Centuria Metropolitan REIT Update – Nick Collishaw

1 July 2016

Our first full financial year has been a very active one. I am pleased to advise that CMA met its annual distribution forecast of 17 cents per security with the final quarter distribution of 4.25 cents confirmed on 23 June 2016 for payment on 12 August 2016.

The portfolio is in good shape with the entire portfolio independently valued on 15 May 2016 at $396.7 million up $17.6 million (4.6%) from 31 December 2015. Vacancies are also trending down (now 2.8%) as a result of leasing success at both 9 Help Street, Chatswood and the Marcus Clarke Street assets in Canberra. Whilst the portfolio is performing robustly we continue to remain focused on delivering quality predictable earnings with the potential for capital growth. It is this strategy that focused our attention on the potential acquisition of a similar REIT, GPT Metro Office Fund (GMF).

In considering and structuring the proposed merger with GMF it has been foremost in our minds that CMA’s distribution outlook and investment fundamentals remain unchanged.  We believe the proposal is true to our track record of delivering CMA’s stapled security holders the benefit of an enhanced portfolio and scale that will lead to increased income security and capital advantages.

Not all investment opportunities present themselves as straight forward property acquisitions so Centuria’s capital market capabilities have placed it in a good position to analyse a corporate transaction such as the proposal currently under consideration.  At the foundation of any transaction must be quality real estate, which the GMF portfolio is.  It meets our investment criteria, being “fit for purpose”, modern, located in established and attractive locations, and leased to robust organisations.

Whilst GMF’s Independent Board Committee (IBC) presently intends to recommend the CMA Takeover Bid to GMF investors there has been a subsequent offer for the portfolio which the IBC is also considering.  Like any investment decision made by CMA, discipline in analysis and value assessment will determine how CMA progresses, and any further action it may take to secure the portfolio.

There has been significant investor interest in the metropolitan office markets, particularly in Sydney and Melbourne.  This interest is a result of increased tenant demand which has lead to real rises in office rentals and higher returns to investors at a time of historically low interest rates (some would argue rates may fall further) making the sector in which Centuria is a specialist manager, very much the property sector of choice.

Today Centuria Metropolitan REIT remains well positioned to continue to deliver on its PDS forecasts. Its FY16 annualised distribution of 17 cents per stapled security offers investors a 7.9% return on its stated net tangible assets (NTA) of $2.15 per stapled security and well worth consideration for a balanced investment portfolio.

 

Other articles appearing in this quarter’s newsletter

New Funds and Upcoming Opportunities Update – Michael Blake

Portfolio Update – Victor Georos

Market Update – Hadyn Stephens

Staff Snapshot