Merger on menu as Centuria lifts profit

1 March 2017

Publication: The Australian
Author: Elizabeth Redman
Date: 10 Februiary 2017

Merger on menu as Centuria lifts profit

Trusts: The listed Centuria Metropolitan REIT yesterday affirmed its plans to consider a merger with stablemate Centuria Urban REIT as it turned in a $27.1 million interim profit.
The office trust is in growth mode and last year had a tilt at the GPT Metro Office Fund before its manager later picked up the bulk of the 360 Capital funds business.
The trust, part of Centuria listed stable overseen by Nick Collishaw reported a jump in profit due to upward revaluations of its properties, with analysts tipping further earnings growth as it spends the proceeds from a recent asset sale.
Net profit rose 40.3 per cent to $27.1m in the first half, up from $19.3m in last year’s first half.
The trust benefited from an independent revaluation of 9 Help Street in Sydney’s Chatswood, with the value increasing $7.1m. The overall portfolio was valued at $417.5m at the end of December, a 4.7 per cent lift from June 30.
Centuria expects the value of its properties to keep rising over the rest of the 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,” trust manager Nicholas Blake said, adding that active management and repositioning strategies could also boost values.
“Importantly, most metropolitan markets are experiencing real rental rate growth coupled with contracting incentives and continuing strong tenant demand,” Mr Blake said.
Strong revaluations have emerged as the theme in this earnings season, with shopping centre owner SCA Property Group, Bunnings landlord BWP Trust and the Australian Unity Office Fund all reporting increases.
The Centuria trust earlier announced the sale of its 14 Mars Road, Lane Cove property for $26m. Proceeds will pay down debt while the trust looks for a reinvestment opportunity.
“There is some earnings per share upside potential as/when (Centuria etropolitan) redeploys the $26m of proceeds from the sale of this asset,” Shaw and Partners analyst Peter Zuk told clients. The trust reaffirmed earnings per share guidance of 18.7c-19c for this financial year and forecast a distribution per share of 17.5c. UBS traders said it was a pleasing result and noted the focus continues to be on the intended merger of the two listed Centuria office trusts.

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