Centuria Office REIT Releases FY24 Financial Results
COF (COF) Share Update August 2024 Wednesday 14th
Centuria Office REIT Announces FY24 Financial Results
Centuria Office REIT (ASX: COF), Australia's largest listed pure-play office REIT, has announced its Full Year financial results for the period ended 30 June 2024. The report highlights strong liquidity, solid balance sheet, and significant leasing activity amidst challenging economic conditions.
Instant Summary:
- $82.2m Funds From Operations (FFO), 13.8 cents per unit (cpu) FFO in line with guidance
- 12.0 cents distribution per unit (dpu), in line with FY24 guidance
- $1.80 per unit Net Tangible Assets (NTA)
- Strong liquidity: $862 million refinanced, no debt expiring before FY28
- 41.3% gearing, 63% hedged as at 30 June 2024
- 42,722 sqm total leasing activity across 51 transactions
- Divested four non-core assets worth $139 million, proceeds used to repay debt
- Portfolio occupancy of 93%, 4.3-year WALE
- 5.0 Stars NABERS SPI energy rating
Financial Highlights
Centuria Office REIT (COF) reported Funds From Operations (FFO) of $82.2 million, equating to 13.8 cents per unit (cpu), which is in line with the guidance provided. The distribution per unit (dpu) was 12.0 cents, also meeting the FY24 guidance. The Net Tangible Assets (NTA) per unit stood at $1.80.
COF demonstrated strong liquidity by refinancing $862 million, ensuring no debt expires before FY28. The Weighted Average Debt Expiry (WADE) expanded to 4.1 years from 2.1 years. The company renegotiated its covenants without any change to the margin, increasing the Loan-to-Value Ratio (LVR) to 60% and lowering the Interest Coverage Ratio (ICR) to 1.75x. The balance sheet remains solid with 41.3% gearing and 63% of debt hedged as of 30 June 2024.
Portfolio Highlights
During FY24, COF engaged in 42,722 sqm of leasing activity across 51 transactions, representing 15% of its portfolio's Net Lettable Area (NLA). Significant lease expiries for FY25 were addressed, with approximately 72% of leases now expiring at or after FY27. COF divested four non-core assets worth $139 million, using the proceeds to repay debt.
The portfolio consists of 19 high-quality assets valued at $1.9 billion, with an average building age of 17 years. About 93% of these assets are A-Grade, and 72% of rental income is derived from government, multinational corporations, and listed entities. The portfolio occupancy rate is approximately 93%, with a Weighted Average Lease Expiry (WALE) of 4.3 years. The portfolio also boasts a 5.0 Stars NABERS Sustainable Portfolio Index (SPI) energy rating.
Management Commentary
Belinda Cheung, COF Fund Manager, noted that the company continued to execute significant leasing activity and capital management despite challenging macroeconomic conditions, including high inflation and interest rates coupled with slow GDP growth. The divestment of non-core assets at an average discount of approximately 2% to prevailing book values and the refinancing of $862 million in existing loan facilities are indicative of strong lender support and underline the quality of COF's portfolio.
Jesse Curtis, Head of Funds Management, added that the office sector is showing signs of improvement with return-to-office mandates, limited new office developments, and population growth leading to a larger white-collar workforce. Investment in transport infrastructure, such as the Sydney Metro and Brisbane Cross River Rail, is expected to improve commutability and positively impact COF's portfolio over the medium term.
The strong liquidity and solid balance sheet reported by COF are likely to have a positive impact on the company's stock. The refinancing of $862 million and the divestment of non-core assets demonstrate effective capital management, which should reassure investors. However, the challenging macroeconomic conditions and higher debt costs could temper some of the positive sentiment.
Investor Reaction:
Analysts are likely to view the results positively, given the company's strong liquidity and effective capital management. The divestment of non-core assets and the refinancing of existing loan facilities are seen as prudent moves. However, the higher debt costs and challenging economic conditions may raise some concerns among investors.
Conclusion:
Investors should take note of COF's strong financial performance and effective capital management strategies. The company's ability to navigate challenging economic conditions and maintain a solid balance sheet is commendable. Investors are encouraged to monitor COF's future performance and consider the potential long-term benefits of holding shares in Australia's largest listed pure-play office REIT.