This article is from the Australian Property Journal archive
AGAINST a backdrop of an improved office market, Centuria Office REIT (ASX: COF) continued to address its vacancies and approaching expiries over the first quarter of FY25.
Over Q1 FY24, COF signed 3,531sqm in lease terms across 11 transactions, including a decade-long lease with ResetData at COF’s under construction 1.5 megawatt edge data centre at 818 Bourke Street.
COF has provided a portfolio update of 91.2% occupancy and a WALE of 4.2-years, with 72% of leases set to expire after FY27.
The REIT also completed $826 million in debt refinancing, including the renegotiation of covenant requirements with LVR increased to 60% from 50% and ICR lowered to 1.75x from 2.00x, with no change to existing debt margins.
“COF’s portfolio continues to perform well, providing solid occupancy and a stable WALE, as Centuria’s inhouse management team continues to focus on addressing vacancies and near-term expiries while progressing value add opportunities,” said Belinda Cheung, fund manager at COF.
“Market fundamentals for office continue to improve, demonstrated by increasing positive net absorption across the majority of Australian markets.”
This comes after a less than stellar result at the close of FY24, with COF posting a $168.7 million statutory loss, building on the previous year’s $91.9 million loss.
COF noted the Australian office market’s improving leasing momentum, with positive net absorption this quarter across most markets, including those markets COF has exposure to: Canberra, Melbourne Fringe, Adelaide, Chatswood, Brisbane Fringe and Perth.
“The tide is turning among office occupier sentiment. Businesses recognise the relevance of office space as a significant conduit for productivity, training and collaboration among their workforces. This sentiment suggests the cyclical decline has reached its trough,” added Cheung.
COF has reaffirmed its FY25 FFO guidance of 11.8 cpu and its distribution guidance of 10.1 cpu and has provided a current annualised distribution yield of 8.4%.
“We remain optimistic on the medium-term outlook for the COF portfolio. Demand for office accommodation has improved, though still bifurcated across quality and geography,” concluded Cheung.
“The supply pipeline remains constricted as elevated development costs persist, driving up the economic rents required to make developments feasible. This further shines light on the discount between COF’s implied value per sqm against replacement cost.”
