Centuria Industrial REIT (ASX:CIP) talks FY17 results & outlook


by Jessica Amir

Centuria Industrial REIT Limited (ASX:CIP) Trust Manager, Ross Lees talks FY17 results, recent acquisitions, portfolio metrics and Q1 FY18 update.

Jessica Amir: Hi I’m Jessica Amir for the Finance News Network. Joining me now from Centuria Industrial REIT (ASX:CIP) is Trust Manager, Ross Lees. Hi Ross, welcome back.

Ross Lees: Thanks for having me Jessica.

Jessica Amir: First up for those new to the company. Can you give us an introduction?

Ross Lees: Centuria Industrial REIT goes by the ticker CIP. It’s a portfolio designed to provide income to investors seeking exposure to industrial real estate. We’ve got a portfolio of 39 assets with a value of a billion dollars and a market capitalisation of about $650 million.

Jessica Amir: Turning to financials now. Just give us a snapshot on how FY18 is shaping up?

Ross Lees: We’re off to a good start in FY18; we’ve put out our first quarter operating update back in October. We’ve undertaken a significant amount of leasing in the portfolio, 17.5 per cent of the portfolio’s being renewed in FY18. We’ve invested $120 million into new acquisitions throughout the first quarter. We’ve improved our portfolio’s weighted average lease expiry to 4.8 years, and our occupancy to 93.5 per cent.

Jessica Amir: Thanks Ross, now to your portfolio in a little bit more detail. Can you give us an update on your properties, where they’re located, tell us about them and give us an update on any recent acquisitions?

Ross Lees: We have 39 assets located throughout Australia and they’re really heavily weighted towards the east coast markets, 87 per cent of our buildings are on the east coast. And importantly, 68 per cent of those are between the dominant markets of New South Wales and Victoria. Our average property size is about 20,000 square metres and that positions us really well in the infill markets, and close to the highway networks and motorway networks. We want to be connected to ultimately the end user. So we’re accommodating our portfolio towards wholesale and retail trade, transport logistics, manufacturing and the growing e-commerce sector.

Jessica Amir: Can you tell us about the tenant profile?

Ross Lees: The tenants that we have are really high quality, albeit we’re catering towards the middle bracket of the market, at the 20,000 square metre space. We have great credit within our portfolio. So 50 per cent of our portfolio’s income, comes from our top 10 tenants, but five of those 10 have more than two buildings with the Fund. The tenants include companies like Woolworths Limited (ASX:WOW), Visy Board Pty Limited, Australian Pharmaceutical Industries (ASX:API) and The Reject Shop Limited (ASX:TRS) to name a few.

Jessica Amir: Now can you give us an update on your key metrics?

Ross Lees: As I’ve said, we put out our first quarter operating update; portfolio occupancy is at 93.5 per cent, as at the 1st of October. Our portfolio weighted average lease expiry’s moving out to 4.8 years. Our near-term expiry risk for FY18 is down to 3.6 per cent and we’ve undertaken record amounts of leasing in the portfolio, so far in FY18 and in FY17 passed.

Jessica Amir: The market’s really competitive. So what are you doing to get that leading edge?

Ross Lees: We are in a competitive market; the industrial sector is very heavily sought after by institutional and private investors. We’re still managing to find very attractive investment opportunities. Just in the first quarter, we’ve settled on the acquisition of $120 million of assets. That’s three properties, two in Western Australia and one in Victoria and a stake in Propertylink Group (ASX:PLG). Those assets were all accretive to our underlying portfolio metrics and importantly catering to customers, who we want to have in our portfolio. In fact, one of those buildings in Western Australia was leased to an existing tenant of ours and before we settled it, we extended the lease by five years.

Jessica Amir: Last question now Ross before we let you go. What’s your guidance for FY18?

Ross Lees: We put out distributable earnings guidance for FY18 of 19.5 to 20 cents per unit. And off the back of that, we expect to distribute 19.4 cents per unit. That’s showing underlying distribution yield of about 7.5 per cent. Also important for investors to understand is that we provide predictable distributable income. So we’re distributing quarterly, giving our investors their desire for predictable income with the opportunity for capital appreciation.

Jessica Amir: Fantastic, well always a pleasure Ross Lees, thanks so much for the update.

Ross Lees: Thanks Jessica.