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Centuria Metropolitan REIT 1H19 results

Australia’s largest office-specific REIT continues to improve $1.4bn portfolio

Centuria Property Funds Limited (CPFL), as Responsible Entity of Centuria Metropolitan REIT (ASX: CMA), is pleased to announce CMA’s half year financial results for the period ended 31 December 2018.

1H19 highlights include:

  • Completion of strategic initiatives repositions CMA as Australia’s largest ASX-listed pure play office REIT
  • 12-month Return on Equity1 (ROE) of 10.9%
  • The acquisition of a $521 million portfolio of four office assets continued to raise CMA’s quality and took the portfolio to $1.4 billion2 (from $930.5 million at FY18)3.

Portfolio highlights:

  • Divestment of remaining industrial assets, at premium-to-book values
  • High occupancy maintained at 98.8%;2,4 100% occupancy through WA, SA, VIC and NSW properties
  • Settlement of new Target Headquarters at 2 Kendall Street, Williams Landing boosted the portfolio: 100% occupancy on a 10-year lease and an uplift of $6.0m since acquisition.

A transformative year

Centuria also appointed Grant Nichols as new fund manager of CMA. Mr Nichols, who is a highly experienced fund manager with over 15 years of experience in Australian office markets, said: “In the last year, CMA delivered 10.9% return on equity to unitholders, and is now Australia’s largest sector-specific listed office REIT with a high-quality $1.4 billion portfolio.

“Having made CMA a pure-play in office assets, Centuria has continued to improve the quality of the portfolio – its delivery on strategy is evident in its strong returns to unitholders5.”

In addition to strategic transactions, Centuria’s experienced in-house team continues to deliver high-quality asset management, with over 14,500 sqm6 of net lettable area (6.7% of the portfolio NLA) leased across sixteen transactions during the half – extending the WALE to 4.3 years2,7 and maintaining high occupancy of 98.8%.

Mr Nichols continued “It’s been a truly transformational period for CMA, executing a number of strategic initiatives to create a truly diversified sector-specific office portfolio underpinned by quality income streams. Tenant appetite to make the move from CBDs to better value, strategically located metro markets continues to grow. With a high-quality, fit-for purpose portfolio 89% weighted to the eastern seaboard and an average building age of 15.5 years, CMA is well positioned to capitalise on tenants seeking to expand or reposition across Australian metropolitan markets.”

On track for FY19

The fund returned a statutory profit of $14.7 million in 1H198 and funds from operations of $26.5 million. With a $26.0 million like-for-like revaluation gain in the last 6 months, CMA is well on track for a strong and steady second half, with nearly 60% of CMA’s income expiring at or beyond FY23.

Grant Nichols commented, “The underlying fundamentals for Australian office markets remain solid, with positive leasing activity and falling vacancy rates evident in most major office markets across the country. With pending supply relatively in-check, this should underpin future market rental growth and continued investment demand, which remains strong. As Australia’s largest pure play listed office REIT, CMA’s scalable portfolio is positioned to benefit from investor and tenant demand alike.”

CMA forecasts FY19 funds from operations9 of 18.7cpu and distributions of 17.6cpu.

1 Return on Equity is calculated as (closing NTA minus opening NTA plus distributions) divided by opening
2 Excludes 13 Ferndell Street, Granville, NSW (settled 31 January 2019)
3 Includes 2 Kendall Street, Williams Landing VIC as if complete
4 By area
5 Past performance is not a reliable indicator of future performance
6 Includes Heads of Agreement
7 By gross income