Centuria Industrial REIT Limited (ASX:CIP) Fund Manager, Ross Lees talks FY18 results, portfolio metrics and trends.
Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Joining me today from Centuria Industrial REIT Limited (ASX:CIP) is Fund Manager Ross Lees. Ross, welcome back.
Ross Lees: Thanks for having me back, Rachael.
Rachael Jones: Now, first up, for those unfamiliar with your funds, could you start by giving us an introduction?
Ross Lees: Centuria Industrial REIT is a real estate investment trust or REIT, and we're listed on the Australian Stock Exchange under the code "CIP". We own a portfolio of 37 high-quality industrial facilities located around Australia with a portfolio value of about a billion dollars.
Rachael Jones: And now to your 2018 results. What were the highlights?
Ross Lees: It was a really exciting year for us. It was the first full year under Centuria's management, and we delivered a huge amount of leasing, and our result was really underpinned by that. We leased nearly a third of our portfolio during FY18, and that really helped underpin our return on equity, where we delivered a standout 17.2 per cent return.
Rachael Jones: Thanks, Ross, and now to your portfolio in more detail. Can you provide us with an update on your properties, their location and your tenant profile?
Ross Lees: Yeah, so we have a portfolio, as I said, of 37 high-quality industrial assets located around Australia, with a really strong weighting to the dominant markets of New South Wales and Victoria. Sixty-six per cent of our assets are in those markets. The portfolio is underpinned by really high-quality rent payers, so the key tenants that underpin our rent and our distributions are companies like Woolworths, Visy and Aurora.
Rachael Jones: And what about the key metrics of the portfolio?
Ross Lees: So, our leasing result, as I said, was a record for us, and that really drove up a number of our key operating metrics. Our portfolio of occupancy is at 94.5 per cent and our weighted average lease expiry is now over 5 years, and that's really a market-leading statistic. During the year, as well, we're really focused on deleveraging our balance sheet, and we improved our gearing by nearly 5 per cent down to 38.4 per cent.
Rachael Jones: Excellent. And what are the key themes and trends you're seeing on the markets?
Ross Lees: Well, the industrial asset class has probably been one of the most dynamic real estate classes over the last year or two. And that's really been driven by the penetration of online retail in Australia. So we're now starting to see 25 or so per cent compound annual growth rate in online spending, and it's industrial real estate that's becoming required to give the solution to our retailers as the consumers start demanding much more rapid delivery times and the requirement for inner industrial property to support that distribution network. Against that backdrop, we're actually seeing a stronger climate for manufacturers as well. The lower Australian dollar, combined with improvements in automation and technology, are really making on-shore manufacturing a more viable option. With both of these factors combining, we're seeing a lot more weight of capital from both local and foreign investors to get set in the asset class.
Rachael Jones: And last question now, Ross. What's the outlook for FY19?
Ross Lees: Well, the fund's really well positioned now. The leasing work we've undertaken in FY18 positions us really well. We only have 7 per cent of the portfolio expiring this year, and we've got an opportunity to lease up our existing vacancies. Off the back of that, we're expecting distributable earnings in the range of 18.5 cents to 19 cents per unit, and our distributions are forecast at 18.4 cents per unit.
Rachael Jones: Ross Lees, thanks for the update.
Ross Lees: Thank you.