been a number of key themes. Identifying how we can deliver value for our security holders, positioning the business for success, simplifying the business and improving transparency so that it's easy to understand, and how do we attract and retain the best people. With the size and scope of our global platform, we believe that Cromwell is uniquely placed in the Australian listed market to take advantage of the ever-increasing demand for real estate investment globally and the weight of capital looking to be deployed.
With 28 offices across 14 countries, Cromwell is well-placed to become a capital efficient global real estate fund manager with a local presence, servicing our investors across multiple jurisdictions and investment strategies. Over the past 10 years, fund management security prices have significantly outperformed REITs. Through a transition to a more capital efficient fund manager, particularly through the creation of a new externally managed REIT, will allow both business to grow through attracting appropriately priced cost of capital and will provide security holders additional choice on how to invest their capital. Central to our strategy will be improving our reporting, our communication to increase transparency and create trust and alignment with our security holders, investors, tenant customers, and our people.
In order to successfully make this transition, we will need to continue the repositioning of our business in Europe to an investment management model, along with executing on a number of initiatives to launch new funds and sell down existing balance sheet exposure in Poland and Italy. In Australia, we want to build on our long history in the Australian office sector, putting our value-added skills to work in delivering new products to our investor base. With a particular emphasis on growing our retail funds management business and creating a new office REIT listed on the ASX using a portfolio of assets from our balance sheet. We need to simplify and refocus the Australian business back to its core competencies. To do this, we'll be looking to divest a number of non-core assets, including our investment in LDK and a number of smaller portfolio assets.
These projects are already underway. Now, I wanna turn to an exciting major project which we've been talking about and which we've been working on since mid last year and foreshadowed at our AGM in November. This project will accelerate our transition to a capital light fund manager model and involves using material portfolio of assets currently owned by Cromwell to create a large, externally managed ASX listed office REIT, in which Cromwell will own a substantial co-investment. Subject to board, regulatory, and security holder and other approvals, existing investors will receive securities in the new REIT and retain securities in Cromwell, which will continue to have circa AUD 12.1 billion of assets under management across multiple funds and geographies. We are well progressed with this project, with the chairperson of the new REIT board and the fund manager having already been identified.
Regulatory process to obtain the necessary approvals are underway, and we anticipate bringing the project to investors for their consideration later this financial year. I'll now just quickly turn to the outlook. The simplification of the Cromwell platform will guide our future priorities and unlock value for security holders. We'll be focused on driving performance of the investment portfolio and growing the funds management platform both in Australia and Europe. We are pleased to be able to share this update and our strategy to move forward now with a clear vision for Cromwell, which is aligned with our security holders. A distribution of AUD 0.01625 per security is expected to be paid for the March 2022 quarter.
We will now offer the opportunity for questions. To ask a question, please dial one on your telephone keypad.
Thank you. Once again, to ask a question, just press star one on your telephone keypad. We have your first question from the line of [ Philemon Jang] from JP Morgan. Please ask your question.
Hey, Jonathan and team. Thanks for your time. Maybe a question for Pertti. Just wanted to get an update on the percentage of EU funds under funds under management that are still in sort of private equity style mandates of shorter fixed terms. I think the last number that you provided at FY 2021 was about 20%.
Yes. Yes. It's about the same at the moment. Of course, CEREIT is a big part of our European business and new funds are to be launched, and they have not been launched yet, what I just said earlier. That number is about right.
Yeah. What's the sort of average duration left for those private equity style mandates?
They are normally between five and seven years, plus potential extensions.
Gotcha. Maybe just the next question on, I guess, demand for pure play office REITs, given the plans to float by the end of FY 2022. Are you still seeing pretty strong demand, or is it sort of a bit more challenged given the rates and capital markets environment?
I mean, demand is still there. I mean, offices still will form an important part of most diversified investment portfolios. You know, the office markets are challenged with the impacts of COVID-19, and like all real estate markets, will be impacted to some extent by changes in the yield environment. Broadly speaking, you know, offices will always be a substantial part of most investment portfolios, and we think that in the long run, it will always perform strongly.
That's great. That's clear. Maybe a last one just for Michael. Just on the like-for-like NOI growth, the decrease of 3.9%, it's probably the first time it's turned negative for a while. I understand there's some repositioning in 400 George Street, Kent Street, and HQ North Tower, but would you have to just talk to the drivers there?
Yeah. I mean, I think you've identified it anyway. Again, a more challenging leasing environment. Main one, of course, was HQ North, where the major tenant there, they extended their lease, but they also handed back a floor. There was a change as well in the leasing profile from the net to gross at the same time that we had other, obviously, outgoing costs increased in Queensland. Generally speaking, it's just that, the impact of the current leasing environment.
Great. Thanks for that.
Your next question comes from Alexander Prineas from Morningstar. Please ask your question.
Thank you. Good morning. A couple of questions, possibly. First of all, on the weighted average debt maturity of 2.9 years, it is shorter than a lot of other REITs. Is that a deliberate strategy? Can you just talk through that?
I think it's the debt expiry profile and the way in which we're dealing with that is gonna be impacted somewhat by the proposed creation of the REIT, in which effectively a lot of the existing debt facilities will need to be refinanced and replaced. The short answer is we haven't been focusing too much on refinancing the shorter ended sort of expiries in the debt profile because of the work that we've been doing on the creation of the new REIT.
Makes sense. In terms of the new REIT, apologies if I missed it, but what level of co-investment is Cromwell thinking of taking?
We haven't landed on an exact number, but it will be substantial. When I use the word substantial, you know, I sort of think greater than 15%.
Okay, thanks. In light of that, would you retain your existing kind of gearing target of 30%-40%, or would that potentially be revised?
I think what you'll see, Alexander, is both the REIT and the operating company will come out with different gearing ranges. Obviously, the REIT gearing range will really be a matter for the independent board in consultation with Cromwell, and the Cromwell board will need to set a gearing range for the operating company. Those ranges and those numbers will be made more clear at the time of any vote or consideration of the issue.
Okay, thanks. Would it be reasonable to assume that for the Cromwell entity, not the REIT, but for Cromwell, that the range could be lower, given that it's, you know, given the capital light approach, or is it too early to say?
No, I think that's a fair, a reasonable assumption. But what I would say is that gearing levels, you know, may change over time, and there may be pathways to lower gearing levels over time.