Centuria’s CIP Reassures Market

2 April 2020

Whilst the duration and extent of impact from COVID-19 remains unclear, CIP has moved to reassure the market that its portfolio is very well position to cope with the downturn. Notwithstanding this, CIP has trimmed its earnings guidance by approx 0.05cps but maintained its distribution guidance at 18.7cps.


CIP enters this period well placed with a strong balance sheet and diverse income streams from customers in defensive sectors across a portfolio of 49 high quality industrial and logistics assets. The portfolio is currently 96.4% occupied with a WALE of 6.9 years as at 31 March 2020. Over 66% of portfolio leases expire at or beyond FY24 and importantly, 54% of its rental income is from tenant customers directly linked to the production, packaging and distribution of consumer staples and pharmaceuticals.


Value add initiatives across portfolio progressing in line with forecast expectations, including expansion of Woolworths regional fresh food distribution centre at CIP’s existing asset in Townsville, QLD and the settlement of the acquisition of 24 West Link Place, Richlands QLD for $8.0 million.


CIP appear to have sufficient headroom to its current loan covenants. It's current loan to value ratio is 38.2%, against a covenant of 55.0% and an interest cover ratio of 4.8 times, against a covenant of 2.0x. The Trust has $80m of undrawn debt and a weighted average debt maturity of 3.6 years as at 31 March 2020 with no debt maturities until December 2021.


Despite CIP’s performance being consistent with expectations during Q3 FY20, due to the uncertainty arising from COVID-19 and the potential impact on business operating conditions, the CPF2L Board has made provisions against the FY20 forecast resulting in the revised forecast FY20 FFO guidance range of 19.1 to 19.5 cents per unit. FY20 distribution guidance is reaffirmed at 18.7 cents per unit, subject to no further changes in circumstances.


The fund is currently trading at -32% below its recent peak of $3.79.


Rival fund manager ESR continues to hold a 19.9% strategic stake in CIP's Manager, Centuria. The pair came together in 2018 following opposing bids for Propertylink Group, which ESR won, taking a minor stake in Centuria at the time. CIP would clearly be in ESR's targets if anything were to happen to unrest Centuria.