Property Australia

Cromwell gears up for growth

PROPERTY AUSTRALIA September 18, 2018

Australia’s real estate market is among the world’s most sophisticated, but the challenge of growth is “very real”, says Cromwell Property Group’s Paul Weightman.

As managing director and chief executive officer, Weightman has driven Cromwell’s success since its inception in 1998. Today, Cromwell has a market capitalisation of $2.2 billion, and total assets under management of $11.5 billion across Australia, New Zealand and Europe.

Starting as a small retail syndication business after “a small group of us raised capital by mortgaging our house and borrowing from family and friends”, Cromwell grew steadily throughout the early 2000s as it amassed funds under management.

The “watershed moment”, Weightman says, came in 2006 when the company stapled its management business to its funds. “We created a REIT that set us on a course for growth”.

Cromwell entered the global financial crisis in a solid position. “We were practically the only REIT that didn’t have to undertake a dilutive capital raising, which allowed us to be active in the market at a time when others couldn’t be.”

Weightman and his team created a global platform in 2016 after the acquisition of Valad Europe for $208 million. This added 200 property professionals in 30 offices across 12 different European countries to the team.

Subsequently the €1.4 billion Cromwell European Real Estate Investment Trust was floated on the Singapore stock exchange in November last year. The initial public offering portfolio comprised 74 assets in five European countries, covering an aggregate lettable area of 1.1 million sqm.

“It was the first Euro denominated REIT on the SGX and the largest REIT IPO in Asia since 2013 by market capitalisation. It also allowed us to connect new sources of Asian capital to opportunities sourced by our on the ground teams in Europe.”

Reflecting on the ups and downs in the market over two decades, Weightman says the biggest change he’s witnessed is the flow of investment. “Over the last 20 years, listed property trusts dominated by domestic investors have transitioned into a market that is more significantly influenced by global investors.”

Looking beyond our borders

Australia’s real estate industry is as “sophisticated as any in the world,” Weightman says. “Our people are generally well educated, well trained and they work hard. We have a market that is very transparent, and that puts everyone on a level playing field.”

But Australia’s market remains small by international standards, and is under-capitalised, he says. “The challenge for growth in an open market with high skills is real and significant.”

He says there is still some reluctance to look beyond Australian shores, a hangover from the GFC “when people went offshore and invested in assets at the top of those markets”.

“But if you are going to grow, it’s inevitable that you’ll have to reach outside Australian borders to achieve those growth aspirations.”

Pointing to Cromwell’s experience in Singapore, “there are numerous sources of capital that we just don’t see in Australia – being in a position to build relationships in those markets gives you opportunities that you wouldn’t get if you didn’t go offshore”.

“That’s not to say it’s easy. You need to be actively involved. You can’t sit back and let the business operate itself remotely. You have to be very hands-on.”

Burning the midnight oil

What keeps Weightman up at night?

“We worry about macro issues – and a lot of things we can’t control, like trade wars, capital cycles and rate rises.” Managing these risks demands discipline and a measured approach – things that are “easy to lose sight of in a growth phase”.

The market is evolving as customers demand more amenity, Weightman adds. Real estate developers, investors and managers need to be “plugged in” to a host of trends in psychology, behaviour, technology, design and entertainment.

“It’s not as simple as putting up a building any more – any asset needs to satisfy a range of objectives. We are moving into a phase in a lot of cities where we are designing and delivering product that needs to satisfy a lot of different demands.”

Talking ‘bout regeneration

It’s an exciting time for “regeneration and reinvention” of space, he says, but one which will also bring obsolescence if property players aren’t on the ball.

Property is a creative pursuit, Weightman suggests. “Real estate people are very good problem solvers. Our industry can be very creative and the impact that we have on our cities and the places we live is very exciting.

“And there aren’t too many industries where you can create something that stands the test of time. That feeling of pride in delivering something lasting is a significant motivation factor for me.”

Weightman’s advice to others taking their first steps up the career ladder?

“Someone once told me that when you set up a deal, make sure you can come back to it in 10 years’ time without being embarrassed or ashamed. It can take 20 years to build a reputation and five minutes to lose it.”

And be bold. “Cromwell has a reputation for being contrarian, or at least independent thinking. We’ve always done things that others aren’t doing.”