The company saw FFO increase over three percent. Image – Canva
  • AOF saw a 66% decline in profit reported in their half year results
  • The company incurred costs from a failed merger and has hit with downward revaluation of assets
  • An increase in FFO was recorded in the results

Australian Unity Investment Real Estate Limited (AUIREL), has recently announced the 2022 half-year results of the Australian Unity Office Fund (ASX: AOF), reporting a 66% decline in profit compared to the previous corresponding half year.

The real estate investment trust (REIT) recorded a $6.8million profit in HY21, down from the $20.8 million profit recorded in HY20.

The $13.3 million reduction in profit has been attributed to a downward revaluation of assets, according to AOF.

The independent revaluation of all the company’s properties reported a $3.6million decline in value. In addition, a proposed merger with Australian Unity Diversified Property Fund which did not proceed, caused AOF to incur $2.6million of costs.

While looking at statutory profit alone might paint a dire picture, the Funds from Operations (FFO) figure has increased 3.5% in HY21 compared with the previous corresponding half year.

FFO calculations allow companies to adjust profit figures to account for once-off expenses, non-cash changes in investment properties and non-cash fair value adjustments to financial instruments amoung other discrepancies. The company recorded $15.6 million FFO, up from $15.1 million in HY20.

Nikki Panagopoulos, AOF Fund Manager expanded on the FFO results.

“The AOF portfolio has performed well over the period, with funds from operations increasing 3% to 9.5 cents per unit, underpinned by a 1.2% increase in occupancy to 96.7%.”

Nikki Panagopoulos, AOF Fund Manager

“Full year guidance of 18.0-18.5 CPU and distribution guidance of 15.2 cents per unit is reaffirmed,” she said.

Australian Unity Office Fund Half Year Results

Movement Percentage HY22 HY21
Total Revenue and Other Income Down (3%) $23,846,000 $24,157,000
Profit from ordinary activities after tax attributable to unitholders Down (66%) $6,834,000 $20,109,000
Directors’ assessment of Funds from Operations Up 3.5% $15,643,000 $15,103,000
Net tangible assets per security Down (1.5%) $2.67 $2.71

AOF ended the half year with a diversified portfolio of seven properties.

“During the half year, 32 Phillip St Parramatta was sold for $66.0 million, enhancing portfolio construction. The sale price was at a 5% premium to the 30 June 2021 independent valuation of $62.75 million.”

“AOF acquired 96 York St, Beenleigh for $33.52 million, with 86% of the property leased to the City of Logan for 10 years including contractual rent increases, underpinning the asset’s future income,” Ms Panagopoulos said.

The weighted average lease expiry (WALE) in AOF’s property portfolio is 2.1years. The net lettable area comes to 91,254 sqm with the company boasting a 96.9% occupancy rate.

Some notable tenants are Telstra, Boeing Defence Australia, Contract Pharmaceutical Services of Australia, Commonwealth of Australia and the NSW State Government.

“Multi-tenanted properties continue to perform well, providing a sustainable income.”

“Upcoming expiries between June 2022 and June 2024 for AOF’s three largest tenants, provide an opportunity to refurbish and reposition those assets,” she said.

“We are also assessing the potential divestment of some or all assets and returning capital to unitholders, as well as assessing a portfolio sale via a corporate transaction.”

“We remain focused on maximising unit holder returns and will continue to keep investors updated,” Ms Panagopoulos concluded.

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