Centuria Metro sees more uplift in suburban office markets

10 February 2017

Publication: Commercial Real Estate
Author: Nick Lenaghan
Date: 10 Februiary 2017

Centuria Metro sees more uplift in suburban office markets

As commercial property values near their peak in CBD markets, there is still more uplift to come in the suburbs, according to Centuria Metropolitan REIT, which holds a $417.5 million portfolio.
The suburban office landlord, one of the listed funds controlled by Centuria Capital, booked a $27.1 million statutory profit for the first half of the 2017 year, up from $19.3 million in the previous corresponding half.
The net result was driven mostly by a near $15 million gain booked in property valuations and there may be more uplift to come this year.
“We expect 2017 will continue to be a strong year for valuation growth with capitalisation rates for metropolitan assets continuing to firm relative to prime-grade CBD assets,” said trust manager Nicholas Blake.
“Importantly most metropolitan markets are experiencing real rental rate growth coupled with contracting incentives and continuing strong tenant demand.”
The Centuria fund has 10 office properties, including 60 Marcus Clarke Street in Canberra, and another three industrial properties in its portfolio.
The Centuria team has been busy, with 22 leasing deals in the first half taking the portfolio to 99 per cent occupancy.
Potential merger
That leasing activity will become more evident as the year progresses. The trust expects its earnings to be skewed towards the second half as leasing deals struck late in the first half take effect.
The trust’s earnings guidance of between 18.7¢ and 19¢ a security, and distribution guidance of 17.5 cents a security, remain unchanged.
At the corporate level there is no action yet on the potential merger with the fund’s listed stablemate, the Centuria Urban REIT, previously known as the 360 Capital Office Fund.
The new fund joined the Centuria stable as part of a $290 million deal last year in which John McBain’s Centuria Capital bought out the 360 Capital platform and took stakes in its funds.
Nicholas Collishaw, who heads Centuria’s listed property arm, said the responsible entities of Centuria’s two listed suburban office funds “may consider the possible merger” of the pair, given the complementary nature of their portfolios.
“The two REITs may pursue a mutually beneficial merger in the future but no decision has been made in this regard at this point,” he said.
“Any merger proposal would need to be in the best interests of respective investors and subject to any necessary approvals.”
Centuria Metropolitan REIT closed on Thursday up 1¢ to $2.23.

Please choose an option to download Unit-Linked Bonds

To immediately access and download the Investment Bonds Product Disclosure Statement, please complete the brief form below...