This article is from the Australian Property Journal archive
AUSTRALIA’S largest list pure-play industrial property trust, Centuria Industrial REIT (CIP), has upgraded its funds from operations guidance on the back of ongoing strong rental growth across its $3.8 billion portfolio, and expects more is on the way.
CIP upgraded full-year FFO guidance up from 17.0c per unit to 17.2c, which it said it is “largely credited to achieving significant average re-leasing spreads of 51%”. The first-half re-leasing spreads eclipsed the 30% average secured across FY23.
CIP leased 108,821 sqm across 17 transactions within its portfolio of $3.8 billion, 88-asset portfolio. The portfolio now has a 7.5-year weighted average lease expiry (WALE) and 97.2% occupancy.
The REIT also delivered 57,722 sqm of new industrial facilities across sites in Melbourne’s Campbellfield and Canning Vale in Perth. These were 44% pre-committed prior to practical completion and achieved a.47% rental premium.
$1b pipeline, more rental growth ahead
CIP said it has identified a $1.0 billion future development pipeline across the next five years to further capture strong tailwinds across urban infill industrial markets.
“The pipeline focuses on key growth sub-markets including multi-level industrial facilities, data centres, distribution centres and cold storage/food logistics,” it said.
Its current development pipeline includes a 58,000 sqm multi-level industrial facility in Wetherill Park in Sydney, a 7,500 sqm industrial brownfield development in Melbourne’s Hallam VIC; and a 22,000 sqm industrial development in Direk, Adelaide.
Jesse Curtis, CIP fund manager and Centuria head of industrial, said, “Looking ahead, domestic urban infill industrial market vacancy remains tight despite wider industrial market vacancy marginally increasing. Tenant demand continues to be skewed towards infill markets as industrial users continue to prioritise proximity to a large population base.
“With limited new supply within these infill markets, rental growth is expected to be prolonged providing the opportunity for continued positive rental reversion from high re-leasing spreads.
“Additionally, CIP’s embedded development pipeline provides the optionality to unlock further value to take advantage of the mismatch between supply and demand and deliver value to unitholders.”
Moody’s Investors Service analyst, Sean Williams, said Moody’s expects CIP to benefit from strong rental growth over the next 12 to 18 months as expiring leases are renewed.
During the period, CIP divested two assets for a combined $70 million, both in line with book values. Proceeds were used to reduce debt and strengthen its balance sheet. Gearing was largely unchanged at 33.7% its staggered debt profile has no expiry until FY25.
“While we expect asset values to remain under pressure in the near term, we expect CIP to maintain headroom against its internal gearing targets as well as our tolerance levels for the rating,” Williams said.
“We expect interest serviceability to be supported by expected income growth, high levels of hedging and minimal debt maturities over the next 12 to 18 months.”
CIP reaffirmed its distribution guidance of 16.0c per unit.
