In morning trade, the industrial property company’s shares are down 8% to $3.69.
Why is the Centuria Industrial share price sinking?
The catalyst for the weakness in the Centuria Industrial share price today has been the completion of an institutional placement.
According to the release, the company has raised $300 million through the issue of approximately 78.9 million shares at $3.80 per new share. This represents a 5.2% discount to the Centuria Industrial share price prior to its trading halt.
The proceeds from the placement will be used to partially fund the acquisition of eight freehold urban infill industrial assets for a total of $351.3 million. This price represents an average initial yield of 4.1% and a weighted average capitalisation rate of 4.23%.
Management notes that the acquisitions expand the company’s exposure across key industrial sub-sectors. These include distribution centres, cold storage, and transport logistics. This is a big positive given how these sectors are experiencing strong tailwinds underpinned by accelerating consumer shift to online retail.
Centuria Industrial’s Fund Manager, Jesse Curtis, commented: “The Placement received strong demand from new and existing institutional investors, indicating clear endorsement of CIP’s strategy and management capability to build scale and amass, off market, a high-quality portfolio of urban infill industrial assets to deliver value to unitholders.”
The company will now push ahead with its non-underwritten share purchase plan which is aiming to raise a further $25 million. These funds will be raised at $3.76 per share. This represents the institutional placement issue price adjusted for its 30 September distribution of 4.325 cents per share.
Is it time to invest?
A number of brokers have responded to the news. One that is bullish is Macquarie Group Ltd (ASX: MQG).
Its analysts were pleased with the acquisitions and have retained their outperform rating and lifted their price target to $4.22.
Based on the current Centuria Industrial share price, this represents potential upside of 14% before distributions.
Speaking of which, Macquarie estimates that the company will pay a 17.3 cents per share distribution in FY 2022. This equates to a 4.7% yield at current prices.