Centuria Industrial REIT maintains its earlier guidance reflecting a 4.4% yield as it presses into value add options to strengthen returns as yields continue to tighten across the industrial & logistics markets.
Jesse Curtis, CIP Fund Manager and Centuria Head of Industrial, said “CIP continues to harness the strong tailwinds of Australia’s industrial real estate market having delivered another strong quarter. Portfolio leasing remains robust with strong tenant customer demand evidenced by leasing volume achieved and high occupancy across the portfolio. CIP’s assets are strategically located in markets with low vacancy rates and limited supply and are positioned to benefit from rising rents.
“The increasing trend of onshoring and reshoring supply chains to ensure business continuity, together with continued adoption of e-commerce, has further accelerated demand for last mile, infill locations that are in close proximity to densely populated areas. Not only do last mile locations ensure quicker delivery timeframes but with rising costs, reduced transportation time is a growing consideration for operators.
“Five urban infill assets were acquired during the period, expanding CIP’s value-add and development pipeline to take advantage of elevated tenant demand and surging rents. The majority of these assets adjoin existing CIP owned assets, delivering on CIP’s strategy to create scaled landholdings in urban infill markets providing optionality and future embedded value to unitholders.”
During Q3 FY22, 38,813sqm of lease terms were agreed across thirteen deals, including:
- 159-169 Studley Court, Derrimut, VIC: A new three-year lease to Silk Logistics across c.3,200sqm. The distribution centre was contracted in December 2021 and value already added through a new lease, while expanding an existing CIP customer.
Strong lease outcomes were also achieved alongside a number of value-add and development initiatives:
- 42 Hoepner Road, Bundamba QLD: Terms agreed with an Australian parcel and logistics operator for a new five- year lease across c.5,300sqm within the newly constructed, 5 Star Green Star asset.
- Southside Industrial Estate, Dandenong South VIC: Construction is on target for completion in first half of FY23. The development has generated significant pre-leasing interest with terms agreed for a further 19,116sqm during the quarter. Five out of the six units have terms agreed, representing a 67% of the development.
CIP acquired three strategic urban infill industrial properties for a combined $55.8million and two development assets with a combined estimated completion value of c.$119million. The acquisitions expand CIP’s portfolio to 85 high-quality industrial assets and a total portfolio value of $4.0billion. Several acquisitions adjoin existing CIP assets, providing further land consolidation within the supply-constrained industrial markets.
Stabilised infill acquisitions include:
- 5/243 Bradman Street, Acacia Ridge QLD for $26.5million.
- 159-169 Studley Court, Derrimut VIC for $17.1million.
- 8 Hexham Place, Wetherill Park NSW for $12.2million.
Development acquisitions include:
- 90-118 Bolinda Road, Campbellfield VIC for $37.7million. The 7.9ha site will be redeveloped into a sustainable five-unit industrial estate with an estimated end value exceeding $104million.
- 16-19 Caribou Drive, Direk SA for $2.7m. The 1.25ha site adjoins CIP owned 9-13 Caribou Drive and is expected to deliver a c.6,500sqm new industrial facility with an on-completion value of c.$15.0million.
CIP continues to work with its tenant customers to help reduce their greenhouse emissions through sustainability initiatives across the REIT’s assets. During the quarter, works commenced on a new 1.5-megawatt solar project at 2 Woolworths Way, Warnervale NSW in partnership with Woolworths. The system comprises over 3,300 solar panels and, once completed, is expected to offset 2,088 megawatt hours of electricity in the first year, avoiding more than 1,500 tonnes of carbon emissions.
Additionally, CIP was selected to participate in the NABERS Warehouse and Cold Storage Accelerate programme. The aim is to assist the rating agency evaluate key metrics across industrial properties.
Jesse Curtis concluded, “CIP remains Australia’s largest listed pure-play industrial REIT and moves into the remainder of FY22 in a strong position. The leasing market continues to be supported by strong fundamentals with urban infill assets in land constrained markets expected to remain in high demand. Eighty-two per cent of CIP’s portfolio is situated in these infill markets, providing our tenant customers with closer proximity to densely populated catchments and critical infrastructure that can aid in reducing transportation costs and ensuring supply chain continuity.
“Utilising Centuria’s inhouse management expertise, CIP will continue to leverage the strength of the industrial market to maximise value for unitholders through capturing rental growth opportunities and delivering on value-add repositioning, refurbishment and development projects.”
CIP reaffirms its FY22 FFO guidance of no less than 18.2 cents per unit (cpu). Distribution guidance is also reaffirmed at 17.3 cpu, reflecting an annualised distribution yield of 4.4% to be paid in equal quarterly instalments.