With an 8% yield, the Centuria Office REIT (ASX:COF) share price is on the rise

The Centuria Office REIT share price is gaining this morning, up 3%, after the company released its HY21 results.

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The Centuria Office REIT (ASX: COF) share price is gaining this morning, up 2.6% at the time of writing.

This comes after the real estate investment trust (REIT) released its first half of the 2021 Financial Year (HY21) results this morning, including an 8.5% dividend yield (based on yesterday’s closing price).

What did Centuria Office REIT (COF) report for HY21?

In an ASX release this morning, COF highlighted that its office assets have benefited from their locations in Australia’s better performing office markets. The Trust said that it has no office assets in Sydney’s CBD. This is due to Sydney’s CBD having the weakest domestic tenant demand.

Noting that the coronavirus had impacted the market over the half year, COF revealed it still managed an average rental collection of 96.7%. COF reinstated its 2021 financial year Funds from Operation (FFO) guidance of 19.4 – 19.9 cents per unit.

The Trust reiterated its FY21 distribution guidance of 16.5 cents per unit. At yesterday’s closing share price, that represents a yield of 8.5%.

During the half year, the Trust secured 31 new lease transactions, covering 28,300 square metres. This is equivalent to some 9.3% of its net leasable area (NLA). More than a third of the newly leased space was with new tenants.

COF said its relatively young average building age of 16.4 years helps attract tenants via greater adaptability to the current environment, like social distancing.  Newer buildings also require less maintenance and capital expenditure.

Comments from COF

Addressing the half year results, Grant Nichols, COF Fund Manager, said:

While working from home is still topical, we understand many workers want to be back in an office environment but not endure time consuming daily commutes, which compromise their work-life balance. Equally, many businesses, especially those affected by the pandemic, are conscious of cashflow and are actively seeking more affordable rents.

These complementing themes highlight the desirability of decentralised office markets and support COF’s robust half year performance, evidenced by its significant leasing activity and continuously strong rent collection.

COF’s Weighted Average Lease Expiry (WALE) is 4.5 years. The Trust has reduced its gearing to 33.2% over the half year. It has also increased its undrawn debt capacity to $175.7 million.

Centuria Office REIT share price snapshot

The COF share price has come back strongly from the 2020 March lows, up 36%. However, it still remains depressed from pre-pandemic levels as investors worry about the pace of the return of office workers.

With this morning’s 3% gains taken on board, the Centuria Office REIT share price is down 7% in 2021.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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