Second asset for wholesale unlisted Centuria Select Opportunities Fund

  • Off-market acquisition provides value-add opportunity to capitalise on near term rent reversion opportunity
  • Currently under-rented in a tightly held market, 0.9% vacancy1

Australasian real estate funds manager, Centuria Capital Group (ASX: CNI or “Centuria”), has secured a second asset for its wholesale unlisted fund Centuria Select Opportunities Fund (CSOF or “Fund”) with the acquisition of a $18million warehouse facility in Sydney’s core central western infill industrial market of Wetherill Park.

Located at 26 Redfern Street, the asset provides two freestanding industrial units totalling c.4,530sqm with a 46% site coverage.

Significantly, the asset provides a value-add opportunity to capitalise on its remaining lease term in the tightly held west Sydney industrial market where vacancy has reached a low 0.9%1, demonstrating high demand for infill industrial assets which is driving strong rental growth.

Jesse Curtis, Centuria Head of Funds Management, said, “CSOF is designed to execute on a counter-cyclical strategy, capitalising on market opportunities to extract outsized returns for investors. This Wetherill Park property provides an opportunity to lean on Centuria’s strong in-house asset management capabilities to achieve compelling re-leasing spreads and rental income in line with the wider infill central western Sydney industrial market. We believe this investment will further contribute to the Fund’s targeted investor returns.”

CSOF has raised $50 million of equity from its Australian wholesale investor network and aims to deploy its capital across the coming 15-month period2, targeting a 15% Internal Rate of Return (IRR)3 across a five-year term. Centuria is co-investing alongside its wholesale investors, indicating its belief in the Fund’s high conviction investment strategy.

The Fund will generate returns by improving the functionality of the warehouses and undertake strategic leasing to access stronger rental streams from the asset.

Both industrial units are c.2,265sqm with 150sqm office spaces and benefit from multiple on-grade roller doors and one sunken loading dock, high clearances, and substantial power capacity. Warehouse 1 includes a 3.2-tonne gantry crane and Warehouse 2 benefits from a surplus hardstand area for external storage. The warehouses are currently leased to different tenants.

26 Redfern Street is located 27kms west of the Sydney CBD and 8kms southwest of the Paramatta CBD. It is positioned within proximity to major arterial roads including the M7 motorway, M4 motorway, the Cumberland Highway and The Horsley Drive, providing superior connectivity and accessibility to the Greater Sydney region.

The asset provides access to a substantial population of 1.4 million households within a 60-minute drive4.

This acquisition builds on the Fund’s seed asset, a $20.6million industrial logistics facility in southeast Melbourne’s industrial heartland of Keysborough.

Across Centuria’s listed and unlisted funds, it manages 27 industrial properties worth c.$1.3billion5 within western Sydney and, compared to this c.410,000sqm portfolio, Centuria believes the current Redfern Street warehouses are significantly under-rented.

Centuria is an ASX-200 listed real estate manager with a track record exceeding 25 years and manages a $6.0billion industrial platform5.

The property was sold via Cushman & Wakefield’s Carl Pearce, Nick Brooks and Alistar Siokos.

1. Source: Cushman & Wakefield, Sydney West submarket Q1 2024

2. From January 2024

3. Internal Rate of Return (IRR) net of fees. The rate specified is a target only and is not a forecast. This target is the total return outcome of the Fund at the end of the term of the Fund.  The IRR target will be a composite return based upon the returns of the underlying investments. The achievement of this target is subject to best endeavours and is not a guarantee of future performance. An investment in the Fund is subject to risks, as detailed in the Information Memorandum of the Fund.

4. Source: SA1 Data

5. As at 31 December 2023

M80 Connect’ capitalises on rising occupier demand, 56% leased1

  • Delivering super-prime, sustainable warehouses in supply-constrained industrial heartland, low 0.7% vacancy2
  • Three of five warehouses leased, expected c.280 new jobs created for Campbellfield VIC
  • M80 Connect adds to CIP’s $1.4billion VIC portfolio3; $200m+ VIC developments delivered in past three years
  • Officially opened by
    • Federal Member for Calwell, Maria Vamvakinou MP
    • Treasurer of Victoria, Minister for Industrial Relations and Minister for Trade and Investment, Tim Pallas MP 
    • State Member for Broadmeadows, Kathleen Matthews-Ward MP
    • State Member for Greenvale, Iwan Walters MP
    • Hume City Council Mayor, Cr Naim Kurt.

Australia’s largest listed pure-play industrial fund, Centuria Industrial REIT (ASX: CIP), has opened north Melbourne’s newest industrial estate, the $116million “M80 Connect,” with the development already more than 50% leased1.

