Centuria Industrial REIT reported a solid FY25 with a 2% rise in Funds From Operations and announced a $60 million on-market buy-back to address valuation gaps. The REIT projects further growth in FY26 backed by robust leasing and asset management.
- FY25 Funds From Operations up 2% to $110.9 million
- On-market buy-back announced for up to $60 million
- Strong portfolio metrics, 95.1% occupancy, 5.8% NOI growth
- Asset divestments at 12% premium to book value totaling $140 million
- FY26 FFO guidance up to 6% with distribution growth of 3%
Robust Financial Performance
Centuria Industrial REIT (ASX, CIP), Australia's largest pure-play industrial REIT, has delivered a steady financial performance for the fiscal year ended June 30, 2025. Funds From Operations (FFO) rose 2% year-on-year to $110.9 million, translating to 17.5 cents per unit, aligning with management's guidance. Distributions were maintained at 16.3 cents per unit, reflecting a disciplined approach to shareholder returns.
The REIT's net tangible assets per unit increased slightly to $3.92, underscoring incremental value creation. Notably, like-for-like net operating income grew by 5.8%, supported by strong leasing activity and rental growth across the portfolio.
Portfolio Strength and Leasing Momentum
The portfolio remains a standout with 87 assets valued at approximately $3.9 billion, maintaining a high occupancy rate of 95.1%. Positive re-leasing spreads averaged 34%, a testament to the REIT’s ability to capture rental uplifts amid tight market conditions. Around 30% of leases are set to expire by FY28, presenting further opportunities for rental growth.
Key leasing renewals included major tenants such as K&S Freighters and Silk Logistics, securing multi-year terms in prime urban infill locations. The weighted average lease expiry by income stands at a healthy 7.1 years, providing income stability.
Capital Management and Buy-Back Initiative
Centuria executed $140 million in asset divestments during FY25, achieving an average 12% premium to book value. These strategic sales have funded an on-market buy-back program of up to $60 million, designed to address the disconnect between the REIT’s trading price and its underlying asset values.
The buy-back is expected to be accretive to both FFO and net tangible assets, reflecting prudent capital management. The REIT’s balance sheet remains robust with pro forma gearing at 33.2%, strong liquidity of $457 million, and a Moody’s Baa2 stable credit rating.
Development Pipeline and Sustainability Focus
Centuria continues to advance its development pipeline with $47 million currently underway, including a significant multi-unit greenfield project in South Australia. Recent completions have secured pre-commitments, enhancing asset values and yield profiles.
On the sustainability front, CIP is targeting zero Scope 2 emissions by 2028 and aims for portfolio-wide Green Star ratings. These initiatives align with broader investor expectations and regulatory trends, potentially enhancing long-term asset desirability.
Outlook and Guidance
Looking ahead, CIP projects FY26 FFO per unit growth of up to 6%, with distributions expected to rise by 3%. Management highlights the favourable supply-demand dynamics in Australian urban infill industrial markets, driven by constrained supply, low vacancy rates, and strong tenant demand, particularly from logistics and e-commerce sectors.
With a significant portion of leases due for renewal in the coming years, CIP is well positioned to capitalise on rental growth opportunities, underpinning its positive earnings trajectory.
Bottom Line?
Centuria’s strategic buy-back and robust portfolio fundamentals set the stage for sustained growth, but investors will watch closely how market conditions impact lease renewals and refinancing risks.
Questions in the middle?
- Will the $300 million Exchangeable Note put option be exercised in March 2026, and how will CIP manage refinancing?
- How will CIP balance further asset divestments with growth investments amid evolving market conditions?
- What impact will sustainability initiatives have on tenant demand and asset valuations over the medium term?