Centuria Industrial REIT (ASX: CIP) has just revealed a number of property acquisitions.
This real estate investment trust (REIT) is all about investing in industrial property for its investors.
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Centuria Industrial REIT's acquisition spending spree
The industrial property business has entered into agreements to acquire four urban infill industrial freehold assets and completed the acquisition of four other freehold assets for a total cost of $351.3 million.
These acquisitions come with an average initial yield of 4.1% and a weighted average capitalisation rate of 4.23%.
Looking at the properties it's buying, there are two in NSW, three in Victoria, two in Queensland and one in Western Australia. Five of the properties are distribution centres, two are for transport logistics and one is a cold storage property.
The main property that is being acquired is 58-88 Lisbon Street, Fairfield in NSW for a purchase price of $200.2 million.
There's an occupancy rate of 100% with this portfolio, with a weighted average lease expiry (WALE) of 3.8 years.
The fund manager of Centuria Industrial REIT, Mr Jesse Curtis, believes there is rental growth potential with these properties:
We consider the acquisitions to be under rented as market rents have continued to grow at a rapid rate on the back of accelerating tenant demand, driven by e-commerce and last-mile users. The WALE of 3.8 years provides the opportunity to leverage CIP's strong leasing capability to achieve positive rental reversion capturing outsized rental growth being experienced within infill industrial markets. In addition, a number of the sites have value add potential through leasing, developing or reportioning, adding to CIP's value-add pipeline.
Further opportunities
Centuria Industrial REIT said that it's also looking at a number of other off-market opportunities and is doing due diligence on over $100 million of further potential acquisitions.
Capital raising
The REIT announced that to partially fund the acquisitions, and provide capacity to debt fund its pipeline of acquisitions in due diligence, it's going to do a fully underwritten institutional placement to raise approximately $300 million.
The issue price will be determined through a book build process today, with an underwritten floor price of $3.80 per unit.
That floor price represents a 5.2% discount to the last closing price and a 4.6% forecast FY22 distribution yield.
Eligible unitholders will be able to buy up to $30,000 in additional units, at the same issue price under the placement, adjusted for the 30 September 2021 distribution of 4.325 cents per unit. This part of the raising is subject to a cap of $25 million (though this may be increased).
Financial impacts
When taking into account the acquisitions and capital raising, Centuria Industrial REIT reaffirmed its FY22 guidance provided in August 2021 of funds from operations (FFU) of no less than 18.1 cents per unit and a distribution of 17.3 cents per unit.
Pro forma gearing is forecast to be 30.3% after the acquisitions and institutional placement. This is at the bottom end of its target range, giving it more capacity to fund its identified pipeline.
Based on the current Centuria Industrial REIT share price, the current FY22 distribution yield forecast is 4.3%.
