The S&P/ASX 200 Index (ASX: XJO) stock Centuria Industrial REIT (ASX: CIP) looks to me like one of the leading options for passive income.
The reasons real estate investment trusts (REITs) can typically be a great option for distributions is because commercial properties usually have a relatively attractive yield compared to residential properties and term deposits.
Centuria Industrial REIT owns a portfolio of industrial properties, focused on Australia's major metropolitan areas.
The business recently reported its FY25 result, which affirmed to me that conditions are improving for the ASX 200 stock.
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How to generate $100 per month of passive income
The business pays a distribution to investors every three months, which is pleasingly regular. However, it doesn't pay income every month. So, I think it'd be best to think of the target as an annual goal and then divide that by 12.
Wanting to receive $100 per month translates into annual passive income of $1,200.
The business has provided guidance that the ASX 200 share could pay an annual distribution per unit of 16.8 cents. At the time of writing, this translates into a forward distribution yield of 5%.
To receive $1,200 of annual income, we'd need to own 7,143 Centuria Industrial REIT units at the start of FY26.
Why this is a good time to invest in the ASX 200 stock
The business continues to have strong metrics, with 87 assets worth a total of $3.9 billion. It has a weighted average lease expiry (WALE) of seven years and a portfolio occupancy of 95.1%. This means it's generating a good level of rental income from its asset base.
It also has projects that should boost its rental income when completed. $15 million of developments were completed in FY25, and it currently has $47 million of developments underway.
A key driver of the rental profits is the organic rental increases the business is seeing thanks to tailwinds like e-commerce adoption, data centres, and refrigeration (for food and medicine). In FY25, the ASX 200 stock saw positive re-leasing spreads of 34%, which means the new rental contracts are earning 34% higher rental income than the previous rental contract.
The Centuria head of funds management, Jesse Curtis, said:
The outlook for Australian urban infill industrial real estate remains extremely favourable with a national 2.8% vacancy rate, constrained supply, and multiple tenant demand tailwinds continuing to persist. CIP's portfolio construction provides exposure to Australia's strongest performing markets with an 85% weighting to core urban infill markets and 88% exposure to the east coast. Further, CIP's average tenancy size of c.7,600sqm aligns with the deepest pool of tenant demand. These characteristics underpin the opportunity to capture significant market rental growth.
The business reported a net tangible asset (NTA) per unit of $3.92 in FY25, which means it's currently trading at a 15% discount to its underlying value, which I think is an appealing discount in an era of reducing the cash rate by the Reserve Bank of Australia (RBA).
