Centuria Metropolitan REIT (ASX:CMA) talks FY18 results & outlook

Interviews

by Jessica Amir

Centuria Metropolitan REIT Limited (ASX:CMA) Acting Trust Manager, Doug Hoskins, discusses CMA’s recent acquisitions and transformation.

Jessica Amir: Hello. I'm Jessica Amir for the Finance News Network. With me today, from Centuria Metropolitan REIT Limited (ASX:CMA), is its Acting Trust Manager, Doug Hoskins. Hi, Doug, and welcome back.

Doug Hoskins: Thanks very much.

Jessica Amir: So, first up, Doug, before we talk about your recent acquisitions, maybe you could just give us a quick introduction to the fund, for those who aren't familiar.

Doug Hoskins: CMA is a real estate investment trust listed on the Australian Stock Exchange and provides security holders with an investment in a high-quality office portfolio. The portfolio contains 23 high-quality metropolitan assets, most of which are office. These assets are located in key markets around Australia. The portfolio is currently valued around $1.5 billion, and our market capitalisation at the beginning of October was $895 million.

Jessica Amir: Thanks, Doug, and can you expand a bit further on some of the fund's key metrics?

Doug Hoskins: The fund is well positioned, and following a recent transaction, the scale and the quality of the portfolio has been improved. The portfolio is 99 per cent leased, with a diversified income stream underpinned by quality tenants. The weighted average lease expiry of the portfolio is 4.2 years, which means leases are locked in for an average term of 4.2 years. The FY19 distribution forecast for the fund is 17.6 cents per unit, which reflects a competitive distribution yield of 7.2 per cent.

Jessica Amir: Thank, Doug. Now can you tell us the strategy that's transformed the REIT from the IPO to where it is today?

Doug Hoskins: One of the key drivers of the fund's success is active asset management. Centuria has a strong track record of not just owning high-quality assets, but also delivering high-quality asset management. The portfolio has a 99 per cent occupancy rate, which is a result of a lot of hard of work. In addition, we assess national transaction opportunities that can complement or enhance our portfolio. The fund's FY18 transactions highlighted a strong arbitrage for both sales and acquisitions, creating value for investors. A more recent example of this was our announcement to acquire interests in four high-quality office assets.

Jessica Amir: And you just mentioned the major acquisition. Just tell us a little bit more about it.

Doug Hoskins: Yeah, absolutely. We recently purchased three high-quality office properties in Brisbane and Melbourne, and a 25 per cent interest in an office property in the key Sydney metro market of Chatswood. These assets are highly complementary to our existing portfolio and in line with our strategy to acquire quality, fit-for-purpose metropolitan office assets. CMA acquired these assets at a 3.8 per cent discount below the independent valuations. This is a major acquisition for the trust, and when the associated capital raising is considered, it's the second largest commercial property transaction in Australia this year. The rationale for the acquisition was that it positioned CMA as a leading pure play office REIT, it improves our exposure to the east coast markets, and it also improves the WALE and the occupancy of the trust.

Jessica Amir: And last but not least, Doug, you've already had a very busy start to FY19, but just remind us, what's your major focus for this financial year?

Doug Hoskins: The focus of the trust for FY19 is to become a pure play high-quality office portfolio. To do this, we're going to complete the acquisition of 2 Kendall Street, Williams Landing, which is on track. We're also going to settle the disposal of 3 Carlingford Road, and dispose the remaining industrial assets if market conditions are favourable. We are also going to keep our eye on the FY19 lease expiry profile. All in all, the fund is well positioned to achieve these priorities.

Jessica Amir: Wonderful. Doug Hoskins, thank you so much for your time.

Doug Hoskins: Yeah, thank you for having me.


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