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Centuria Metro Profits impacted by financing costs


Centuria today announced the Centuria Metropolitan REITs full year financial results for the period ended 30 June 2019.

The REIT is one of the few pure office REITs with 20 office assets covering 218,000sqm worth $1.4bn. The portfolio has a high occupancy (98.4%) and WALE of 3.9 years. Strong capital flows to the sector have seen cap rates in the portfolio compress by 26bps and whilst like for like assets values were up 5.3%, the overall net asset gain was impacted by the costs of acquisition, refinancing break costs and mark to market swaps which have contributed to 37% decline in statutory profit and a reduced return on equity of just 7.3%, compared to 14.9% for the pcp.

Financial Highlights

  • Funds From Operations (FFO) of $61.2 million

  • FFO1 per unit (EPU) of 18.7 cents per unit (cpu), in line with FY19 guidance

  • Distributions per unit (DPU) of 17.6cpu, in line with FY19 guidance

  • Statutory net profit of $53.6 million, down 37%

  • 12 month total unitholder return of 22.4%

  • Net Tangible Assets (NTA) of $2.49 per unit

  • All debt has been refinanced, with the average debt term to expiry extended and an increased diversity of lenders

Portfolio Highlights

  • Transformed to the largest pure play ASX listed office A-REIT

  • Portfolio book value increased by $469.5 million to $1.4 billion

  • Leases agreed for 31 separate lease transactions, totalling over 21,750sqm (10% of portfolio NLA)

  • High portfolio occupancy maintained at 98.4%, WALE 3.9 years

During the year, CMA completed the acquisition of four quality office buildings, settled on the completion of a new office development, whilst disposing of the two remaining industrial assets. As a result of these transactions, CMA’s portfolio has grown to 20 assets with over 218,000 sqm of net lettable area, over 200 tenants and an average building age of around 16 years.

Like for like portfolio revaluations of $45.2 million contributed to NTA of $2.49 per unit. Significant revaluation gains that occurred during 2H19 included 9 Help Street, Chatswood which incurred a $7.5 million or 9.8% increase predominantly due to a ~$50/sqm increase in market rents across the building, and 154 Melbourne Street, South Brisbane which incurred a $5.5 million or 7.1% increase due predominantly to the renewal of building’s major tenant, the QLD Government, across 4,282 sqm. CMA’s weighted average capitalisation rate reduced to 6.22% as at 30 June 2019

The net valuation gain was $7.1m but was substantially offset by $6.7m loss of the fair value of derivative financial instruments due to the declining bank bill swap rate, which impacted the FY19 return on equity of 7.5%.

CMA refinanced its entire debt book during 2H19, increasing the weighted average debt maturity to 4.0 years whilst maintaining a competitive all in debt cost of approximately 3.2%. CMA has also further diversified its number of lenders from two to four, with all four major Australian banks now lenders. Since 1H19, CMA has also reduced gearing 110bps to 34.2%. The refinance has however cost CMA dearly, with one off break costs of $6.7m.

CMA are forecasting FY20 FFO1 guidance 19.0 cents per unit, with distribution guidance of 17.8 cents per unit, payable in equal quarterly installments.

CMA Trading Chart vs ASX200 AREIT Blue - CMA, Purple ASX200 AREIT Last 12 months

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