- CIP leased 88,517 square metres across 19 transactions.
- Portfolio WALE of 8.1 years, and 98.7 per cent occupancy.
- Valuation of portfolio: $3.9B across 88 assets.
It’s 19 per cent from 19 deals for Centuria Industrial REIT (ASX: CIP), the re-leasing spreads a significant jump up from its FY22 result of 8 per cent.
The company credits strong sector tailwinds for some of its half-year highlights, which include over 88,000 square metres of lease terms agreed, $215 million in proceeds from strategic transactions, reduced gearing, 100 per cent pre-leasing of its now completed Dandenong South development, and more.
Jesse Curtis, CIP Fund Manager and Centuria Head of Industrial, said, “Industrial market rents accelerated during the period due to record low national vacancy and continuous tenant demand, particularly in urban infill markets. This demand is reflected in CIP’s leasing activity and re-leasing spreads. CIP has further opportunities to execute new leasing and value-add initiatives to capitalise on the domestic market’s strong rental growth trajectory with nearly one-third of its portfolio expiring or value-add developments being delivered by FY25.”
CIP credited some of the income growth strength to the fact a fifth of the portfolio is linked to CPI (consumer price index) rent reviews. Additionally, 87 per cent of the company’s income is secured by blue chip national, multi-national, or listed tenant customers.
Strong leasing activity also contributed to offsetting the REIT’s capitalisation rate expansion. Though CIP’s Weighted Average Capitalisation Rate (WACR) expanded 47bps to 4.66 per cent, resulting in a 1.9 per cent valuation decrease on a like for like basis, the reduction was primarily concentrated on two long Weighted Average Lease Expiry (WALE) assets.
The company said valuations across the remainder of its active portfolio remained broadly unchanged, the portfolio valued at $3.9 billion across 88 assets as at 31 December 2022, with WALE of 8.1 years and 98.7 per cent occupancy.
CIP explains that the lower portfolio values is also partially credit to $215.4 million of strategic transactions executed during the half year, including the sale of circa 50 per cent interest in eight existing assets to an investment vehicle sponsored by Morgan Stanley Real Estate Investing (MSREI) for $180.9 million, resulting in a partnership known as Centuria Prime Logistics Partnership (CPLP). Additionally, CIP divested the $ 34.5 million 30 Clay Place, Eastern Creek NSW asset during the period.
Proceeds from these transactions helped decrease CIP’s debt and gearing reduced to 31.6 per cent, at the bottom end of CIP’s target gearing range.
“With a substantially strengthened balance sheet CIP will continue to execute its core strategies across its urban infill industrial portfolio during the remainder of FY23. The portfolio is well positioned with high occupancy and strong, reliable rental streams. Though transaction volumes have moderated during 2022, industrial asset values are continuing to hold with uplift in market rental growth counteracting capitalisation rate expansion. CIP maintains its guidance while continuing to monitor broader economic conditions,” said Curtis.