Located at 100 Bolinda Road, Campbellfield VIC, the super-prime facility provides five warehouses totalling 45,375sqm within a 7.92ha site. The development was officially opened by Federal Member for Calwell, Maria Vamvakinou MP; Treasurer of Victoria, The Hon. Tim Pallas MP; State Member for Broadmeadows, Kathleen Matthews-Ward MP; State Member for Greenvale, Iwan Walters MP; and Hume City Council Mayor, Cr Naim Kurt.

M80 Connect has been delivered to meet rising occupier demand for modern, sustainable facilities in north Melbourne’s industrial heartlands where vacancy rates have reached a low 0.7%2.

Prior to opening, M80 Connect is c.56% leased1 with power infrastructure and critical equipment enclosure specialist, EnerSys Group Australia & New Zealand; and global logistics company, LX Pantos.

When fully occupied, it is anticipated M80 Connect will deliver c.280 new jobs for the Campbellfield community. This is in addition to the 450-675 jobs generated during the property’s development.

The property is owned by CIP and was developed by Cadence Property Group in conjunction with Centuria’s in-house development team. The estate was delivered by builder Texco Construction.

Jesse Curtis, Centuria Head of Funds Management, said, “It is a privilege to open M80 Connect in the company of such esteemed leaders. Their presence highlights the growth of Australia’s industrial sector and its significant contribution to our economy from a local to a national level. The domestic industrial markets continue to be driven by burgeoning ecommerce adoption and rising onshoring trends, creating more jobs and supporting other expanding industries such as infrastructure, logistic and retail.

“Within the north Melbourne industrial market, M80 Connect stands out as the beacon of a new generation of industrial development with strong sustainability credentials and spaces that lend themselves to last mile operations. We are proud to provide our customer tenants with such a high-quality new premise for their businesses and warmly welcome ICS Industries and LX Pantos to their new home.”

In the past three years, CIP has developed more than $200million of industrial assets within Victoria. Across the next five years, CIP has identified a $1.0billion development pipeline4 nationwide.

CIP is one of Victoria’s largest industrial landlords with a portfolio of 32 assets worth c.$1.4billion3.

Federal Member for Calwell, Maria Vamvakinou MP, said, “This investment signals strongly that our community remains the key hub for local manufacturing and the building of our industrial capacity, helping drive innovation across our economy. The industrial development will help deliver economic growth locally across the supply chain, as well as create the jobs required to revive Australia’s advanced and sovereign manufacturing capabilities.”

Treasurer of Victoria, Minister for Industrial Relations and Minister for Economic Growth, The Hon. Tim Pallas MP said “The growing industrial sector is a significant contributor to our state’s economy. Developments like M80 Connect give Victorians confidence about our economic future – supporting jobs, keeping local communities strong and encouraging businesses to invest and expand their workforces.”

State Member for Broadmeadows, Kathleen Matthews-Ward MP, said “The delivery of M80 Connects is a welcome addition to the Broadmeadows community and the Campbellfield neighbourhood. The development breathes new life into the area and contributes to the job growth, business diversity, economic growth and the overall identity of Broadmeadows.”

Mayor of Hume City Council, Cr Naim Kurt, also said, “Centuria’s commitment to Campbellfield underscores the strategic location Hume City Council holds for businesses, as a gateway to major freight terminals, highways and the Tullamarine Airport. The M80 Connect development is a strong endorsement of the work Hume City Council is leading in supporting investment and job creation for our community, and we look forward to working with Centuria to maximise the opportunity for local employment.”

Charlie Buxton, Cadence Property Group Chief Executive Officer, said “M80 Connect is our second development delivered in partnership with Centuria, following the successful completion of Southside Industrial Estate in Dandenong South. It presents and outstanding opportunity for tenants to secure A-grade industrial space in this tightly held location and comes at a time of very tight vacancy.

“This development builds on our reputation as a trusted and capable delivery partner within the logistics sectors and we are thrilled with the outcome for Centuria.”

M80 Connect features 15m-35m loading canopies allowing for all-weather operations, excellent B-Double access, secure container rated hardstand, multiple on-grade container-height motorised roller shutter doors, recessed loading docks, ESFR fire sprinkler system and 277 car parking spaces.

Sustainability features include electric vehicle charging stations, 350kw solar system, rainwater harvesting for estate irrigation, water efficient fixtures and fittings, and energy efficient lighting. The development is targeting a Green Building Council of Australia Five Star Green Star rating.

M80 Connect provides access to a population of more than 4.5 million people within a 60-minute drive time, demonstrating its reach to a dense and growing population.

