Centuria Industrial REIT (ASX:CIP) talks 1H19 results & outlook


by Jessica Amir

Centuria Industrial REIT (ASX:CIP) Fund Manager, Ross Lees talks 1H19 results, portfolio metrics and trends.

Jessica Amir: Hi, I'm Jessica Amir for the Finance News Network. Joining me today from Centuria Industrial REIT is its Fund Manager, Ross Lees. Hi, Ross, and welcome back.

Ross Lees: Thanks for having me, Jessica.

Jessica Amir: Thanks for coming in. So, first up, for those who haven't heard of CIP, just give us a quick introduction.

Ross Lees: Centuria Industrial REIT is Australia's largest ASX listed industrial investment vehicle. We own a portfolio of 41 assets located around Australia, with a portfolio of about $1.2 billion. Our objective is to deliver unit holders with rental income from that portfolio, in the form of distributions, and the opportunity for capital growth on their investment.

Jessica Amir: Now, let's dive deeper into the fund. Just give us an update on the tenant profile, Ross.

Ross Lees: The tenants that ultimately pay the rent and in turn the distribution to our unit holders are really high-quality local and international companies. Some of those names that people might be familiar with are companies like Visy Industries Holdings, Toll Holdings Limited (ASX:TOL), DHL Group, Australian Postal Corporation and Woolworths Group (ASX:WOW). Our portfolio's got enough scale now where we're seeing, right across the portfolio, tenants finding the opportunity to mix and match around the portfolio and expand their footprint within CIP as well.

Jessica Amir: And can you give us an update on the key metrics?

Ross Lees: The portfolio value's now $1.2 billion. Our occupancy has improved over the half up to 97.1 per cent and our weighted average lease expiry, which is the average duration of our leases, is now 4.7 years. Our assets are well-diversified around the country with 64 per cent of the portfolio in the dominant markets of New South Wales and Victoria, and our average asset size is just under 20,000 square meters. And that's really important for us at the moment because that's where we're seeing the depth of tenant demand across the country.

Jessica Amir: Changing pace now, congratulations on your first half 2019 results. Maybe you can just give us some highlights?

Ross Lees: It was an excellent first half for us across the portfolio. We really continued on the momentum that we built up last year, in the leasing side of the portfolio, and as I said, we've improved occupancy to 97.1 per cent now, which was a great achievement for us. Also, we've expanded the portfolio with $110 million of acquisitions, most of which were executed off-market, and they're really complementary to the existing portfolio. And then, from a financial point of view, our return on equity was a real stand-out. We delivered 15.8 per cent return on equity for the last 12 months.

Jessica Amir: Ross, just generally, there seems to be a lot of interest in the industrial sector, both here in Australia and globally. What's taking place and what's fueling this?

Ross Lees: Yes so, the industrial asset class has probably been the most in-demand real estate asset class, both in Australia and globally over the past one to two years. At the moment in Australia we're seeing over 20 groups trying to increase exposure to the asset class. What's driving this is the global thematic around E-commerce and online retailing. What we're seeing in Australia for that is 25 per cent per annum compound annual growth rate in online retailing in Australia. And users that are related to online retail, E-commerce, are creating that uptick in demand, to occupy the space, and that's, in turn, creating investment demand from investors around the world.

Jessica Amir: Just lastly, Ross, on the back of this hype and increase in competition, how have you managed to continually grow and find value?

Ross Lees: Look, our acquisition philosophy is simple. We look for assets that are high-quality, in the right location, and that are the right size to meet the ongoing needs of our tenants. Where we've been looking really quite hard over the last year or so, is in assets that are under 20,000 square meters. When we analyse the markets nationally, that's where we're seeing the greatest turnover of tenant demand, and that should keep the properties occupied long-term. So, we're spending a lot of time trying to find value in those opportunities.

In the last six months, over the last half of the financial year, we identified and executed $110 million worth of acquisitions that are complementary to the portfolio, and that we believe have great long-term growth prospects.

Jessica Amir: Wonderful. Well done on your success, and thank you for your time, Ross Lees.

Ross Lees: Thank you, Jessica.


Jessica Amir

Finance News Network
Jessica joined FNN in January 2017 after having worked in financial advising for seven years and in TV journalism for seven years, specialising in finance, equities and analysis. She has interviewed former Prime Ministers of Australia, Tony Abbott, Julia Gillard and Kevin Rudd and ex Treasurer Jo Hockey. Jessica has worked as a journalist with Sky News Business, ABC 1, ABC's The Business, ABC24 and has also been a regional Channel 7 and 9 TV reporter with Prime7 and Win News.