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APN Industria REIT with Income Growth from Stable Asset base
February 20, 2019
APN released the results for the Industria REIT for the period ending 31 December 2018 with a stable asset providing a base for income growth over the medium term.
The REIT has out-performed the benchmark ASX200 AREIT index since the start of 2018.
Funds From Operations (FFO) up 3.4% to $15.3 million and on-track to deliver guidance of 3 – 4% growth
Underpinning the future growth profile with 6,600 square metres leased across the portfolio
$26.3 million of acquisitions settled at an average 7.1% yield, with the benefit a 5.7 year weighted average lease expiry providing income visibility
Distribution paid up 3.7% to 8.5 cents per security.
Financial Results Net profit for the six months ending 31 December 2018 was $14.6 million, up $0.8 million on the prior corresponding period (pcp). Growth was driven by contracted fixed uplifts across the portfolio, leasing, and two new acquisitions at 1 West Park Drive, Derrimut and 13 Ricky Way, Epping.
FFO increased $0.5 million to $15.3 million; or 3.3% on a per security basis to 9.4 cents. Guidance of 19.05– 19.25 cents per security for FY19 is reiterated.
Net Tangible Assets (NTA) increased $0.7 million, with valuation gains of $3.1 million partially offset by stamp duty costs related to the acquisitions and derivative fair value movements.
The balance sheet has a modest gearing ratio of 33.3%, which is at the lower end of the target 30 – 40% gearing band. Refinancing risks remain low as the debt maturities are staggered across four financial years, with the nearest debt maturity in FY20 limited to ~$46 million. The weighted average debt maturity was 2.8 years, and the average interest rate 3.6%.
The trust installed 1MW of solar panels at the office park in 2017 at a cost of $1 million delivered a return on cost of 15% to the trust and offered its tenant's a cost saving, joining a growing number of big commercial landlords that have embraced solar.
Property Portfolio Portfolio occupancy increased to 96% following 6,600 square metres of leasing. Approximately 2,900 square metres of vacancy was leased and a further 3,700 square metres of renewals agreed. Leasing transactions with existing tenants seeking expansion space exceeded 1,600 square metres.
Key asset highlights included:
88 Brandl St, Brisbane Technology Park (BTP) - ~890 square metres leased as nine leasing deals were agreed with new and existing tenants (expansion space);
8 Clunies Ross Court, Brisbane Technology Park (BTP) - ~740 square metres leased, with an existing tenant expanding into the space;
7 Clunies Ross Court, Brisbane Technology Park (BTP) - ~680 square metres leased, with new amenity being introduced including Anytime Fitness and a modernised café offering; and
5 Butler Boulevard, Adelaide Airport – renewed ~2,900 square metres expiring in FY20 whilst also agreeing terms to lease up ~1,400 square metres to bring the property to 100% occupancy.
Full year FFO guidance of 19.05 – 19.25 cents per security, representing 3 – 4% growth over FY18, is reiterated. Guidance is subject to current market conditions continuing and no unforeseen events.