Centuria Metropolitan REIT (ASX:CMA) Trust Manager, Nicholas Blake talks 1H18 results, portfolio metrics and trends.
Jessica Amir: Hi, I'm Jessica Amir, with the Finance News Network. Joining me today, from Centuria Metropolitan REIT, is its fund manager Nick Blake. Hi Nick, and welcome.
Nick Blake: Thank you Jessica.
Jessica Amir: So Nick, for those investors new to the fund, just give us an introduction, and tell us about your strategy.
Nick Blake: CMA is Australia's leading ASX listed, Metropolitan Office REIT. We're included in the S&P/ASX 300 A-REIT index. And we're established just over three years ago, recognizing a clear value differential between the CBD and non-CBD markets.
Jessica Amir: Turning to your second half results, and uplifting in all areas, walk us through your highlights.
Nick Blake: It's a strong result for CMA, with all of our key metrics improving on the prior period. Importantly, we delivered 9.4 cents per security and distributable earnings, placing us well on track to deliver our full-year guidance.
Jessica Amir: To your portfolio in more detail, just walk us through your key tenants.
Nick Blake: CMA has over a 180 tenants. Over 40% of our rental income, was derived from our top 10 tenants, all of whom, are household names, or government institutions. The majority by number, occupy areas of less than 500 square meters. And our hands-on management style is well suited to manage those style of tenants.
Jessica Amir: And just walk us through your acquisitions and disposals.
Nick Blake: We've had a busy period on the capital transactions front. Over the period, we acquired four assets. Two in the improving Perth market, where we've acquired two quality assets with strong income profiles and tenant covenants. Additionally, we've acquired two assets in the high performing, New South Wales state, particularly 201 Pacific Highway, which joins our existing asset at 203 Pacific Highway, in St Leonards. And 77 Market Street in Wollongong.
We sold one asset, being 44 Hampden Road Artarmon, where we generated a 14% premium to book value, and then 18% annual return to CMA, through its ownership period.
Jessica Amir: And what are the key metrics for the REIT?
Nick Blake: Portfolio is in great shape. Nearly 98% occupied, with a well of over four years. Very strong visibility on our forward expiry profile, less than 1.2% of income expiring the remainder of this financial year. Another 50% of our income expiring FY2022 and beyond.
Jessica Amir: One more general question now, with interest rates heading higher, globally, how does this affect the fund, or if any effect, at all?
Nick Blake: It's fair to say interest rates have created a bit of volatility in the market of late. More importantly, CMA is well positioned to withstand that turbulence, with an exceptionally strong balance sheet, geared at below 30%, and a debt maturity of about three years. Importantly, over 50% of our debt is hedged.
Jessica Amir: What trends are we seeing in office demand?
Nick Blake: It's a great time to be in Metropolitan Markets. Our investment thesis was established on the basis that there would be a spillover of demand, from the CBD markets, and this has continued to carry through. Underlying fundamentals remain robust, and we believe we're well positioned to capitalize on this trend going forward.
Jessica Amir: Speaking about going forward, what's your guidance for the second half of this financial year?
Nick Blake: CMA has reaffirmed its full year distributable earnings guidance of 18.6 cents per security. And our distribution guidance remains at 18.1 cents per security, paid in equal quarterly installments to reflect CMA investors' desire for growing and predictable income streams. Our current pricing, we're yielding in excess of 7.6%.
Jessica Amir: Nick, well, I thank you so much for the update.
Nick Blake: You're welcome.