Stoneweg European REIT: Proposed conversion to stapled trust

Proposed conversion to stapled trust

The manager of Stoneweg European REIT has proposed the REIT to be converted into a stapled trust, comprising Stoneweg European REIT and Stoneweg European Business Trust. 

Each unit in Stoneweg European REIT would be stapled to a unit in Stoneweg European Business Trust. The stapled group would be known as Stoneweg European Stapled Trust.

Rationale of proposed conversion

According to the manager, the stapling is aimed at future-proofing the platform, enabling income diversification, and improving tax efficiency across Europe. 

#1 - Diversifying income streams to non-passive sources. 

By incorporating a Business Trust alongside the REIT, the proposed stapled structure will provide Stoneweg European Stapled Trust with the flexibility to generate income from non-passive sources, beyond traditional rental streams. This enables Stoneweg European Stapled Trust to engage in a broader range of real estate-related activities, including property development, leasing, asset and property management, as well as investments in ancillary infrastructure such as solar power.

According to the manager, these expanded capabilities allow for more diversified revenue generation and greater operational resilience throughout varying market conditions. With this enhanced flexibility, Stoneweg European Stapled Trust will be better positioned to capitalise on its development pipeline of approximately €200 million across key European markets, including the Netherlands, Italy, and France. Over time, this approach is expected to support more stable and sustainable cash flows, strengthening the trust’s long-term growth trajectory.

#2 - Potential tax efficiency

The stapled structure offers meaningful tax advantages for real estate investments across Europe, enhancing the overall efficiency and flexibility of the platform. Notably, under German real estate transfer tax (RETT) rules, Stoneweg European Stapled Trust may be exempt from RETT on transactions involving 90% or more of an asset’s beneficial interest—an exemption that facilitates more efficient joint ownership arrangements between the REIT and the Business Trust. According to the manager, this structural flexibility may be beneficial for future acquisitions, joint ventures, and capital recycling strategies.

The evolving tax and regulatory landscape in Europe further highlights the need for a structure that can adapt. According to the manager, the stapled trust model is aligned with practices in established markets like the United States and Australia, where similar frameworks are widely adopted to enhance tax efficiency, broaden investment mandates, and support sustainable growth.

With the formation of Stoneweg European Stapled Trust, Stoneweg is expected to be better positioned to attract a wider base of global investors who are seeking access to diversified income streams and scalable real estate platforms. In addition to operational benefits, the stapled structure may also enhance trading liquidity and support a more robust valuation over the long term.

Investment mandate remains unchanged

The formation of Stoneweg European Stapled Trust will not result in any change to the existing investment mandate. Both entities will continue to focus on acquiring and managing real estate assets located across Europe, in line with the current strategy of SWREIT.

Stoneweg European Stapled Trust’s principal investment objective will remain the same: to invest, directly or indirectly, in a diversified portfolio of income-generating real estate assets. These will primarily include properties used for logistics and light industrial purposes, offices, data centres, and retail, along with related real estate assets that support these sectors. The continuation of this strategy ensures consistency in asset exposure for existing unitholders.

Crucially, the Manager does not intend to alter the investment focus. The trust will maintain its emphasis on high-quality logistics and light industrial assets, data centres, and offices situated in key European markets, preserving strategic continuity while enabling flexibility through the stapled structure.

Unitholders will maintain proportionate ownership across both entities

Unitholders of Stoneweg European REIT will receive a corresponding number of units in Stoneweg European Business Trust, thereby preserving their proportional ownership across both entities within the newly formed Stoneweg European Stapled Trust. This ensures that unitholders maintain the same level of economic interest and voting rights following the stapling.

The management team and board of directors will remain largely unchanged, providing continuity in governance and strategic direction. 

Additionally, Stoneweg European Stapled Trust and its affiliated entities will continue to benefit from the existing right of first refusal (ROFR) arrangement with its sponsor, Stoneweg International (SWI) Group. This ROFR agreement ensures priority access to a pipeline of potential acquisition opportunities, aligned with Stoneweg European REIT’s investment mandate and long-term growth strategy.

Commitment to leverage limits and stable dividend payouts 

While REITs in Singapore are subject to a 50% aggregate leverage limit under Monetary Authority of Singapore (MAS) regulations, Business Trusts are not bound by the same requirement. Despite this distinction, Stoneweg European Stapled Trust will continue to adhere to disciplined financial management practices. 

On a consolidated basis, Stoneweg European Stapled Trust will target a medium-term aggregate leverage ratio of 35% to 40%, with an internal ceiling of 45%. This remains below the MAS regulatory cap for REITs and is aimed to provide financial flexibility. 