Its highly accessible location is a mere 15km from Melbourne’s CBD, 10km from Tullamarine Airport, 17.5km from the Port of Melbourne and provides direct access to the Metropolitan Ring Road.

Remaining units include Warehouse 2 (9,303sqm) and Warehouse 3 (10,528sqm).

Daniel Eramo and Joe Brzezek from CBRE together with Robert di Natalie and Krista Hibert from JLL are the appointed leasing agents.

1. Includes Heads of Agreement
2. CBRE: Australia’s Industrial and Logistics Vacancy Second Half 2023 Report, December 2023
3. As at 31 December 2023
4. Estimated value on completion. Includes land, development cost and estimated development upside

Strengthens leadership team in preparation for new property growth cycle

  • Andrew Essey appointed to the newly created Chief Investment Officer position
  • Jesse Curtis promoted to Head of Funds Management
  • New Fund Managers for CIP and COF; new Head of Transactions

Centuria Capital Group (ASX: CNI or “Centuria”) has strengthened its senior management structure with a number of internal promotions, effective from Monday 15 April 2024.

Jason Huljich, Centuria Joint CEO, said, “The new senior roles are part of a strategic plan to ensure Centuria is well positioned to capitalise on market growth as the green shoots of real estate transactions gain momentum, indicating the potential eve of a new property cycle. We are proud to announce these senior roles have been filled by long-standing current members of the Centuria team who build on the legacy they have helped create.”

Andrew Essey has been promoted to the newly created position of Chief Investment Officer (CIO), responsible for the Group’s investment strategy, transactions and institutional capital. Previously, he was Group Head of Transactions and successfully executed more than $11 billion of direct real estate transactions between 2017 and 2024. Mr Essey joined Centuria in early 2013 and has more than 17 years of experience across real estate capital transactions, leasing and funds management.

Mr Essey said, “Centuria has a strong reputation for executing landmark real estate transactions through leveraging our deep industry relationships and broad skillsets. We have a significant appetite to grow our assets under management to deliver healthy recurring revenue for the Group, our REITs and unlisted funds. We also maintain focus on furthering our institutional partnerships, domestically and abroad, to support our growth objectives. It is an honour to be recognised with this promotion and I look forward to continuing our strategic real estate platform expansion.”

Jesse Curtis is appointed Head of Funds Management, responsible for both listed and unlisted property funds across the office, industrial, retail, healthcare and agricultural sectors, including more than 100 open and closed-end unlisted funds. Previously, he was Centuria’s Head of Industrial and Centuria Industrial REIT (ASX:CIP) Fund Manager. He increased CIP’s AUM to $3.9 billion1 from $1.2 billion2. Mr Curtis joined Centuria in 2019 and has more than 17 years of experience in funds management and capital markets.

Mr Curtis said, “Centuria’s fund management track record extends beyond 26 years and in this time the company has generated a strong $20 billion of real estate assets under management. This is a significant mantle to take up and I am honoured to be charged with the responsibility of furthering Centuria’s success. Centuria presents a formidable funds management team and I believe we are well positioned to take advantage of emerging market conditions to further grow our portfolios and deliver compelling returns to our investors.”

Grant Nichols is promoted to Head of Listed Funds and CIP Fund Manager, the latter of which will assume responsibility for Australia’s largest listed pure-play industrial REIT. Previously, he was Centuria’s Head of Office and Centuria Office REIT (ASX:COF) Fund Manager. He increased COF’s AUM to $2.1 billion1 from $1.4 billion2. Mr Nichols joined Centuria in 2019. His 20-year career in commercial real estate funds management extends across office and industrial sectors in both listed and unlisted markets.

Belinda Cheung is promoted to COF Fund Manager, following Mr Nichols promotion. She is responsible for Australia’s largest listed pure-play office fund. From April 2022, Ms Cheung was COF’s Assistant Fund Manager. Ms Cheung has 14 years of experience across listed and unlisted real estate funds management, strategy and analysis, financial reporting and assurance, with exposure to office, retail, healthcare and industrial sectors.

Following Mr Essey’s promotion, Nathan Guo will assume the role of Head of Transactions, responsible for originating and managing the Group’s property transactions across all real estate sectors. Previously, he was Senior Transactions Manager across Office and Industrial. Mr Guo joined Centuria in 2017 and brings more than 10 years of industry experience to his new role.

Mr Huljich concluded, “As Centuria evolves, we adjust our management structure to reflect our growth and ensure the most adept personnel are in place to lead each of our business divisions. We congratulate Andrew, Jesse, Grant, Nathan and Belinda on their promotion and are confident they will build on Centuria’s success in their new roles.”

