APN Funds Management Ltd (ASX:APD), today announced the full FY15 results for its Industria REIT (ASX:IDR). The REIT reported promising growth in Distribution per Security and an increase in Net Tangible Assets per security, however is not optimistic about the coming year.
Industria REIT delivered distributable earnings of $20.3 million or 16.20 cents per security, up 98 per cent on the previous corresponding period. The distribution of 16.20 cents was 3.1 per cent below IPO forecasts from 2013, however are in line with guidance provided in February this year. The lower than expected results are largely attributable to lower than expected rental income.
At the AGM in November last year, the company revised the distributable earnings forecast for FY15, due to deterioration conditions in the Brisbane leasing market, resulting in longer than forecasted vacancy periods and lower than forecast rental income.
The REIT’s total investment property assets decreased by $4.1 million or 1 per cent, due to the sale of two properties, both at premium to carrying value. Resulting in Net Tangible Assets of 249.8 million or $2.02 per security as at 30 June 2015.
Despite a difficult leasing environment the REIT managed to lease and renew over 18,800 sqm during FY15. A 92 per cent occupancy rate was achieved and a portfolio Weigthed Average Lease Expiry of 4.8 years by area. The REIT has a target gearing range of between 30 – 40 per cent and has managed to keep gearing at 33.4 per cent.
Looking into 2016, the REIT expects leasing conditions to remain challenging. At present there are no signs of improvement in either tenant demand or leasing terms in the Brisbane market and they do not expect this situation to change in the near term. Due to the pessimistic outlook, the REIT forecasts distributions for FY16 to be between 15.00 and 15.80 cents per security.
Industria REIT’s share price took a hit in June this year after distribution announcements came in below investor expectations. The stock is now trading below NTA per share as forecasted distributions are set to decline.
Author: Ben Visser
Aug 17, 2015
Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.