Stoneweg European Stapled Trust remains committed to delivering stable and growing distributions, along with long-term enhancement of net asset value (NAV) per unit. Distributions are expected to be primarily supported by recurring rental income, with capital gains from real estate investments supplementing returns where appropriate. 

No changes to fee structure

There will be no changes to the fee structure arising from the proposed stapling. The management fees payable to the Trustee-Manager of Stoneweg European Business Trust will be based on the same fee formula currently applied to the Manager of Stoneweg European REIT.

Notably, the Trustee-Manager has committed to waiving trustee fees for Stoneweg European Business Trust for as long as it remains stapled to Stoneweg European REIT. This arrangement means that unitholders may benefit from potential net fee savings for the same pool of assets. 

Understanding the Stapled Trust Structure 

Stoneweg European REIT will not be the first stapled REIT in Singapore. Existing examples include CDL Hospitality Trusts, CapitaLand Ascott Trust, and Far East Hospitality Trust. 

What Is a Stapled Trust?

A stapled trust is a structure that combines separate legal entities—typically a Real Estate Investment Trust (REIT) and a Business Trust—into a single traded security. Once stapled, the units of both entities are inseparable and must be bought and sold together. 

Comparing a REIT and a Business Trust

A REIT is primarily focused on generating passive income from completed, income-producing properties such as offices, retail assets, and logistics facilities. In Singapore, REITs operate under a regulatory framework set by the Monetary Authority of Singapore (MAS), which includes leverage limits and a cap of 10% on investments in uncompleted developments. In return for tax transparency, REITs must distribute at least 90% of their taxable income to unitholders. Learn more about Singapore REITs here. 

In contrast, a Business Trust has greater operational freedom and is not subject to the same regulatory restrictions as REITs. It can earn income from both passive and active sources, including property development, leasing, asset enhancement, and facility management. With no statutory limits on development activities or gearing, Business Trusts can undertake larger and more complex projects.

Unitholder approval required at Extraordinary General Meeting (EGM)

Stoneweg European REIT has received approval in-principle from the Singapore Exchange Securities Trading Limited (SGX-ST) for the listing and quotation of the stapled securities on the Main Board of the SGX-ST.

In addition to this regulatory approval, unitholder consent is required to proceed with the proposed stapling of Stoneweg European REIT and Stoneweg European Business Trust to form Stoneweg European Stapled Trust. Two resolutions will be put to vote at the upcoming Extraordinary General Meeting (EGM):

• Approval of amendments to the Stoneweg European REIT Trust Deed, which requires at least 75% of the total number of votes cast.

• Approval of the proposed stapling, which requires a simple majority of more than 50% of the votes cast.

The EGM is scheduled to be held at 4:00 pm on Tuesday, 29 April 2025.

In line with good corporate governance practices, the Sponsor, the Manager, and their respective associates will abstain from voting on all resolutions related to the proposed stapling.

Stabilisation of asset values with interest rate cuts 

As of December 2024, Stoneweg European REIT’s total portfolio valuation was €2.24 bn, up 0.8% from €2.22 billion on a like-for-like basis compared to December 2023.

The manager of Stoneweg European REIT believes that the REIT is well-placed to capitalise on selective acquisitions, rental growth, and further asset enhancements with macroeconomic conditions stabilising and European real estate at a positive inflection point. 

The recent interest rate cuts by the European Central Bank has created a more supportive environment for refinancing and capital deployment. At the same time, increasing infrastructure and defence spending across Europe—spurred by geopolitical shifts, energy security concerns, and sustainability goals—is expected to strengthen the region’s long-term economic resilience.

Commencement of unit buyback programme

On 20 March 2025, the Manager of Stoneweg European REIT commenced a unit buyback programme, funded by proceeds from recent asset divestments. This initiative follows the approval of a unit buyback mandate by unitholders at the FY2023 Annual General Meeting held on 30 April 2024.

As outlined in the unitholder letter dated 11 April 2024, the buyback is intended to serve as a flexible and cost-effective capital management tool. Its key objectives include enhancing returns on equity, improving net asset value (NAV) per unit, and supporting the stability of Stoneweg European REIT’s unit price. When implemented strategically, the buyback programme may also help to reduce price volatility, counter speculative trading, and reinforce investor confidence.

The decision to activate the buyback reflects the manager’s conviction in the strength of Stoneweg European REIT’s underlying fundamentals and its long-term value creation strategy.

Historical dividend yield of 9.5%

Based on its FY2024 dividend per unit of €14.106 cents, Stoneweg European REIT trades on a dividend yield of 9.5%. 

Related links:

• Stoneweg European REIT share price and share price target
• Stoneweg European REIT dividend history and forecast

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