1. As at 31 December 2023.
2. As at 31 December 2018.

Global alloys/metals specialist selects Bannister Road for first Australian operation

Australia’s largest listed pure-play industrial fund, Centuria Industrial REIT (ASX:CIP), has secured global alloy and metal specialist, ICD Group, as its first tenant for the recently completed new-build industrial facility at 204 Bannister Road, Canning Vale WA.

ICD Group has committed to a 10-year lease term commencing from 1 March 2024 and including fixed annual rent reviews.

It is the first time ICD Group will open operations within Australia through its subsidiary, ICD Superalloys Australia Pty Ltd. The premise will be the first dedicated superalloy processing facility established in Australia.

Jesse Curtis, CIP Fund Manager and Centuria Head of Industrial, said, “We are pleased to welcome the ICD Group to Bannister Road as well as to our Australian shores. It is an honour to be part of this global operator’s expansion and mark the beginning of its history down under. Attracting global tenants of this calibre is setting a new benchmark for the Perth industrial market, illustrating how the sector is growing in sophistication.

“The Western Australian industrial market has significantly evolved in recent years, driven by rising ecommerce adoption and businesses onshoring their supply chains. Attracting global enterprises is a significant indication of the market maturing and we aim to continue attracting tenant customers of this stature to our assets.”

Wayne Hawkes, ICD Group Managing Director, said, “We are excited to announce the launch of ICD Superalloys Australia, marking a significant step forward in our global expansion strategy. This move will enable us to better serve our existing customers while also offering our comprehensive suite of services to a new market.

“We are confident that our expertise and state-of-the-art facility will position us as the leading provider of Minor Metals and Superalloy Revert solutions in Australia and South-East Asia.”

CIP’s dual tenancy industrial development reached practical completion in late 2023 and ICD Group is currently undertaking a detailed fitout.

The Bannister Road industrial facility has a remaining 8,800sqm warehouse available, complete with 500sqm of office space.

The asset provides a 13.7m clearance, ESFR sprinkler system, multiple on-grade doors, recessed loading docks, container rated hardstand and is also future-proofed with capacity for a 38m super awning installation.

The industrial facility achieved a five-star Green Star design rating and its sustainability features include two 100kW solar systems, six electric vehicle charges, water-resistant landscaping and is 100% supplied with electricity (no gas).

Savills’ leasing agent responsible for negotiating the transaction, Alex Yeo, commented that one of the key attractions of the Bannister Road facility was its immediate availability for the new tenant. He said, “This transaction further underlines the strength of the Perth industrial market, particularly where landlords can offer high-grade accommodation without the time delays often attributed to a pre-lease process.”

CIP’s portfolio is eight per cent1 weighted to Western Australia, totalling eight assets worth c.$259million1. CIP’s entire Australian portfolio comprises 88 assets worth $3.8 billion1.

1. As at 31 December 2023

On Friday 8 March, we celebrated International Women’s Day with a morning tea across all our offices. This year, the International Women’s Day theme was “Inspire Inclusion”. When we inspire others to understand and value women’s inclusion, we forge a better world.

Our guest speaker, Davina Rooney – CEO of the Green Building Council of Australia, provided some inspiring insights. An engineer by trade, Davina has worked across Australia, the UK, India (Himalayas) and Pakistan. Her wealth of experience extends beyond engineering and sustainability, to academia and not for profit.

Jason and Davina speaking at International Women's day morning tea

$50m raised from HNWs, secures seed investment

  • Centuria Select Opportunities Fund targets 15% IRR1, five-year term after 15-month capital deployment
  • Co-investment strategy targeting opportunities across diverse property and real estate finance sectors
  • Seed investment worth $20.6m: under-rented industrial facility in Keysborough Vic.

Australasian real estate fund manager, Centuria Capital Group (ASX: CNI or ‘Centuria’), has raised $50 million of equity from its Australian wholesale investor network to capitalise on non-core divestment opportunities for its unlisted Centuria Select Opportunities Fund (CSOF or Fund).

CSOF will execute a counter-cyclical strategy to access opportunities across diverse property and real estate finance sectors. It aims to deploy its capital across the coming 15-month period and is targeting a 15% Internal Rate of Return (IRR)1 across a five-year term.

The Fund’s seed investment relates to a $20.6 million industrial logistics facility in southeast Melbourne’s industrial heartland of Keysborough where vacancy rates are less than one per cent2.

