The Cromwell Property Group (ASX: CMW) share price is on watch this morning after the company announced its share purchase plan (SPP) was oversubscribed.
What did Cromwell announce this morning?
The Aussie property group said strong support was received from Cromwell's eligible security holders, with applications totalling approximately $32.5 million received under the company's 24 July SPP.
This represents an oversubscription of around $2.5 million, which Cromwell has elected to accept in full to fund its future growth pipeline.
The proceeds from the SPP, together with the around $375 million raised from Cromwell's successful institutional placement (completed on Thursday 27 June 2019), will be used to fund a number of strategic growth opportunities as part of Cromwell's 'Invest to Manage' strategy, including more than $1.0 billion of acquisition opportunities in Australia and Europe.
Cromwell said it will also look to use the proceeds, along with recycled capital from asset sales, to deliver more than $1.0 billion of accretive value-add development opportunities across Cromwell's existing Australian Core+ and Active real estate portfolio.
Cromwell CEO Paul Weightman said that the level of support received from both institutional and retail investors was a strong endorsement of Cromwell's 'Invest to Manage' strategy.
"We are committed to our strategy of growing our global funds management platform. The funds raised under the institutional placement and the SPP show that our securityholders support our strategy, and will give us certainty of funding to pursue the opportunities we have identified while also strengthening the balance sheet," Mr Weightman said.
Based on the increased offer size, 28,294,234 securities will be issued and are expected to be allotted on Wednesday 31 July 2019. Transaction confirmation statements are expected to be sent out on or about Thursday 1 August 2019.
What does this mean for the Cromwell share price?
The Cromwell share price has climbed 20% higher since the start of the year to $1.18 per share as the Aussie real estate stocks have generally performed strongly so far this year.
However, with this latest oversubscribed SPP, I wouldn't be surprised to see the Cromwell share price dip in early trade with investors clearly keen to offload some of their shares to the company.
The Cromwell Group currently boasts a market cap of $3.1 billion and trades on a price-to-earnings (P/E) ratio of 11.2x earnings, and while low, is typical of real estate investment trusts (REITs) given their high payout ratios.
Cromwell shares are currently yielding a handy 5.1%, and with a 52-week high of just $1.27 per share, momentum could be a factor that carries the Cromwell share price higher later in the day.
