The Centuria office REIT trading update.

No inflation hedge to be found here.

You can eyeball the point, late last year, at which everyone thought “oh no, we aren’t all going back to the office” after all.

We don’t think office is dead, and do own DXS in our direct equity portfolios. However, that’s enough exposure for us, and the trade is looking far less certain than it did 12 months ago, with rolling COVID and increased acceptance of WFH.

The onus is on REITs to create a truly enjoyable working environment, and that’s difficult to do with old assets that require lots of capex. COF’s average age of its assets is 17 years, 90% are prime, and thus is probably good enough long run to be okay.

But for anything less, you’d be worried.

Restated, I agree with most of managements’ framing here (the below slide).

Deals are being done, it’s just a question of price, and that price has downward pressure; a tug of war b/w occupancy and rental outcomes. But population growth, status quo (e.g. employers still agitate for direct observation, returning to office etc) means prime won’t be a ghost town equivalent.

In the interim, just watch out for the highly geared, predominantly unhedged names.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

Receive our investment insights

Something went wrong. Please check your entries and try again.