Jason Huljich, Centuria Joint CEO, commented, “We are looking at high-quality assets that can provide value-add opportunities such as positive rental reversions, as is the case for the Keysborough investment. We are also looking at industries with strong tailwinds that lend themselves to supply-demand imbalances and growth opportunities.

“CSOF is positioned to capitalise on attractive medium term market opportunities for Centuria’s deep network of wholesale unlisted investors. The Fund is also targeting direct and indirect investments that lend themselves to the capabilities of our in-house real estate team, such as leasing, repositioning, refurbishment and development, as well as real estate credit opportunities. Centuria is co-investing alongside our wholesale investors because we believe in this high conviction investment strategy.”

Located at 93-103 Pacific Drive, Keysborough Vic, the modern logistics facility was built in 2017, providing an 8,756 sqm3 warehouse with a low 45% site coverage. The asset benefits from dual access via Perry Road and Pacific Drive, up to 10.9-metre clearance, four on-grade and two recessed docks and a c.1,500 sqm hardstand.

Its short 2.0-year WALE provides a value-add opportunity to generate positive rent reversions in line with market asking prices today. The property also provides access to 1.5 million households within an hour’s drive time4.

Keysborough is positioned 30km southeast of Melbourne’s CBD with proximity to major road arterials including Greens Road and the Eastlink Freeway.

Centuria is an ASX-200 listed real estate manager with a track record exceeding 25 years, and manages a $6.0 billion industrial platform5.

CBRE’s Andrew Bell and Chris O’Brien represented the vendor.

1. Internal Rate of Return (IRR) net of fees. The rate specified is a target only and is not a forecast. This target is the total return outcome of the Fund at the end of the term of the Fund.  The IRR target will be a composite return based upon the returns of the underlying investments. The achievement of this target is subject to best endeavours and is not a guarantee of future performance. An investment in the Fund is subject to risks, as detailed in the Information Memorandum of the Fund.
2. Source: CBRE
3. GLA
4. Source: SA1 data
5. As at 31 December 2023

Resource use and circularity have been identified as global megatrends and issues from the World Green Building Council, reflecting the importance of waste management.

The climate-related reporting landscape is rapidly evolving both in Australia and globally. Scope 3 emission reporting, which includes carbon emissions from operational waste, is becoming increasingly important for both tenants and landlords.

The primary focus for reducing carbon emissions has typically been through energy and water efficiencies. While Centuria remains committed to improving our performance in these areas, we are now also focussing on actively managing waste streams through BinTracker Premium to reduce waste going to landfill and collecting waste data collection, which will assist with future scope 3 climate-related reporting obligations.

Bintracker dashboard

One of the significant challenges with waste management is the education and coordination needed to align cleaning contractors, internal staff and tenants to ensure that all parties are working collaboratively toward the desired outcome of reduced landfill.

In September 2022, Centuria’s Queensland team took the initiative to analyse various solutions to control, recycle or upscale waste matter within office buildings. At the heart of the issue was the limited waste stream options provided for tenants.

The new BinTracker Premium system provides office buildings with four waste streams including general waste, mixed recyclables, paper recyclables and organics (compost). This involved provision of new, separate bins deployed to each tenant in addition to:

  • Tenant engagement and training
  • New scales at each property to effectively measure and record the waste volume per stream, per tenancy
  • Facility manager training and advice (especially regarding the size of central bins and frequency of collections).
  • Refining collections per waste stream, which has a cost saving potential as general waste collection is more costly than other streams
  • Site assessments for bespoke needs.
  • Bintracker Premium mobile app, which provides transparent monitoring of bins and bags with weight data recorded and automatically reported.

Bintracker Premium is now in the process of being implemented across Centuria’s entire Australia office portfolio, consisting of c.70 buildings and almost 1,000 tenants. The new waste management system is being rolled out between February to June 2024.

To date, 37 buildings across Centuria’s office portfolio currently use Bintracker Premium and across these buildings, between 24 May and 29 January 2024, the system has measured:

  • a 40.4% recycling rate
  • c.300 tonnes redirect from general waste.

The new waste management system has also provided these buildings and their tenants with ongoing cost savings through a revised procurement strategy informed by enhanced data analytics. Most importantly, the thorough and meaningful data shared with tenants assist them with reporting their ESG metrics.

Centuria is now also looking to roll the new waste management system and benefits out across its Industrial platform.

