Centuria Office fund forecast finds favour
Centuria Office REIT, which runs a $2 billion portfolio focused on suburban markets, has reinstated its earnings guidance after almost a year, striking a note of confidence despite the uncertainty that has disrupted office markets around the country.
The stock bounced 1.5 per cent, closing 3¢ higher at $1.98 as investors bought into that certainty, even as the main property stocks barometer, the S&P/ASX200 REIT index, went backwards by 2.4 per cent.
The Centuria-run fund brought back its distribution guidance last year, but the delivery of an earnings forecast of 19.4-19.9¢ per unit at its 2021 interim result announcement on Thursday, along with the reaffirmation of its full year distribution guidance of 16.5¢, buoyed the stock.
“This is the first time we have provided earnings guidance since we withdrew it,” fund manager Grant Nichols told The Australian Financial Review.
“We are predominantly an income-biased fund. A lot of our investors are seeking security of income.”
Vacancy rates in all CBD markets around the country, except Canberra, have surged higher in the last six months as new supply continued apace while demand turned negative.
Against that backdrop of disruption, the Centuria-run fund’s focus on suburban markets has proved to be somewhat of bulwark over the past year, according to Mr Nichols.
The trust struck leasing deals across 9 per cent of the portfolio, maintained a high level of rent collection nearing 97 per cent, and reduced its gearing.
Fund from operations – the earnings measure favoured by the property sector – rose nearly 19 per cent to $57.7 million, boosted in part by a Foxtel surrender payment. Statutory profit was $21.5 million, down from $24.7 million.
“The benefit of the Centuria Office REIT portfolio is that we are exposed to a number of the markets that have been the better performers,” Mr Nichols said.
“A lot of the metro markets that we’re invested in have very limited supply.”
Mr Nichols is also confident that the working from home trend could favour landlords with suburban-based office stock. While the long-term effect on CBD workplaces from changing work practices remains to be seen, offices closer to home may become more popular, he said.
“With working from home there has come a strong desire for people to reduce their commute to and from work.
“While there are question marks remaining about the productivity of working from home and there are obvious benefits from being in a centralised workplace, if people have the ability to access an office closer to home – and that is generally in metropolitan locations – we think that is something employees will have a preference for.”
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