The Cromwell Property Group (ASX: CMW) share price has traded marginally lower this morning after the company responded to media speculation about a potential takeover transaction.
What did Cromwell announce?
Cromwell noted recent press speculation regarding London-listed RDI Reit and confirmed that it has made an approach to the board of RDI regarding a potential transaction.
The company insists any transaction would be aligned with its strategic goal of growing funds under management and expanding its investment footprint in the UK and Europe, with half of the group’s $11.5 billion of assets under management concentrated in Europe.
Discussions are ongoing between RDI and Cromwell about the potential takeover bid, with Cromwell not guaranteeing any certainty of a formal offer or terms of any offer to be made.
How has the Cromwell share price performed in 2019?
The Cromwell share price is up 10% so far this year as it has marginally underperformed the S&P/ASX200 Index (ASX: XJO).
The diversified real estate investor and manager has also underperformed the ~17% return on the S&P/ASX200 Real Estate Index (ASX: XRE) despite outperforming some of its real estate peers including Shopping Centres Australia Property Group Re Ltd (ASX: SCP) and Scentre Group (ASX: SCG) this year.
The real estate sector domestically has been undergoing a correction for the best part of a year now which has sent several of the major real estate investment trust (REIT) unit prices plunging lower.
The big positive for Cromwell at this point in the domestic cycle is its significant weighting to offshore real estate, which has arguably protected it from the losses seen by some of its peers in net tangible asset (NTA) value.
Given the typical reaction to market acquirer’s, I wouldn’t be buying any of Cromwell’s shares until a takeover offer is either confirmed or ruled out by the real estate group.
However, I am of the belief that commercial real estate (CRE) can offer a good portfolio income hedge as the economic growth tide begins to turn in 2019.
For those who value growth over income, I’d check out this buy-rated stock which is well-positioned for substantial growth as it captures a big stake in this booming $22 billion industry.
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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Shopping Centres Australasia Property Group. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.