Centuria Office REIT’s FY23 results hit by portfolio revaluation

Oksana Patron

18 August 2023

Centuria Office REIT (COF) has reported approximately a $102 million decline for its like-for-like portfolio revaluations at the end of June compared to December, 2022, and has reported a $91.9 million of statutory loss.

By comparison, the trust reported $115 million of statutory profit in the prior year.

Similarly, earlier this week, Dexus had reported a $752.7 million statutory net loss after tax for 12 months to 30 June compared to $1.6 billion in net profit after tax in FY22.

Grant Nichols, COF fund manager and Centuria head of office, said that FY23 was an operationally successful year with portfolio occupancy increasing to 97.1%, while maintain a healthy WALE (weighted average lease expiry).

“Capital management remained a key focus during the period, with recent divestments delivering a pro forma gearing of 36.7%, while refinancing resulted in no debt tranche expiring until FY26,” he said.

“Recent non-core divestments also improved overall portfolio quality, while the sales prices achieved were consistent with COF’s Year End portfolio revaluations.”

COF also announced distributions of 14.1 cpu, which were in line with FY23 guidance, and said that its funds from operations (FFO) of $93 million was impacted by rising interest rates during the period.

During the reporting period, COF also divested of two non-core assets, at 54 Marcus Clarke Street in Canberra, which was sold for $23 million and reflected a 1.7% discount to the December, 2022, and 35 Robina Town Centre Drive, Queensland, which was sold for $40 million and reflected approximately a 5% discount.

Commenting on the outlook, Nichols said he believed that while hybrid working arrangements and increased workplace flexibility were likely to become prevalent, the office would remain an “important and focal point in many workplace operations”.

“With productivity falling in both Australia and overseas, we have seen an increase in mandated return to office policies that aim to address productivity, increased loneliness and diminished corporate culture,” he said.

According to Centuria’s 2023 annual Australian office tenant customer survey, approximately 75% of respondents stated they would expect to retain or increase their office space requirements in the medium term.

“Additionally, tenant respondents stated they’ve considerably pulled back on providing fully flexible working from home arrangements. This indicates an emerging return to office work culture and greater potential for rising physical occupancy.”