With several ups and downs in the real estate market of Australia, domestic as well as foreign investors are keeping a close watch on the Australian property market. Let us have a look at the recent updates and stock performances of two major players operating in the Australian property market.
Scentre Group (ASX: SCG)
Company Profile: Real estate management company, Scentre Group (ASX: SCG) operates in the regions of Australia and New Zealand. Established in 2014, the company is primarily engaged in development, design, construction, asset management, leasing and marketing activities of its real estate holdings. It owns a huge portfolio of 41 shopping centres under the Westfield brand. Moreover, the company focuses on working with leading firms to provide its clients with excellent services.
SCG shopping centre portfolio (Source: Company’s Website)
Change in substantial holding: On 28 June 2019, the company notified regarding the change of interests of substantial holder, BNP Paribas Nominees Pty Limited, which now holds 456,501,107 ordinary shares with a voting power of 8.59%.
Sydney CBD office towers disposal: In another announcement made on 27 June 2019, the company disclosed that it has disposed its Sydney CBD office towers to certain funds managed by Blackstone Group LP in a deal worth $1.52 billion. Under the terms of the transaction, Blackstone will get a lease of 299 years for office properties located at 77 and 85 Castlereagh Street and 100 Market Street. However, the ownership of Westfield Sydney and Sydney Tower will remain with SCG. Initially, the company plans to use the proceeds towards debt repayment. The transaction is anticipated to be dilutive to Funds From Operations (FFO) during 2019 by around 0.4 cents/security, while the 2019 prediction distribution continues to be the same at 22.60 cents/security.
According to Scentre Group CEO Peter Allen, the transaction, in addition to the company’s new joint venture with Perron Group for Westfield Burwood in Sydney, resulted in the release of $2.1 billion of capital, which would enable SCG to move ahead with its strategic objectives and create long-term value for securityholders.
On the same day, the company also unveiled its intention to start an $800 million buyback of SCG securities, which in turn would improve its return on equity as well as maintain its strong balance sheet position. It plans to start the program after the 2019 half year results announcement, which is expected on 22 August 2019. The company intends to complete the buyback within 12 months.
Stock Price Performance: With a market cap of A$21.11 billion and 5.32 billion outstanding shares, SCG stock last traded at A$3.840 on 28 June 2019, down 3.275% from its previous close. It has an annual dividend yield of 5.58%, while EPS stands at A$0.431. The stock reported a negative six-month return of 1.51% and three-month return of 5.33%.
Centuria Industrial REIT (ASX: CIP)
Company Profile: Centuria Industrial REIT (ASX: CIP) is a listed property trust, serving as an income focused industrial investment vehicle. The firm included in the S&P ASX300 index owns a property portfolio including around 40 high-quality industrial real estate assets located in the key metropolitan regions of New South Wales, Victoria, Queensland, Western Australia, Australian Capital Territory and South Australia.
Successful completion of institutional placement: Centuria Property Funds No.2 Limited (CPF2L), as responsible entity of Centuria Industrial REIT (CIP), notified on 28 June 2019 that it secured $70 million with the completion of a fully underwritten institutional placement that was previously announced on 27 June 2019. The placement was fully underwritten by Moelis Australia Advisory Pty. Ltd. and UBS AG, Australia Branch. CPF2L had issued nearly 23 million new CIP units at an issue price of $3.05 per new unit. The settlement date of the new units is 2 July 2019. The allotment and normal trading are due on 3 July 2019. Of the total proceeds, the company plans to direct $59.3 million towards the acquisition of three high quality industrial assets and $10 million for capital expenditure to enhance the assets.
Properties being acquired (Source: Company’s Report)
Unit purchase plan: On 28 June 2019, it also announced an undertaking of a non-underwritten unit purchase plan (UPP) to raise up to $5 million. The company plans to invite eligible Australia and New Zealand based unitholders to subscribe for up to up to $15,000 in additional units without any brokerage or transaction costs. The unit purchase plan will have an issue price of $3.05 per unit.
Valuation update: Centuria Industrial REIT gave a valuation update on 27 June 2019, according to which 9 of the company’s existing 42 properties have been revalued as at 30 June 2019. The revaluation leads to an increase of $24.1 million or 8.5% on prior valuations, reflecting 32 bps of capitalisation rate compression on those properties.
Capital Management: The company, as part of its ongoing capital management, has decided to refinance $160 million of its total facility of $520 million to two new tranches of three-year and five-year, respectively. Moreover, it has agreed to reset $110 million of existing interest rate swaps to capitalise on the low interest rate environment. Until FY2022, the company has no debt expiring.
Financial impact: After the placement and acquisition completion, for FY19, the company expects 19.3 cents of Funds From Operations (FFO), 18.8 cents per unit of distributable earnings per unit and 18.4 cents of distribution per unit, as well as FY20 FFO per unit growth of 2–3% over FY19 FFO.
Stock Price Performance: With a market cap of A$864 million and 270.85 million outstanding shares, CIP stock last traded at A$3.060 on 28 June 2019. It has an annual dividend yield of 5.77%, while EPS stands at A$0.384. The stock reported a positive six-month return of 16.42% and three-month return of 6.33%.
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