Centuria Industrial results released today reflect the strength and resilience of the industrial market conditions over the past 12 months.
The Trust has grown 30% in size to $1.6bn and delivered a 12-month total unitholder return of 10.0%. With limited impacts from COVID, the fund, and indeed the whole sector, is trading at a 17% premium to NTA.
Jesse Curtis, CIP Fund Manager, said, “Throughout FY20, industrial assets have continued to demonstrate their resilience particularly against the backdrop of COVID-19. The rising trend of e-commerce, particularly for nondiscretionary items, such as groceries and pharmaceuticals, is driving leasing demand along with manufacturing and packaging. CIP benefits from 52% of its tenancy base belonging to production, packaging and distribution of consumer staples and pharmaceutical sectors.
“By applying an active approach to the management of CIP’s portfolio, we have been able to deliver strong portfolio metrics and importantly meet our FY20 distribution guidance of 18.7cpu and deliver a 12-month total unitholder return of 10.0%.”
Statutory profit of $75.3 million was reported for FY20. FFO of $63.5 million or 18.9cpu was delivered in line with revised FY20 guidance. Total distributions of 18.7cpu were paid in line with guidance and represented a 1.6% increase on FY19, supported by diversified income streams and leasing success across CIP’s portfolio.
Total assets increased to $1,635.8 million, underpinned by the acquisition of seven quality industrial assets for over $300 million as well as like for like revaluation gains of $48.5 million in FY20. Revaluation gains contributed towards the 3.3% increase in CIP’s Net Tangible Assets (NTA) per unit to $2.82 over FY20.
Valuation uplift was driven by active leasing and strong market fundamentals. Thirty of the portfolio’s assets were externally valued in June 2020, contributing towards valuation growth. The portfolio’s Weighted Average Capitalisation Rate (WACR) firmed by 41bps over FY20 to 6.05%. The increase in NTA, combined with distributions of 18.7cpu delivered a Return on Equity (ROE) of 10.1%.
During the period, CIP continued to strengthen its balance sheet, securing an additional $130 million of long term debt facilities to support transactions. CIP continues to benefit from a staggered debt profile to diversified lenders, a weighted average debt maturity of 3.3 years and no debt maturities until FY22.
Gearing reduced to 27.2% in FY20 through a combination of equity funded acquisitions, revaluations and capital management initatives. CIP continues to operate with a robust balance sheet and significant covenant headroom with an interest coverage ratio of 5.2x (covenant 2.0x) and loan to value ratio of 28.4% (covenant 55%). CIP’s balance sheet remains well positioned to capitalise on future growth initiatives.
CIP’s property portfolio grew to 50 assets with a total book value of $1,602.4 million, an increase of 31.2% over FY20. Occupancy improved to 97.8%. CIP’s high occupancy has been driven by strong leasing results with over 122,000sqm leased across 27 leasing deals. Importantly, CIP’s WALE significantly increased to 7.2 years.
The portfolio’s staggered lease expiry profile remains well positioned with only 5.4% expiring prior to the end of FY21 and no more than 16% in any year over the next 3 years. Portfolio income streams remain well diversified with over 110 tenant customers and 52% of portfolio income derived from tenant customers directly linked to the production, packaging and distribution of consumer staples and pharmaceuticals.
CIP has continued to focus on select value-add initiatives across approximately 33,000sqm of the portfolio. Notably:
- 21 Jay Street, Bohle (Townsville) QLD – Development completion, expanding the Townsville Regional Distribution Centre by 5,690sqm (totalling 10,416sqm) and generating a yield on cost of 7.75%. Reset lease with Woolworths for a new 12-year term from completion of the development
- 46 Gosport Street, Hemmant (Brisbane) QLD – Refurbishment completion in March 2020. Terms agreed for 73% of asset with strong enquiry for the remaining space. Cap rate compression of 75bps reflecting improved asset
- 42 Hoepner Road, Bundamba (Ipswich) QLD – 2.4 hectare site acquired with a Development Application (DA) approval to build a c.10,200sqm modern warehouse that has an anticipated end value of $17.5 million
During FY20, more than $300 million of acquisitions were executed increasing portfolio WALE to over 7 years. The acquisitions align with CIP’s strategy to acquire fit for purpose quality industrial assets located within infill markets closely located to major infrastructure that support long term reliable income.
CIP has concurrently announced the acquisition of 3 new industrial facilities worth $447m. See separate article.
CIP provides FY21 FFO guidance of 17.4 cents per unit and DPU guidance of 17.0 cents per unit with distributions paid in quarterly instalments.
Jesse Curtis, said “Australian industrial property continues to draw strong interest providing a competitive environment to secure investment stock underpinned by resilient occupiers and strong industry trends in online retailing. CIP enters FY21 well positioned to benefit from these tailwinds with a materially increased WALE of 10.2 years, high occupancy of 98.2% and strong balance sheet laying the foundations to deliver reliable income streams and capital growth for our investors.”
FY20 Financial Highlights
- Statutory net profit of $75.3 million
- Funds from operations (FFO) of $63.5 million
- FFO per unit of 18.9 cents per unit (cpu), in line with FY20 guidance
- Distributions per unit (DPU) of 18.7 cpu, in line with FY20 guidance
- 12 month total unitholder return of 10.0%
- Inclusion in the S&P/ASX 200 Index
- Strengthened balance sheet, with 27.2% gearing
- Significant covenant headroom: ICR 5.2x (covenant 2.0x) and LVR 28.4% (covenant 55%)
FY20 Portfolio Highlights
- Leases agreed for more than 122,000sqm, representing 12.9% of the portfolio GLA
- Occupancy increased to 97.8% driven by leasing success; strong WALE of 7.2 years
- 52% of portfolio income derived from tenants providing production, packaging and distribution of consumer staples and pharmaceuticals
- Value add initiatives include the doubling in size of the Townsville Regional Distribution Centre (now 10,416sqm), and repositioning and leasing of 46 Gosport Street, Hemmant QLD
- Total FY20 acquisitions of over $300 million increasing total portfolio value to $1.6 billion (as at 30 June 2020)
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