CIP announces upgraded earnings guidance and $1bn development pipeline
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.
- On a net rent basis compared to prior passing rents
- 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.
- Includes heads of agreement (HOA)
- Estimated value on completion. Includes land, development cost and estimated development upside
- At CIP ownership share of joint venture assets
- By income
- Rental premium secured against underwritten rental values
- Before transaction costs
- Gearing is defined as total interest bearing liabilities divided by total assets