Morningstar | Cromwell Property Group is a Higher Risk Than Most Major Australian REIT Peers
Cromwell Property Group is a property owner, developer, and manager for third-party investors. The vast majority of earnings flow from the (predominantly office) portfolio, while the management and development divisions could add upside as property markets improve in the longer term. Management's strategy is to use higher gearing over a lower-grade portfolio to maximise returns, while mitigating risks by locking solid tenants into long-term leases. Unfortunately, many long-term leases are expiring in coming years, which is likely to see rents fall on renewal. Internal management, with significant director security ownership, aligns management interests with those of investors. Still, Cromwell's financial leverage and lower-quality portfolio present higher risk than peers, leading us to believe the stock is only suitable for risk-tolerant investors (not typical income investors), despite the attractive yield.Cromwell Property Group has five operating segments: property investment, which owns investment properties located throughout Australia; property/internal funds management, which includes property and facility management, leasing and project management for the trust and all of Co.'s managed investment schemes; external funds management - retail, which at June 30 2016, included nine Co.-managed external retail funds with combined assets under management of A$1.70 billion; external funds management - wholesale, which had combined assets under management of A$5.60 billion as at June 30 2016; and property development.
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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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