Real Estate Space and Shares to watch – COF, CIP, MGR, GPT

Summary

• Real Estate sector was one of the hardest hit sectors by the SARS-CoV-2 outbreak.
• Centuria Property Funds Limited reported a fall in its statutory net profit from A$53.6 million in FY2019 to A$23.1 million in FY2020.
• Centuria Industrial REIT signed deals to acquire three high-quality industrial assets for A$447.1 million. It announced a fully underwritten Entitlement Offer of A$340.8 million to fund the acquisition partially.
• Mirvac Group got approval for the next phase of A$1 billion Waterfront Newstead.

The COVID-19 pandemic has hit a few sectors harder than the others, and one of those hard-hit sectors include real estate. While indices like the technology index have attained their pre-COVID-19 level, real estate is still struggling to reach that level.

By the end of the day’s trade on 5 August 2020, S&P/ASX200 A-REIT dropped 0.53% and settled at 1,229.4. A marginal decline of 0.67% was also seen in S&P/ASX 200 Real Estate index.

A Report from Deloitte stated that several Real Estate companies experienced a negative impact of COVID-19. However, different companies were impacted in different ways. The level of impact relied on the geographical region as well as the asset class.

GOOD READ: Real Estate Winners Vs Losers Over the Last Three Months

In this article, we would consider four ASX-listed stocks from the real estate sector and cover their recent update and their stock performance.

Centuria Office REIT (ASX:COF)

Centuria Property Funds Limited, acting as a Responsible Entity of Centuria Office REIT, has released its FY2020 results (period ended 30 June 2020). Below are the key highlights:

• Funds from operations (FFO) was A$85.4 million, and FFO per unit was 18.6 cents per unit.
• Distribution per unit of 17.8 cents was in line with the guidance.
• Statutory net profit was A$23.1 million, lower than A$53.572 million in the previous corresponding period.
• Net Tangible Assets for the period was A$2.49 per unit, in line with FY19.
• The balance sheet was strengthened with 34.5% gearing and undrawn debt capacity improved to A$131 million.

Property Portfolio snapshot:

Operations review:

The COVID-19 pandemic affected the results in FY2020. The total value of the Trust's portfolio improved by 49% YoY to A$2,086 million. The weighted average capitalisation rate for the portfolio improved by 29 basis point as at 30 June 2020 to 5.93%. There was uncertainty in the market due to the pandemic that affected the critical drivers of property valuation.

In FY2020, the Trust secured 41 leases across 32,378 m². This represents 10.6% of the portfolio's Net Lettable Area in the full year ended 30 June 2020.

Centuria Industrial REIT (ASX:CIP)

Centuria Industrial REIT is Australia’s largest ASX-listed income focused industrial property investment vehicle that gives investors a chance to invest in the industrial property through a real estate investment trust.

Centuria Property Funds No. 2 Limited, a responsible entity of Centuria Industrial REIT, announced its FY 2020 results. It also provided an updated on the acquisition of the Telstra Data Centre in Clayton VIC. Further, the company completed two high-quality industrial assets in NSW & VIC for A$30.4 million. Other than this, the company announced an equity raising plan to fund the acquisitions partially.

FY2020 Highlights:

Portfolio Highlights:

• Leases agreed for over 122,000 m². It represents 12.9% of the portfolio GLA.
• Occupancy improved by 97.8% because of the leasing success.
• 52% of the portfolio income generated by the company was derived from tenants providing production, packaging, and distribution of consumer staples & pharmaceuticals.
• Value add initiatives taken during the period. It comprises of the doubling in size of the Townsville Regional Distribution Centre along with the repositioning plus the leasing of 46 Gosport Street, Hemmant QLD.
• Total acquisition in FY2020 was of more than A$300 million. Thus, increasing the total portfolio value to A$1.6 billion.

Strategic Acquisitions and Equity Raising:

As highlighted above, the company signed deals to acquire three high-quality industrial assets for A$447.1 million. The breakdown is as follows:

• Telstra Data Centre, Clayton, VIC: The asset was acquired on a 30-year WALE on sale and leaseback terms worth A$416.7 million.
• An industrial facility in Smeaton Grange, NSW: The asset has 9.7-year WALE for A$16.4 million.
• A distribution centre in Tullamarine, VIC: The asset has a 2.7-year WALE and is worth A$14 million.

These assets would be partially funded by a fully underwritten Entitlement Offer of A$340.8 million at an issue price of A$3.15 per unit.

Mirvac Group (ASX:MGR)

Mirvac Group is an Australian property group engaged in creating beautiful homes, inspiring workplace districts and flourishing shopping centres.

Approval for Next Stage of A$1 billion Waterfront Newstead:

On 5 August 2020, Mirvac Group announced its intent to introduce the next stage of its A$1 billion Waterfront Newstead community in Brisbane in the early parts of 2021, once it gets development approval for its new Sky Precinct from Brisbane City Council.

The next stage of the transformative project is designed as a 'park within a park', attracting greenery from nearby Waterfront Park up its frontage and throughout luxurious landscaped balconies.

The 25-level building envisioned by the company’s design team will have 143 one, two, three- and four-bedroom apartments which are planned for owner-occupiers & to embrace Brisbane River views along with the sub-tropical climate of the city.

The work is anticipated to start in the upcoming months on a new Waterfront sales and display suite.

DO READ: Real Estate sector under scanner: Rental vacancies surge, Mirvac plans Sydney’s tallest building

Mirvac Position as an Innovator:

Mirvac announced on 31 July 2020 that Fast Company has recognised it as part of the leading 50 of the 100 Best Workplaces for Innovators in 2020. The list acknowledges and honours businesses that demonstrate a commitment to innovate at all levels.

GPT Group (ASX:GPT)

The GPT Group is amongst the largest diversified property groups in Australia and the top 50 ASX-listed companies by market capitalisation.

On 15 June 2020, the company announced a third building in the GPT Wholesale Office Fund portfolio, 111 Eagle Street, has attained carbon neutral certification under NABERS and Climate Active, and in association with the international Greenhouse Gas Protocol.

The building is located in the prime location commercial Golden Triangle area. With a total area of 63,700 m², the office tower has 54 levels. It is now the first building in Brisbane which could attain unified carbon-neutral certification. The company has plans to continue implementation of a similar approach across the remaining Group’s portfolio. The GPT Wholesale Office Fund is working in the direction to achieve carbon neutrality by the end of 2020. Besides, the Group is moving in the direction of achieving its 2030 target.

To achieve the certification, GPT concentrated on energy efficiency, using both on-site and off-site 100% renewable electricity plus a demand response program to handle electricity loads within the buildings.

Stock Performance:

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