Centuria released today details of its Industrial portfolio valuations revealing a 1.3% gain thanks in part to a 14bps sharper cap rate.
Jesse Curtis, CIP Fund Manager, said, “The CIP portfolio continued to maintain its strong position throughout the COVID19 affected period. Industrial property remained resilient during this trading period largely due to the defensive nature of industrial occupiers and ongoing demand from e-retailing, online grocery shopping and packaging requirements.
“As Australia’s largest domestic, pure-play industrial REIT, CIP’s high-quality assets continue to perform well. The portfolio benefits from a robust tenant profile and geographically diverse assets in well-positioned, in-fill locations close to major transport infrastructure. With strong investment demand for quality industrial assets, CIP’s solid performance is anticipated to continue with its portfolio underpinned by a long WALE, strong valuations, and high occupancy.
“To this end, leasing demand continued in recent months, as indicated by our Hemmant asset lease. Demand also enabled CIP to action value-add initiatives including the acquisition of another Brisbane site, providing an opportunity to develop core industrial product and enhance the portfolio’s quality. Both the leasing success and the acquisition demonstrate CIP’s ability to identify and execute on industrial value-add initiatives.”
The update valuations as at the 30th June included external independent valuations on 30 of 51 properties within CIP’s portfolio, representing c.50% by value. The remaining properties were subject to internal or Director’s valuations. Combined, these valuations indicate an estimated increase in portfolio value of $21m or 1.3% compared to the preceding book value.
The portfolio’s weighted average capitalisation rate tightened over the second half of the financial year, from 6.19% to 6.05%. The 14bps tightening is consistent with ReSourceData's market data for the Industrial sector which shows the weighted average cap rate for all industrial deals dropping from 5.2% in December 2019 to 5.1% in June 2020.
The increase in portfolio value is the result of strong leasing outcomes and the continued strength of the industrial investment market. Where relevant, valuers incorporated ongoing rent relief claims related to the National Code of Conduct on Commercial Leases. These valuations remain subject to finalisation and audit.
Centuria have noted that rent collections for CIP are averaging over 95% across the portfolio. Included within the outstanding rent is agreed and pending rent relief claims related to the National Code of Conduct on Commercial Leases.
CIP has benefited from strong leasing outcomes following the repositioning of 46 Gosport Street, Hemmant QLD . This asset was acquired with vacant possession in July 2019, underwent a repositioning programme to modernise the property, and now terms are agreed for 70% of its space. Re-purposing industrial assets is a challenging exercise and is often the cause of substantial discounts for assets with near term expiries or are vacant.
CIP also acquired an industrial development site at Lot 2 Hoepner Road, Bundamba, in Brisbane. The 2.4ha site, located in the core South Western Brisbane industrial precinct, has excellent connectivity to major arterial roads. The acquisition expands CIP’s existing holdings within the precinct. It has development approval to build a c.10,200sqm modern warehouse facility, with an anticipated c.$17.5m end value. Development is expected throughout a 12-month period.
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