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CIP reports 28%1 re-leasing spreads in Q3 FY23

Tailwinds unabating with industrial market vacancy less than 1%2 nationwide

  • c.68,600sqm3 leased during the quarter, 157,124sqm leased YTD (5% portfolio)
  • Speculative developments target strong demand appetite, furthers rental growth opportunities
  • 98.5% portfolio occupancy4, 7.9 year WALE5
  • Reaffirmed FY23 guidance: FFO of 17.0cpu and distribution of 16.0cpu

Australia’s largest listed pure-play industrial fund, Centuria Industrial REIT (ASX:CIP), has reported year to date positive re-leasing spreads averaged 28%1, which reflects continuous tenant demand and record low national vacancy for prime industrial facilities.

During the period, CIP leased 68,606sqm3 throughout its portfolio across six leasing deals. Year to date, CIP has leased 157,124sqm, representing 5% of its portfolio by Gross Lettable Area (GLA).

The strong leasing activity reflects unabating tenant demand for high quality industrial facilities with CBRE reporting a 0.6% national average vacancy across Australia’s industrial markets2.

Jesse Curtis, CIP Fund Manager and Centuria Head of Industrial, said “CIP has experienced another strong quarterly performance punctuated by strong rental growth. The Australian industrial real estate market continues to benefit from high tenant demand and a low volume of new supply of industrial space, which continued to reduce vacancy and accelerate market rental growth nationally. This growth has been concentrated in urban infill markets where CIP holds critical mass.

“To further capture tenant customer demand, CIP is progressing more than 57,300sqm of high-quality, sustainable industrial space through its development pipeline. The development in Canning Vale WA is nearing Practical Completion (PC) and the M80 Connect development in Campbellfield Vic is progressing well. Both projects have attracted significant tenant interest due to their high quality and urban infill locations.”

CIP’s development projects include 12,300sqm at 204 Bannister Road, Canning Vale WA, which expects PC in July 2023, and a five unit industrial estate providing c.45,000sqm in Campbellfield Vic. The latter anticipates PC in Q2 FY24.

In addition to CIP’s strong rental revenue, the REIT recently strengthened its balance sheet through proactive capital management with the issuance of exchangeable notes, further diversifying CIPs sources of capital while reducing its average cost of debt.

CIP settled a $300 million exchangeable notes offering on 3 March 2023. Proceeds were used to repay existing debt facilities and for general corporate purposes. The notes provided a fixed 3.95% per annum coupon and are exchangeable into CIP units at an initial exchange price of A$4.166, representing a 2% premium to last reported NTA of $4.08 per unit as at 31 December 2022.

Mr Curtis continued, “CIP remains in a strong position moving into the final quarter of FY23. With a fortified balanced sheet and a high-quality portfolio of urban infill industrial assets, CIP is well placed to continue to take advantage of the positive sector tailwinds driving the industrial real estate market. We remain very confident in the underlying industrial market fundamentals and are focused on executing our strategy through active management of Australia’s largest listed pure-play industrial REIT.”

CIP reaffirms its FY23 FFO guidance of 17.0 cents per unit (cpu). Distribution guidance is also reaffirmed at 16.0 cpu, reflecting an annualised distribution yield of 5.1%7 to be paid in equal quarterly instalments.

  1. On a net rental basis compared to prior passing rents. The reported leasing spreads are over 105,259sqm. Rents on 51,865sqm of leasing which were under tenant exercise of options are currently under negotiations and not included in the 28% leasing spreads reported
  2. CBRE: Q1 2023 Industrial & Logistics Figures
  3. Includes heads of agreement (HOA)
  4. Includes occupancy at 616 Boundary Road, Richlands QLD which is on a short term lease to December 2022
  5. By income
  6. Subject to standard exchange price adjustments
  7. Based on CIP unit price of $3.12 as at 28 April 2023