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Centuria Office REIT (ASX:COF) - Fund Manager, Grant Nichols
Fund Manager, Grant Nichols
Source: Centuria
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  • Centuria Office REIT (COF) posts a $16.6 million increase in funds from operations (FFO) for the financial year to June 2021
  • The company announced it received $102.2 million FFO for the year, an increase from $85.4 million in FY20
  • Like-for-like portfolio revaluations at June 30, 2021 of $16.3 million contributed to net tangible assets of $2.48 per unit
  • COF provides FY22 distribution guidance of 16.6cpu, which equates a current yield of 6.7 per cent
  • Shares in COF are down 0.61 per cent, trading at $2.46 at 11:10 am AEST

Centuria Office REIT (COF), Australia’s largest listed pure-play office REIT, has posted a $16.6 million increase in funds from operations (FFO) for the financial year to June 2021.

The company announced it received $102.2 million FFO for the year, an increase from $85.4 million in FY20.

The receipt of a surrender payment from Foxtel, who resigned their lease over the whole property at 35 Robina Town Centre Drive, Robina, QLD, benefitted FFO in FY21.

COF received a surrender payment equal to the rent due for the remaining Foxtel lease term, discounted to June 2020, per the terms of the agreement.

The building has been substantially re-let after the surrender in July 2020, with occupancy climbing to 88.6 per cent.

COF fund manager Grant Nichols said the results throughout FY 21 were pleasing.

“Distributions were in line with guidance of 16.5cpu, which equates to a 6.7 per cent yield, while FFO of 19.9cpu was at the top end of the 19.7-19.9 cpu guidance range.

“The REIT also benefitted from a $16.3 million valuation uplift on a like for like basis as at 30 June 2021, which reflects the portfolio’s high-quality assets and strong tenant covenants.”

COF’s success is attributable in part to its exposure to Australia’s better-performing office markets, which provide strong workforce commutability and attractive, low-cost rentals, according to Mr Nichols.

“These markets attract quality tenants, which underpin sustainable income returns and lower volatility,” he said.

“Through 2H21, COF increased occupancy to 93.1 per cent, maintained a weighted average lease expiry of 4.3 years and improved average rent collections to 98.3 per cent.”

Despite the impact of COVID-19 at the time, Mr Nichols said COF was one of the few REITs to give dividend forecast at the start of FY21.

Statutory net profit for FY21 was $76.9 million, with like-for-like portfolio revaluations at June 30, 2021 of $16.3 million contributed to net tangible assets of $2.48 per unit.

COF’s financial profile was improved over the year, with $405 million in debt refinancing in the second half of FY 21, bringing the weighted debt term to 4.2 years (from 2.3 years) and providing $106.7 million in undrawn debt.

The REIT presently has no debt tranches that will expire before June 2024, and its all-in debt cost is at 2.4 per cent.

Throughout FY 21, COF benefited from strong lease activity, with 61 tenants signing leases totalling 52,077 square metres.

New tenants accounted for 26,388 square metres of the leases signed, with 15 of the new tenants occupying more than 500 square metres.

“Throughout FY21, a number of office transactions have reinforced the strength of the Australian commercial office market and suggest continuing strong investment demand for Australian office assets,” Mr Nichols said.

“This resilient performance continues to attract the interest of domestic of offshore capital, who view Australia’s economic and office market fundamentals favourably.

“While there remains uncertainty due the ongoing disruptions caused by COVID-19, we have seen increasing white collar employment growth and greater confidence from tenants in relation to their future office accommodation requirements. Throughout FY22 we expect to see more employees returning to the office and further improving leasing activity.”

Shares in COF are down 0.61 per cent, trading at $2.46 at 11:10 am AEST.

COF by the numbers
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