Centuria Office Fund provided a trading update for Q1, 2021, revealing COVID impacts continue to disrupt income and occupancy levels across the portfolio, though there’s hope for a return to normal.
Fund Manager, Grant Nichols commented, “Despite the ongoing impacts from COVID-19, we continue to generate a solid amount of leasing activity, with tenants attracted to the quality, highly connected and affordable office space that the COF portfolio provides. The leasing activity also indicates that tenants continue to value office space as a central workplace, essential to maintaining productivity and culture.
Rent collections for Q1 FY21 remained solid, averaging c.94% across the portfolio. Rent collections for Q4 FY20 also improved to c.96%, an increase from the reported 89% announced on 2 July 2020. Included within the outstanding rent is agreed and pending rent relief claims related to the National Code of Conduct on Commercial Leases.
The Group provided rent relief, both waivers and deferrals, totalled c.$1.0 million for Q1 FY21, a reduction of 58% from the rent relief provided in relation to Q4 FY20 ($2.4m).
Terms were agreed, or leases completed for c.12,550sqm across 18 separate deals during the quarter, representing approximately 4.1% of portfolio NLA. Of the agreed deals, c.6,000sqm related to new tenants entering COF’s portfolio across 11 separate deals. The balance related to tenant renewals.
Occupancy as at 30 September 2020 was 95.9% and the WALE5 was 4.5 years, with over 60% of leases expiring at or beyond FY24.
Occupancy reduced 2.2% from 30 June 2020 due to Foxtel surrendering its lease at 35 Robina Town Centre Drive, Robina, QLD – as previously announced. Under this agreement, COF has received a surrender payment equivalent to the rent payable under the remaining Foxtel lease term discounted to June 2020. This space is now being actively marketed for lease, providing an opportunity to utilise Centuria’s strong leasing capabilities to reposition the asset, maximising the benefit of the surrender payment received.
Grant Nichols commented said, “Maintaining high portfolio occupancy remains the key management focus and we are actively seeking outcomes to address the current vacancy and upcoming expiry risk, particularly at Robina and 818 Bourke Street, Melbourne.”
COF reiterates its FY21 distribution guidance of 16.5 cents per unit, which represents a current distribution yield of 8.1%.
Grant Nichols commented, “COF continues to generate strong portfolio metrics, particularly the quality of the underlying tenant covenants, with around 80% of portfolio income from government, listed or multinational corporations. COF remains well placed to deliver attractive income returns to unitholders, with the portfolio providing quality, highly connected and affordable office space, particularly at a time when tenants are focused on their operating costs.”
“While immediate uncertainty resulting from COVID-19 remains, the medium to long-term outlook for high quality office assets remains positive, as evidenced by strong recent investment sales for comparable office buildings and the growing trend of tenants returning to office space to enhance productivity and culture.”
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