Centuria Capital Group’s office real estate investment trust has posted a $21.2 million loss for the first half of the financial year, on the back of reduced property valuations.
The property fund, referred to as COF, has improved its result on the prior corresponding period, when it reported a $99.4 million loss.
The REIT owns 235 William Street in Northbridge, 144 Stirling Street in Perth and 46 Colin Street in West Perth.
These are valued at a combined $256 million and represent 14 per cent of COF.
This represents an $800,000 dip in value since last year, but an increase in Perth’s portion of the national portfolio.
Centuria’s office REIT is worth $1.9 billion across 19 assets.
In the last 12 months, the group has divested three office buildings in the ACT, South Australia and Queensland.
The weighted average capitalisation rate, also known as the yield, of the REIT has increased to 6.77 per cent from 6.26 per cent in the prior corresponding period.
Given the inverse correlation between yields and values, this represents a dip in valuations in the past 12 months.
As COF points out, the estimated replacement cost of its office portfolio is double its current valuation and almost three times its implied valuation of its assets.
The fund reported strong leasing activity for the first half, with 12,611 square metres leased across its portfolio.
Occupancy across its office buildings is 92.2 per cent, which is well above the national average.
COF delivered funds from operations of $34.7 million, or 5.8 cents per unit, and paid its investors 5.05 cents per unit in dividends.
COF fund manager Belinda Cheung said the first half of the year was characterised by continuous leasing activity.
“Since 2020, the office industry has weathered numerous headwinds yet Centuria has actively addressed and mitigated significant expiries by leasing 81 per cent of the portfolio’s NLA (net lettable area), which speaks to the strength of the team’s long term and active commitment towards leasing management,” she said.
As of December 31 2024, like-for-like portfolio valuations declined by 1.4 per cent or $27.6 million, compared with June 30 2024.
Centuria head of funds management Jesse Curtis said this slowing of valuation decline could indicate a change in investor sentiment.
“Despite ongoing bifurcation across office markets, there is growing evidence of shifting sentiment, underpinned by further momentum in office-centric workforces led by government departments and large corporations,” he said.
“Adding to this are key economic drivers including population growth spurring white-collar employment and future office supply contracting as economic rents outstrip prevailing market rents.
“The gap between replacement cost and valuations is now significant with COF’s implied value per square metre approximately a third of the estimated replacement cost.”
At the time of writing, COF’s shares were up 0.44 per cent to $1.14 per share.
