Centuria Office REIT Expands Portfolio with $273.1m Acquisitions

Centuria Office REIT (COF), has acquired two high-quality office acquisitions in key near-city and metropolitan Melbourne and Sydney markets for a total purchase price of $273.1 million.

The acquisitions increase the REIT’s portfolio value by c.14% to $2.3billion, while improving its Weighted Average Lease Expiry (WALE) from 4.3-years to 4.5-years and occupancy from 93.1% to 93.7%.

These modern assets also further reduce the portfolio’s average building age to 15.5 years while increasing its combined NSW and VIC exposure to 49.5%. COF’s FY22 lease expiry profile has also further reduced 6.5%.

Grant Nichols, COF Fund Manager and Centuria Head of Office, said, “These high-quality, modern office acquisitions are strongly aligned with COF’s strategy and deliver benefits including broader geographic diversification, high occupancy, an enhanced portfolio WALE and, being young assets, limited capital expenditure requirements.

“COF’s portfolio focuses on metropolitan and near-city office markets that provide excellent worker commutability via good public transport nodes and road arterials. These have been better performing office markets throughout the past 12 months, attracting occupiers seeking shorter travel time to and from work at affordable rents.” 

Complementing the acquisitions is the recent announcement COF will be included in the FTSE EPRA Nareit Global Index from Monday, 20 September 2021. This enables COF to be more easily compared to international listed peers.

COF secured a 100% interest in 101 Moray Street, South Melbourne for $205.1 million on a 5.00% capitalisation rate. The acquisition of this property was previously announced in August.

The recently constructed building is fully occupied with a 6.3-year WALE. Its near-city location has become a desirable area for Melbourne tenants, particularly within the technology and media sectors, as South Melbourne offers iconic retail amenity with access to key transport infrastructure. The building was fully leased within nine months of practical completion and now enjoys a strong and diversified income profile.

COF is also acquiring the remaining 50% interest in 203 Pacific Highway, St Leonards, Sydney, for $68 million on a 5.75% capitalisation rate.

The high-quality office building is 99.3% occupied with a 3.9-year WALE. The REIT already owns a 50% interest in 203 Pacific Highway and has exercised its pre-emptive right after the co-owner issued a transfer notice.

203 Pacific Highway adjoins another COF asset, 201 Pacific Highway. Both properties are located in the heart of the St Leonards’ business precinct, directly above the entrance to the railway station, approximately four kilometres north of Sydney’s CBD.

To partially fund the acquisitions, COF is undertaking a fully underwritten 1 for 6.4 accelerated non-renounceable entitlement offer to raise $201.0 million.

The fixed Issue Price of $2.50 per unit represents a:
• 3.5% discount to the last close price of $2.59 per unit on 3 September 2021;
• 3.0% discount to TERP of $2.58 per unit;
• 7.2% forecast FY22 FFO yield; and
• 6.6% forecast FY22 distribution yield
New units issued under the Equity Raising will rank equally with existing COF units from the date of issue.

COF reaffirms its FY22 Funds From Operations (FFO) guidance of 18.0 cents per unit (cpu), and Distribution guidance of 16.6 cpu. The acquisitions and equity raise consolidate COF’s position as Australia’s largest listed pure-play office REIT.

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About Warwick Petschack

Warwick has over 25 years of property investment and management experience. Principally responsible as Managing Director for Capital Management Australia and Joint Managing Director for Chauvel Capital Partners and Editor of Australian Property Markets News.

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