The Centuria Industrial REIT (ASX: CIP) share price is in focus after delivering its FY22 half-year result, which included an increase of guidance for FY22.
This real estate investment trust (REIT) is the largest domestic pure play industrial property trust. Its properties are mostly located in urban locations throughout the country, with a quality and diverse tenant base.
HY22 result
Centuria Industrial REIT generated $53.9 million of funds from operations (FFO). FFO is essentially the cash net rental profit. In per unit terms, FFO rose by 3.4% to 9.1 cents.
In terms of statutory net profit, which includes items like property revaluation profits, it made $308.1 million of net profit.
The business experienced $281 million in a like for like valuation uplift on the back of leasing success and investment demand. That equates to a 10% valuation uplift in percentage terms. Average rental growth was 10% compared to prior passing rents, which I think shows a strong level of organic growth.
In terms of the net tangible assets (NTA) per unit, it increased by 10% over the six months to $4.21. This is a good indicator of the underlying value of the REIT.
Portfolio update
Centuria Industrial REIT said that it achieved strong leasing success with 109,188 sqm of lease terms agreed during the period, representing 8.5% of portfolio gross lettable area (GLA).
Its portfolio has grown to 80 locations, valued at $3.9 billion, with a 90% weighting to the Australian eastern seaboard. The business acquired 21 high-quality urban infill industrial assets worth $680 million.
The portfolio now has a 99.2% portfolio occupancy (up from 96.9% a year ago), with a 8.9 year weighted average lease expiry (WALE). Those are some very attractive numbers for a REIT.
Distribution
For this half-year, Centuria Industrial REIT decided to increase the distribution by 2.35% to 8.7 cents.
Guidance increase
Management decided to increase the FY22 FFO guidance to be no less than 18.2 cents per unit, up from 18.1 cents per unit.
Outlook for the Centuria Industrial REIT share price
The manager of the REIT, Jesse Curtis, said:
Australian industrial property remains a highly favoured asset class. Tenant demand remains unabated driving national industrial vacancy to record lows. With demand for industrial space expected to remain elevated, thanks to customer shifts to e-commerce plus onshoring to maintain supply chain resilience, and with limited supply within urban infill markets, we expect to see industrial rents continue to rise. Coupled with sustained global investment for quality Australian industrial assets, upward pressure continues to be applied on asset values…Centuria Industrial REIT is well placed to leverage these continual themes.
I think the REIT is a strong contender to be the best performer in 2022. There seems to be very strong demand for industrial property and this should be supportive for both valuations and rental growth. However, it will be interesting to see how rising interest rates affect things.
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