Australia’s largest listed pure-play office fund, Centuria Office REIT  (ASX: COF), has reported resilient Financial Year 2025 interim results with continuous leasing activity and  value-add strategies enabling the REIT to deliver Funds from Operations (FFO) and distributions in line with  guidance². 

COF continued to deliver on its key strategic objectives during the period, executing 12,611sqm of leasing  across 23 transactions, which accounts for 4.6% of portfolio NLA¹. Significantly, in the past five years COF has  leased c. 224,000sqm across its portfolio¹. 

During the half, COF delivered FFO⁴ of $34.7million or 5.8 cents per unit (cpu) and distributions of 5.05cpu  were paid to unitholders in line with FY25 guidance². 

Belinda Cheung, COF Fund Manager said, “The first half of FY25 was characterised by continuous leasing  activity, which underscores Centuria’s proactive management. Since 2020, the office industry has weathered  numerous headwinds yet Centuria has actively addressed and mitigated significant expiries by leasing 81%¹ of  the portfolio’s NLA, which speaks to the strength of the team’s long term and active commitment towards  leasing management.” 

The REIT is capitalising on tenants’ strong demand for data consumption and AI capabilities by repurposing  vacant office accommodation for digital infrastructure. This value-add strategy has been executed through its  leasing activity with next-generation cloud services provider, ResetData. 

Ms Cheung explained, “Our value-add strategies extend to the conversion of traditional office space to data  infrastructure for our new tenant, ResetData. This strategic initiative diversifies our income streams while also  providing an attractive yield on cost and mitigates some existing vacancy.” 

Construction commenced on a 1.1-megawatt edge data centre for ResetData’s 10-year lease at 818 Bourke  Street, with works anticipated to be completed in Q4 FY25. The works involve converting underutilised office space to data infrastructure, facilitating high-density and efficient data solutions for close proximity users.

As at  31 December 2024, the conversion to data centre space has resulted in a 10% uplift in the property’s valuation. 

COF currently manages a modern office portfolio of 19 high-quality assets worth $1.9bn⁵, which provide a portfolio occupancy of 92.2%6, 4.2-year WALE⁷. 

More than 93% of the portfolio comprises A-Grade assets with an average building age of 18 years. The  majority of the REIT’s rental income (77%) is derived from government, multinational corporations and listed  entities. 

As at 31 December 2024, like-for-like portfolio revaluations only marginally declined by c.1.4% (c.$27.6million)  from COF’s 30 June 2024 portfolio value, contributing to NTA of $1.72 per unit⁸. COF’s weighted average  capitalisation rate (WACR) expanded 19bps during HY25 to 6.77%. The resilience of the portfolio value could  suggest a reflection of changing sentiment. 

Jesse Curtis, Centuria Head of Funds Management, added, “Despite ongoing bifurcation across office markets,  there is growing evidence of shifting sentiment, underpinned by further momentum in office-centric workforces  led by government departments and large corporations.  

“Adding to this are key economic drivers including population growth spurring white-collar employment and  future office supply contracting as economic rents outstrip prevailing market rents. The gap between  replacement cost and valuations is now significant with COF’s implied value per square metre approximately a third of the estimated replacement cost.” 

COF reaffirms FY25 FFO guidance of 11.8 cpu² and distribution guidance of 10.1 cpu²(distribution yield of  8.6%³), which are expected to be paid in equal quarterly instalments.  

¹Includes Heads of Agreement and executed leases
² Guidance remains subject to unforeseen circumstances and material changes in operating conditions
³ Based on COF closing unit price of $1.16 on 3 February 2025
⁴ FFO is the Trust’s underlying and recurring earnings from its operations. This is calculated as the statutory net profit adjusted for certain
non-cash and other items
⁵ Excludes the right of use asset
⁶ By gross income
⁷ Weighted average lease expiry (WALE) by gross income
⁸ NTA per unit is calculated as net tangible assets divided by closing units on issue