Steady as she goes for CFS

CFS Retail Property Trust has notched up a solid distributable profit of $312.65 million for FY10 which is slightly higher than the previous FY09 result of $307 million.

The trust has returned to the black, profit for the 12 months to 30 June 2010 was $315.0 million, compared to a loss of $366.9 million for the previous year. The profit included a net gain on investment properties and associate revaluations of $49.2 million (compared to a $548.6 million loss for the previous year) and a net loss on the fair value of derivatives of $23.2 million (compared to an $84.8 million loss for the previous year).

The trust announced a distribution of 12.50 cents per unit, which is in line with the distribution paid in the previous year. Despite a change in the distribution policy which came into effect on 1 July 2009. On a like-for-like basis distribution increased 3.1%. Net property income increased 10.1% to $465.7 million and on a like-for-like basis, increased by 3.5%.

CFX’s strong result has catapulted the trust above the A-REIT sector and Australian sharemarket returns over the one, three, five and ten-year periods to 30 June 2010. The trust delivered a total return of 22.2%, which was above the UBS Retail 200 Accumulation Index return of 16.2%. Over the three, five and 10-year periods, the trust outperformed the Index by 17.9%, 13.3% and 6.8% respectively.

Total gross assets increased 5.2%, from $7.3 billion at 30 June 2009 to $7.7 billion at 30 June 2010, driven predominantly by the acquisition of Northgate Shopping Centre and the completion of major developments in the development pipeline. NTA per unit was $2.02 at 30 June 2010, which is unchanged from 30 June 2009 but an increase on the $1.99 reported at 31 December 2009.

As at 30 June 2010, the gearing level was 29.5% up from 27.3% at 30 June 2009, with borrowings of $2.26 billion. The weighted average debt maturity was 2.8 years and weighted average interest rate (including margins and fees) was 6.8%.

Fund manager Michael Gorman said continual redevelopment of the trust’s portfolio of assets is a key driver of returns for the trust. As at 30 June 2010, CFX had a $1.4 billion development pipeline delivering an expected average year-one yield of 7.4%.

The trust’s portfolio also recorded total actual sales of $6.6 billion, up 6.4% from the previous year, reflecting the increase in sales generated by the major redevelopment projects as they were completed during the year.

Strong actual sales growth included retail specialty stores (up 8.8%) and supermarkets (up 6.1%). But retail specialty store sales softened on a comparable basis, down 1.3%. The result reflected the significant distortion in sales from December 2008 to July 2009, caused by the delivery of $20.9 billion in cash payments from the Federal Government‟s fiscal stimulus packages.

Gorman said regional and quality sub-regional shopping centres continue to attract strong demand for existing retail space, maintaining high levels of occupancy.

“Australian retail property is well positioned in the medium to long term and will maintain high occupancy levels, due to the inherently favourable supply and demand fundamentals,”

Colonial First State Global Asset Management head of property Darren Steinberg said the outlook for the Australian retail property market is that sales growth will remain below the long-term trend at around 3% over the next 12 months.

“Beyond this, a combination of high consumer confidence, a strong labour market, population growth and strength in the Australian economy is expected to return retail sales growth back to the long-term trend.

“Our outlook for the next 12 to 18 months is positive. The strength of the Australian economy in the medium to long-term augurs well for Australian property markets and for A-REITs with proven strategies to deliver solid long-term returns for investors,”

Gorman forecasts a distribution in the range of 12.60 to 12.70 cents per unit for FY11.

CFX shares traded 0.3% higher at $1.91 yesterday.

Australian Property Journal