Harnessing tailwinds from real estate finance, agriculture and industrial sectors

  • Focused on outperforming industrial sector and expanding alternatives: real estate finance, agriculture
  • Increased development pipeline to $2.3bn, concentrated in supply constrained markets
  • $2.1bn institutional capital bolstered by $500m Starwood industrial mandate
  • HY24 delivered operating earnings per security (OEPS)1of 6.1cps, Distribution per security (DPS) of 5.0cps
  • Reaffirmed FY24 OEPS guidance of 11.5-12.0cps, DPS guidance of 10.0cps

Australasian real estate funds manager, Centuria Capital Group (ASX: CNI or “Centuria”), announced its interim results for the 2024 Financial Year, which showed the Group’s resilience against a backdrop of economic uncertainty, high interest rates and fewer transactions.

Centuria’s assets under management (AUM) expanded to $21.1 billion2, largely driven by growth within its real estate finance business, Centuria Bass Capital ($1.58 billion AUM, +41% yoy); industrial platform ($5.92 billion); and focus on agricultural real estate ($0.55 billion, +31% yoy).

John McBain, Centuria Joint CEO, said, “Centuria is proud of the diversity which has been built into the Group over the past years. The need for this diversity has been highlighted by recent pandemic and financial market disruptions. The entire management team has worked diligently to expand into the financing and agriculture sectors and this has been a major factor in our ability to forecast reliable earnings to our securityholders.

“We’ve received strong interest from wholesale investors for our finance funds, which benefit from upward interest rate movements and provide short-term investment periods. These unlisted funds have become attractive, counter-cyclical investment options.”

Centuria has also identified a $2.3 billion development pipeline to capitalise on strong supply-demand imbalances within select commercial markets. Significantly, $1.0 billion is earmarked for the outperforming industrial sector, which benefits from constrained supply, outsized rental growth and continued high occupier demand.

The Group further captured industrial investment appetite with the $500 million Last Mile Logistics Partnership (LMLP) from US private investment firm, Starwood Capital, of which $147 million has been deployed.

Jason Huljich, Centuria Joint CEO, said, “Centuria continued to harness tailwinds from the outperforming industrial real estate sector by securing the Starwood mandate, in addition to CIP identifying a significant development pipeline, which aims to capitalise on historically low domestic vacancy rates and limited supply within urban infill industrial markets.

“Alternative real estate markets, namely real estate finance and agriculture, provided strong growth throughout the period, benefiting from unlisted wholesale and retail investor appetite for emerging market investment opportunities. We believe these sectors, in particular, will continue to expand in the near to mid-term driven by constrained lending criteria from traditional finance markets and Australia’s expanding population increasing demand for fresh produce.”

During the period, Centuria’s unlisted platform generated $0.3 billion of capital raising inflows. Additionally, $0.3 billion of gross development projects were completed during HY24.

As at 31 December 2023, Centuria managed c.417 properties3 and 2,450 tenant customers3. Its real estate platform provides an average 96.2% occupancy3, 5.7-year WALE3 and an average capitalisation rate of 6.03%3.

Centuria’s Group Operating Profit After Tax was $49.4 million4, resulting in OEPS1 of 6.1 cents per security (cps) and an interim distribution of 5.0cps was declared. Total operating revenues of $149.6 million reflect restrained transaction volumes. Net asset value (NAV) increased to $1.78 per security5,6, through unrealised fair value gains from the Group’s co-investment stakes.

Balance sheet flexibility strengthened through a $50 million extension of Centuria’s revolving loan note to FY27. Centuria benefits from $255 million of cash and undrawn debt available at HY24 end and the realisation of $187 million in cash from the sale and recycling of balance sheet assets, which contributed to operating gearing7 of 13.9%.

Mr McBain and Mr Huljich concluded, “Australia’s growing population, driven by surging migration, provides strong tailwinds across the real estate sectors Centuria is exposed to. This extends to traditional sectors including decentralised offices, large format retail and daily needs retail as well as industrial, agriculture, healthcare and real estate finance.

“Centuria maintains a conservative approach to capital management with substantial cash and undrawn debt, which enables us to support the continued growth of our business units. The Group remains focused on creating long-term value for our securityholders.”

Centuria reaffirms its FY24 operating EPS guidance of 11.5 – 12.0 cents per security and DPS guidance of 10.0 cents per security.

1. Operating EPS is calculated based on the Operating NPAT of the Group divided by the weighted average number of securities.
2. AUM includes assets exchanged to be settled, cash and other assets.
3. Aggregated across all funds managed by Centuria and is not representative of any single fund. Excludes land, Development assets, US syndicates, Centuria Bass Credit, assets exchanged yet to be settled.
4. Operating NPAT of the Group comprises of the results of all operating segments and excludes non-operating items such as transaction costs, mark to market movements on property and derivative financial instruments which are the results of Benefit Funds, Controlled Property Funds and share of equity accounted net.
5. Number of securities on issue 31 December 2023: 799,796,794 (at 31 December 2022: 792,787,120).
6. Increase in net asset value per security is primarily attributable to continued profitability and the unrealised fair valuation gains on the Group’s co-investment stakes, less borrowing, payable, option.
7. Gearing ratio is calculated based on (operating borrowings less operating cash) divided by (operating total assets less operating cash).

