Transformative HY21 Results for Centuria Industrial REIT2 February 2021
Centuria Industrial REIT has announced a transformative set of results for the first half of the 2021 Financial Year (HY21) with a record number of acquisitions as well as significant leasing activity within the six-month period.
CIP secured nine industrial properties worth $694million, bringing the Trust’s portfolio of high quality industrial assets to 59 properties, up from 50 at FY20 Year End.
CIP’s portfolio value increased nearly 50% within the half year period to $2.4 billion, including the $694million of acquisitions and a $104million revaluation uplift.
The record deals and value uplift reaffirm CIP as Australia’s largest domestic pure-play industrial REIT listed on the ASX.
Complementing the property transactions is a significant period of leasing for the Trust with more than 140,000 sqm leased across 14 deals, representing 13% of the portfolio GLA. Portfolio GLA totals 1.05million sqm. Leasing activity also resulted in tenant retention of 81%.
Jesse Curtis, CIP Fund Manager, commented, “During this first half of FY21 we strategically targeted acquisitions within tightly held industrial sub-sectors with favourable supply demand dynamics to create a diversified pure-play industrial portfolio. In particular, we expanded into the data centre and cold storage sectors, with the acquisition of the $416.7million Telstra Data Centre in Clayton VIC, as well as four cold storage facilities, worth $214.1million, within key infill markets along the eastern seaboard.
“During the COVID period we observed a rapid increase in demand for data warehousing with a shift to cloud based data storage coupled with an increase in online shopping, particularly for non-discretionary items such as groceries and pharmaceuticals. We believe these trends are here to stay and investing in the undersupplied industrial sub-sectors of data centre and cold storage is a sound strategy. These sub-sectors complement the other sub-sectors that CIP provides exposure to including manufacturing, distribution centre and transport and logistics.”
All acquisitions within the HY21 period were acquired with 100% occupancy and an average 19-year WALE.
CIP’s portfolio WALE increased throughout the HY21 period to 9.8 years, with portfolio occupancy at a high 97.7%.
Approximately 26% of CIP’s portfolio comprise triple-net leases, providing a strong income stream.
CIP’s portfolio comprises 117 diverse, high-quality tenant customers skewed to customers directly linked to the production, packaging and distribution of consumer staples, pharmaceuticals and telecommunications providing reliable income streams.
Curtis continued, “Industrial tenant demand remains robust, particularly for e-commerce and online retailing occupiers. While having grown quickly during the pandemic period, online retail penetration in Australia still lags the global average, providing the potential for significant take up of industrial space. CIP continued to benefit from this trend, leasing more than 140,000sqm and substantially de-risking major lease expires.”
Near-term, major lease expiries successfully renewed include Woolworth’s Warnervale (NSW) distribution centre and Visy’s Warwick Farm (NSW) manufacturing facility.
CIP’s strong performance resulted in an upgraded Funds From Operation (FFO) guidance of no less than 17.6 cpu (previous 17.4 cpu) and reaffirmed FY21 distribution of 17.0cpu.
The Trust has begun the second half of FY21 in a strong position having secured two warehouses in Derrimut, VIC, for a collective $37.25million. The neighbouring distribution centres, located at 179 Studley Court and 513 Mount Derrimut Road, provide a blended 4.6-year WALE and 100% occupancy, leased to Volkswagen Group and Tasman Logistics, respectively.
Curtis concluded, “Following the first half 2021 results, CIP’s position has been reinforced as a major owner of industrial property. Transformative acquisitions and significant leasing activity have grown the fund’s scale. Inclusion in the S&P/ASX 200 Index increased investor relevance. Industry tailwinds continue to support investment fundamentals for industrial assets attracting both domestic and international capital. We believe this trajectory will continue throughout the medium to long-term and we aim to continue building on CIP’s success, especially throughout the second half of FY21.”
CIP’s HY21 results reported a $99.6million statutory net profit and FFO of $42.8million. The Trust has a strong balance sheet with 29.6% gearing and $146million of undrawn debt.
Centuria Industrial are a pure play Industrial REIT and have a well established portfolio focus on metropolitan markets which should continue to perform well in 2021.
The portfolio should be able to take advantage of distributed energy systems to extract additional income from its tenant clients.
The decline in unit price over the past 6 months is deceptive as the group has undertaken equity raisings and completed several divestments. The group are trading above NTA ($2.99).
We have placed them on preferred REIT list.