eCommerce Growth & Onshoring Deliver CIP Strong HY22 Results

1 February 2022

Centuria Industrial REIT, Australia’s largest listed pure- play industrial fund, today announced its strong interim results for the first half of 2022 Financial Year with upgraded Funds From Operation (FFO) guidance of no less than 18.2 cents per unit (cpu) and a reiterated distribution guidance of 17.3cpu, reflecting a 4.6% distribution yield.

Strong tailwinds from the ecommerce sector and increased supply chain onshoring, have increased occupier demand for last mile urban infill markets, where CIP has significant exposure. Subsequently, CIP delivered strong leasing activity with 109,188sqm of lease terms agreed, representing 8.5% of portfolio GLA, and achieved an average 10% rental growth over prior passing rents.

Jesse Curtis, CIP Fund Manager and Centuria’s Head of Industrial, said, “CIP delivered a strong performance throughout the first half of FY22 with significant leasing activity supported by exceptional, double-digit rental growth and strategic acquisitions. Strong leasing activity increased our portfolio occupancy to a high 99.2% while portfolio WALE was maintained at a long 8.9 years. We credit our strong occupancy to our active inhouse asset management approach.

“Demand, particularly from the ecommerce occupiers, created competition for high-quality industrial assets. Major renewals and new tenant leases, together with strong investment demand for industrial assets, underpinned a healthy $281 million valuation uplift.”

During the period, CIP’s portfolio expanded 32% to 80 high-quality industrial assets worth $3.9 billion with 155 tenant customers. The expansion included 21 urban infill acquisition worth $680million with 56% of the acquisition in tightly held NSW markets.

Of the 21 transactions, nine of the acquisitions were adjoining assets that delivered on CIP’s strategy to create consolidated landholdings, that generate income in urban infill markets to create scale and deliver value with future optionality.

Illustrative of Centuria’s strong transaction capability and market relationships, all of the acquisitions were secured off-market or via select campaigns.

Mr Curtis explained, “Acquisitions were largely positioned within land-constrained, eastern seaboard markets that lend themselves to low vacancy rates and high tenant demand, creating opportunities to extract outsized returns. Several acquisitions provided value-add opportunities through near term development, repositioning or leasing.”

CIP commenced the second half of FY22 in a strong position and already expanded its portfolio to 84 high- quality industrial assets worth $4.0billion, while maintaining 99.2% portfolio occupancy and 8.8-year WALE.

Mr Curtis, continued, “Australian industrial property remains a highly favoured asset class. Tenant demand remains unabated, driving national industrial vacancy to record lows. With demand for industrial space expected to remain elevated, and with limited supply within urban infill markets, we expect to see industrial rents continue to rise. Coupled with sustained global investment for quality Australian industrial assets, upward pressure continues to be applied on asset values.”

During HY22, CIP strengthened its balance sheet and was assigned a Moody’s Credit Rating of Baa2 Stable. It successfully completed its inaugural Medium Term Notes issuance with a $350 million debt raising, broadening its range of capital sources.

CIP also benefited from a 10% increase in Net Tangible Assets (NTA) per unit to $4.21, which supported a strong 46.5% Return on Equity. Its portfolio’s Weighted Average Capitalisation Rate (WACR) compressed 35bps from 4.54% to 4.19% during HY22.

Since Centuria assumed management of the REIT five years ago, CIP’s portfolio has transformed. Across the five-year period CIP has delivered a 12% average annual growth in Net Tangible Assets with average annual return on equity of 23% per annum.

Mr Curtis concluded “Under Centuria’s active management approach we’ve achieved meaningful scale, been included in major indices, enhanced tenant and building quality, and improved portfolio metrics. Looking forward, CIP looks to continue its strategy of delivering reliable income streams and capital growth for investors from a high-quality portfolio of industrial assets.”

Further Information

The Centuria Industrial Results Presentation and Property Compendium are available to download from the CIP news page.

HY22 Financial Results

Earnings HY22HY21
Statutory profit / (loss)$ million308.199.6
Funds From Operation$ million53.942.8
FFO per unitcpu9.18.8
Distribution per unitcpu8.78.5
Return on Equity%46.511.9
Balance Sheet HY22FY21
Total Assets$ million3,936.63,105.9
Net Tangible Assets (NTA)9 perunit$4.213.83

Property Portfolio

Portfolio Snapshot Pro forma HY22  HY22FY21
Number of assets 848062
Book value$ million3,972.43,878.92,945.1
Occupancy by income%
WALE by incomeyears8.88.99.6
Leases agreed GLAsqm109,188239,950

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