OCBC Investment Research
13 August 2025

Stoneweg Europe Stapled Trust: Unlocking Value in European Real Estate Amid Recovery – A Detailed Investment Analysis

Executive Summary: A Rebound in Sight for Stoneweg Europe Stapled Trust

Stoneweg Europe Stapled Trust (SERT), a prominent Singapore-listed real estate investment group, is showing early signs of recovery in a challenging European market. Despite recent headwinds from higher financing costs and asset divestments, SERT’s streamlined portfolio and strategic sector allocation position it for resilient near-term income and potential long-term growth. Trading at a notable discount to net asset value (NAV), SERT stands out as an attractive option for investors seeking high-quality exposure to European real estate.

Key Highlights and Investment Thesis

• Distribution Performance: 1H25 distribution per stapled security (DPS) declined 7% year-on-year to 6.553 Euro cents, largely attributed to increased interest costs. The result met analyst expectations.
• Portfolio Strength: SERT’s rental reversions surged by 11.9%, with portfolio occupancy rising to 92.4%. Notably, the logistics and industrial (L&I) segment reached 94.4% occupancy, while office assets improved to 86.2%.
• Valuation: Fair value estimate revised to EUR1.82 with a maintained BUY rating. SERT trades at a significant discount to NAV, presenting a compelling value proposition as market sentiment shifts toward European assets.

Company Overview: Structure, Portfolio, and Management

SERT is a stapled group comprising Stoneweg European Real Estate Investment Trust and Stoneweg European Business Trust. Its principal mandate is to invest in income-generating commercial real estate across Europe. As of 31 December 2024, SERT managed a portfolio worth EUR2.2 billion, spanning over 100 primarily freehold properties in gateway cities across the Netherlands, France, Italy, Germany, Poland, Denmark, Czech Republic, Slovakia, Finland, and the United Kingdom.

• Portfolio Allocation: 55% logistics and industrial, 45% office properties.
• Segment Revenue Share (FY24): Light Industrial / Logistics (47.9%), Office (49.2%), Others (2.9%).
• Geographical Diversification (FY24):
  • The Netherlands: 25.7%
  • Italy: 16.0%
  • France: 19.1%
  • Poland: 12.6%
  • Germany: 8.9%
  • Denmark: 5.7%
  • Finland: 4.2%
  • Slovakia: 3.1%
  • Czech Republic: 2.5%
  • United Kingdom: 2.2%

Financial Performance: Revenue, Income, and Key Ratios

Operational Momentum: Occupancy, Rental Reversions, and Capital Management

• Occupancy: Overall portfolio occupancy improved 0.4 percentage points quarter-on-quarter to 92.4%. L&I assets saw a similar increase to 94.4%, while office occupancy climbed 0.5 points to 86.2%.
• Rental Reversions: Portfolio-wide rental reversions were +11.9%. L&I assets saw +8.1% in 1H25 and +9.8% in 2Q25. Office assets returned to positive territory with +13.6% in 1H25 and +17.5% in 2Q25.
• Leverage and Interest Costs: Aggregate leverage increased from 42.9% to 43.3% as the revolving credit facility (RCF) was drawn for investment. All-in interest rate improved by 19 bps to 3.97%, with 85% of debt hedged.

Portfolio Updates: New Investments and Divestments

• Investment in AiOnX: SERT invested EUR50 million in AiOnX (formerly Stoneweg Icona data-centre fund), gaining a 4–8% stake. The fund controls interests in five early-stage data centre development sites across Ireland, Spain, Italy, Denmark, and the UK, totaling 225 hectares and over 1,100 MW of secured power. The UK site, located in Cambridgeshire, will reach 330MW, targeting global technology clusters. The investment is funded by RCF and is expected to have minimal near-term DPS impact during the roughly 10-year development phase.
• Divestments: The proposed sale of Arkońska Business Park in Poland for EUR7.8 million lowers SERT’s exposure to Poland and increases its L&I allocation to 56.1%. A EUR15 million divestment of Via della Fortezza, 8 in Florence, Italy, was completed in July 2025.

ESG Performance and Initiatives

• ESG Rating: SERT’s ESG rating was downgraded in December 2024 due to non-pay benefits not meeting expectations. However, SERT emphasized employee training, providing 22.6 hours per employee in 2024.
• Governance: SERT boasts a majority-independent board, exceeding global peer standards and protecting unitholder interests.
• Green Building Initiatives: SERT holds 48 green building certificates and targets net zero operational carbon emissions by 2040, leveraging stringent European environmental regulations and green leasing strategies.

Valuation Analysis: Peer Comparison

Financial Statement Summary

Potential Catalysts and Risks

• Catalysts:
  • Accelerated synergies with new sponsor
  • Faster-than-expected asset enhancement initiatives (AEI)
  • Distribution per unit (DPU)-accretive acquisitions
• Risks:
  • Slower-than-expected European economic growth
  • Higher-than-anticipated redevelopment costs
  • Delayed ECB rate cuts

Conclusion: SERT’s Strategic Positioning and Investment Appeal

Stoneweg Europe Stapled Trust is emerging from a period of portfolio reconstitution with a focus on high-quality, income-generating assets in prime European locations. Its tilt toward logistics and industrial properties, robust occupancy rates, and commitment to ESG standards enhance its resilience and growth prospects. With a significant NAV discount and attractive yield, SERT is well-positioned for investors seeking diversified returns and exposure to the European real estate market.