Centuria Office REIT reports strong leasing activity and refinancing in FY24

Centuria Office REIT (ASX:COF) has announced significant leasing and capital management achievements for the 2024 financial year, delivering on its guidance despite challenging economic conditions.

The real estate investment trust executed 51 leasing transactions covering 42,722 square metres, representing about 15% of its portfolio net lettable area.

COF Fund Manager Belinda Cheung said the company had focused on its key priorities during FY24.

“During FY24, Centuria has executed on COF’s priorities by achieving strong leasing activity, non-core divestments and debt refinancing,” Ms Cheung said.

“This was achieved against a backdrop of challenging macroeconomic headwinds including a high inflationary and interest rate environment coupled with slow GDP growth.”

The company divested four non-core assets for $139 million, using the proceeds to reduce debt. It also refinanced over $862 million in existing loans and improved debt covenant terms.

COF delivered funds from operations of 13.8 cents per unit and distributions of 12 cents per unit, in line with its guidance.

The REIT reported a portfolio occupancy of about 93% and a weighted average lease expiry of 4.3 years.

In an innovative move, COF secured a 10-year lease with ResetData at its 818 Bourke Street, Melbourne property for an edge data centre using liquid immersion cooling technology.

“We are seeing signs of improving office sector tailwinds with return to office mandates coinciding with limited new office developments and population growth leading to a larger white-collar workforce,” said Jesse Curtis, Head of Funds Management.

Ms Cheung noted that increased construction and financing costs are likely to reduce new office supply in the medium term, potentially benefiting COF’s existing portfolio.

“COF estimates that the economic rents required to support new developments have increased c.60% since 2020, and the COF portfolio is valued at less than half the increased replacement cost,” she said.

The company’s debt refinancing has resulted in no debt expiring before FY28, with renegotiated covenants maintaining current debt margins.

COF’s portfolio comprises 19 high-quality assets valued at $1.9 billion, with an average building age of 17 years and 93% of the portfolio classified as A-Grade assets.