Centuria Industrial Growth Impacts Distribution Yield4 February 2020
Centuria's Industrial REIT expanded its portfolio by 27% during 2019 at the expense of a lower distribution yield of 5.6% (down from 6.7%).
CIP’s property portfolio grew to 48 assets with a total value of $1,552.3m, an increase of 27.1% over 1H20. During HY20, $297.8m of acquisitions were executed at an average yield of 6.3% which along with the costs of transactions has impacted the distribution yield in the first half. The acquisitions have however improved the tenant base and increased the portfolio WALE from 4.3 to 7.1 years.
Revaluations gains contributed towards a 6.7% increase in CIP’s Net Tangible Assets (NTA) per unit to $2.83. The revaluation gains continued to be driven by CIP’s NSW & VIC portfolios, which account for the main concentration of CIP’s portfolio at 53%. The portfolio’s Weighted Average Capitalisation Rate (WACR) firmed by 27bps over HY20 to 6.19%.
Occupancy was maintained at 95.8%, driven by strong leasing results with over 63,300sqm leased. Importantly, CIP’s WALE significantly increased to 7.1 years, underpinned by the addition of the ultra long leases to Arnott’s and leasing across the existing portfolio.
The increase in NTA, combined with distributions of 9.4cpu for the half generated a Return on Equity (ROE) of 13.4%, down from 15.8% in the prior corresponding period.
During the period, CIP strengthen its balance sheet, securing an additional $130m of long term debt facilities to support transactions and increasing the weighted average debt maturity to 3.8 years. CIP continues to benefit from a staggered debt profile with no maturities until FY22. Gearing reduce by a further 190bps to 35.5% in HY20 through a combination of equity funded acquisitions and revaluations. CIP’s balance sheet remains well positioned to capitalise on future growth initiatives.
HY20 Financial Highlights
- Statutory profit of $31.5 million, down -31% from $46.1m due to reduced valuations gains
- Funds from operations (FFO) of $30.0 million, up 25%
- FFO per unit of 9.9 cents per unit (cpu), in line with FY20 guidance
- Distributions per unit (DPU) of 9.4 cpu, in line with FY20 guidance
- 12 month Return on Equity (ROE) of 13.4%
- Balance sheet gearing of 35.5% , 190bps reduction since FY19
HY20 Portfolio Highlights
- Leases agreed for more than 63,300sqm, representing 6.8% of the portfolio GLA
- Occupancy maintained at 95.8% with WALE increasing substantially to 7.1 years
- Portfolio value increased to $1.6 billion
- Total acquisitions of c.$300m transform portfolio quality
CIP Fund Manager, Jesse Curtis, commented, “Significant acquisitions and portfolio leasing have driven a strong first half result for FY20 and is a clear demonstration of our active management approach to position CIP as Australia’s largest domestic pure play industrial REIT. Success during the half was driven by a continued focus on executing our investment strategy of acquiring quality industrial assets located within infill markets, fostering relationships with our tenant customers and driving leasing outcomes to deliver superior returns for CIP’s unit holders.”
CIP commences 2H20 in a strong position and re-iterates FY20 FFO guidance of 19.6-19.9 cpu and DPU guidance of 18.7cpu with distributions paid in quarterly installment .
Jesse Curtis commented, “CIP’s strategy remains consistent, to own quality industrial assets located within infill markets with close proximity to major infrastructure. The portfolio will continue to benefit from increased demand within the Australian industrial and logistics sector supported by population growth, trends in online retailing and scarcity of investment grade stock.”
“Focus remains on executing fund objectives to deliver a high level of service to our tenant customers and value to unitholders through leasing, transactions and value-add initiatives, reinforcing CIP as Australia’s largest domestic pure play industrial REIT.”