Metro market positive net absorption outperforms Sydney/Melbourne CBDs

  • 28,659sqm leased across 23 deals, (9.7% of portfolio)1; c.67% of portfolio leased since COVID hit
  • Maintained high 96.2%2 occupancy, 4.4-year WALE3; 92% portfolio weighted to metropolitan/fringe
  • Reduced future metro office supply, coupled with forecast population growth, provides mid-term tailwinds
  • Reaffirmed FY24 FFO guidance4 of 13.8cpu, distribution guidance of 12.0cpu4

Australia’s largest listed pure-play office fund, Centuria Office REIT (ASX:COF), has delivered solid interim results for the 2024 financial year, with strong leasing transactions demonstrating the continued resilience of metropolitan markets over Sydney and Melbourne CBDs.

Approximately 92% of COF’s portfolio is exposed to metropolitan, fringe and near-city office markets, that is, markets outside the Sydney and Melbourne CBDs. COF’s portfolio consists of 22 modern office buildings worth $2.1 billion5.

During HY24, COF leased 28,659sqm across 23 transactions, representing (9.7% of portfolio NLA)1. Significantly, since 2020 when the COVID pandemic impacted the office sector, COF has leased more than c.67% of its portfolio, totalling more than 197,000sqm.

Grant Nichols, COF Fund Manager and Centuria Head of Office said, “Four years on from the start of COVID’s impact and, despite flexible working arrangements having become somewhat ubiquitous, many Australian office markets experienced positive net absorption throughout 2023. This suggests many tenants have already right-sized and tenant demand may be finding an equilibrium.

“Many tenants have not decreased their footprint and the office leasing distress predicted by some market speculators has not materialised, particularly in the markets COF is exposed to6. In fact, metropolitan office demand continues to materially outstrip the Sydney and Melbourne CBDs. In particular, the Brisbane fringe market incurred the strongest net absorption in 2023 and has limited pending supply. COF has substantial exposure to this market with a 20% portfolio weighting.”

During the half, COF maintained high occupancy exceeding 96%2 and its portfolio WALE increased to 4.4 years3.

COF delivered Funds From Operation (FFO) of $41.8 million or 7.0 cents per unit (cpu)7 and distributions of 6.0cpu, both in line with FY24 guidance4. The latter provides a distribution yield of 9.6%8.

Ross Lees, Centuria Head of Funds Management, added, “COF is providing unitholders with a well-priced investment, considering its high distribution yield. COF’s portfolio construction, comprised of modern, high-quality assets within metropolitan markets, is differentiated by amenity, affordability and connectivity. These unique attributes capitalise on the continued bifurcation between Prime grade stock and secondary assets.”

Mr Nichols concluded, “Looking forward, we expect future office supply to materially reduce over the medium term. Development feasibilities have been impaired due to rising construction costs, increased finance costs and softening capital market transactions, pushing economic rents significantly above prevailing rents in the majority of Australian office markets. This is likely to provide strong future tailwinds for the markets COF is exposed to, especially in light of forecast population and white collar employment growth.”

During the period, COF continued to maintain liquidity with $88.2 million pro forma debt facility headroom9, a 2.7-year weighted average debt expiry and has no debt expiring until FY26. As at 31 December 2023, 76% of debt is hedged.

Selective divestment of two non-core assets during the period improved overall portfolio quality, positioning COF to take advantage of the recovering conditions within decentralised office markets.

COF also addressed its most significant FY25 lease expiry, relating to its largest tenant (c.5% portfolio NLA). The Commonwealth Government committed to a further 10-year term at 235 William Street, Northbridge, WA.

COF reaffirmed its FY24 FFO guidance of 13.8 cpu4 and distribution guidance of 12.0 cpu4 (distribution yield of 9.6%9), which are expected to be paid in equal quarterly instalments.

COF HY24 results highlights

Centuria Office REIT Fund Manager, Grant Nichols discusses the Fund’s HY24 highlights.

