Office appetite puts Centuria Capital in prime position

Centuria Capital’s metropolitan office fund is emerging as one of the winners from the apartment boom, with its portfolio well positioned as suburban office towers and industrial parks become more prized.

The Centuria Metropolitan REIT turned in a strong first half, delivering on its forecasts and strengthening the financial metrics of its near $400 million portfolio.

“I think the REIT’s performance has proven the investment thesis of investing in metropolitan real estate,” says Nick Collishaw, Centuria’s chief executive, listed property funds.

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“With so much residential development coming up in the suburbs, supply is actually dwindling,” the former Mirvac chief adds. In a busy half, the fund snapped up a tower in St ­Leonards on Sydney’s north shore and almost filled up its Canberra properties.

UBS traders say there is “upside risk to earnings post the St Leonards acquisition and Canberra leasing”.

I think the REIT’s performance has proven the investment thesis of investing in metropolitan real estate

The analysts also backed Centuria’s knowledge of suburban markets, which Collishaw notes outstripped some larger groups.

“(The) strategy of taking on leasing risk and executing is starting to create value,” UBS says.

The fund delivered on its distribution forecasts and reaffirmed distributable earnings guidance for fiscal 2016 of 17.9c per security. The fund’s distribution guidance for the full year is 17c per security, in line with previous guidance.

This equates to a distribution yield of about 8.5% and the shares closed just half a cent down at $1.985 in a rough day of trade.

“Despite the uncertain global economic outlook and recent volatility in Australian equity markets, CMA’s underlying portfolio remains well placed to deliver stable, predictable rental income into the future, providing for quarterly distributions to our securityholders and the potential for additional value creation through active asset management,” trust manager Nicholas Blake says.

(The) strategy of taking on leasing risk and executing is starting to create value

The fund’s portfolio hit $379.2 million, a 3.9% lift over the half, and its net tangible assets increased by 8c to $2.05 per security.

Collishaw says that the trust is well positioned to deliver despite global uncertainty and equity-market volatility.

“Tenant demand for metropolitan office space remains strong, particularly in those sub-markets where supply is restrained,” he says.

The group is also looking at a repositioning of its Epping ­property.

This article originally appeared on www.theaustralian.com.au/property.