  1. By Net Lettable Area (NLA), including Heads of Agreement and executed leases
  2. Occupancy by gross income as at 31 December 2023
  3. Weighted Average Lease Expiry (WALE) by gross income as at 31 December 2023
  4. Guidance remains subject to unforeseen circumstances and material changes in operating conditions
  5. Excludes the right of use asset
  6. JJL research 2023
  7. FFO is the Trust’s underlying and recurring earnings from its operations. This is calculated as the statutory net profit adjusted for certain non-cash and other items
  8. Based on COF closing unit price of $1.25 on 14 February 2024
  9. Headroom reflects undrawn debt (including a $1.5m bank guarantee held as security over the 46 Colin Street, West Perth WA ground lease)

51% re-leasing spreads1 achieved within HY24, driving strong FFO

  • FY24 earnings (FFO) guidance upgraded to 17.2cpu2
  • 51%1 re-leasing spreads achieved during HY24 across 108,821sqm3
  • $1.0bn development pipeline4 identified over the next five years

Australia’s largest listed pure-play industrial REIT, Centuria Industrial REIT (ASX:CIP), today announced its half year results for the 2024 financial year, which are underscored by upgraded Funds From Operation (FFO) guidance of 17.2 cents per unit (cpu)2 from 17.0cpu.

Strong income growth underpinned CIP’s FFO guidance upgrade, also known as earnings guidance, which is largely credited to achieving significant average re-leasing spreads of 51%. The HY24 re-leasing spreads eclipse those secured throughout FY23, which averaged 30%.

During the period, CIP leased 108,821sqm3 across 17 transactions within its portfolio of 88 assets valued at $3.8 billion5. The strong leasing activity equates to 8% of total portfolio Gross Lettable Area (GLA). In total, CIP’s portfolio provides a 7.5-year Weighted Average Lease Expiry (WALE) and 97.2% occupancy6.

The REIT also delivered 57,722sqm of new industrial facilities across two sites in Campbellfield VIC and Canning Vale WA. These new facilities were c.44% pre-committed prior to practical completion (PC) and achieved a c.47% rental premium7.

Significantly, CIP has identified a $1.0 billion4 future development pipeline across the next five years to further capture strong tailwinds across urban infill industrial markets. The pipeline focuses on key growth sub-markets including multi-level industrial facilities, data centres, distribution centres and cold storage/food logistics.

Jesse Curtis, CIP Fund Manager and Centuria Head of Industrial, said, “CIP enters the second half of FY24 in a strong position having executed outsized re-leasing spreads and identified an executable development pipeline. CIP has a strong track record in delivering high-quality infill industrial developments and further activates a development pipeline, unlocking embedded value while providing modern, sustainable industrial assets.”

Examples of projects within CIP’s development pipeline include a 58,000sqm multi-level industrial facility in Wetherill Park NSW; a 7,500sqm industrial brownfield development in Hallam VIC; and a 22,000sqm industrial development in Direk SA .

Also during the period, CIP divested two assets for a combined $70 million8 with both trading in line with book values as at 30 June 2023. Proceeds were used to reduce debt and strengthen CIP’s balance sheet.

CIP maintained a healthy balance sheet with gearing largely unchanged at 33.7%9 and maintains a staggered, diverse debt profile with no debt expiry until FY25.

Mr Curtis, continued, “Looking ahead, domestic urban infill industrial market vacancy remains tight despite wider industrial market vacancy marginally increasing. Tenant demand continues to be skewed towards infill markets as industrial users continue to prioritise proximity to a large population base.

“With limited new supply within these infill markets, rental growth is expected to be prolonged providing the opportunity for continued positive rental reversion from high re-leasing spreads. Additionally, CIP’s embedded development pipeline provides the optionality to unlock further value to take advantage of the mismatch between supply and demand and deliver value to unitholders.”

Ross Lees, Centuria Head of Funds Management, added, “CIP has had a longstanding differentiated strategy to build a portfolio of high-quality urban infill logistics assets. It is pleasing to see this long-term disciplined approach to portfolio construction, alongside an active approach to asset management, resulting in significant rental growth being delivered for unitholders.”

In addition to upgraded FY24 FFO guidance, CIP reaffirmed its distribution guidance of 16.0cpu, paid in equal quarterly instalments.

  1. On a net rent basis compared to prior passing rents
  2. Guidance upgraded from 17.0 cents per unit (cpu). Guidance remains subject to unforeseen circumstances and material changes in operating conditions, and assumes the average floating rate is based on a BBSW rate of 4.6% over FY24.
  3. Includes heads of agreement (HOA)
  4. Estimated value on completion. Includes land, development cost and estimated development upside
  5. At CIP ownership share of joint venture assets
  6. By income
  7. Rental premium secured against underwritten rental values
  8. Before transaction costs
  9. Gearing is defined as total interest bearing liabilities divided by total assets

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