LA Private

$225m debt refinance and non-core divestment boost Centuria Office REIT’s capital position

Centuria Office REIT (ASX:COF) has announced significant developments, including a successful $225 million debt refinancing initiative and the exchange of a sales contract for the divestment of a non-core property. These moves are expected to enhance COF’s financial position and optimise its portfolio composition.

The $225 million debt refinancing involved the refinancing of $175 million of existing loan facilities and the addition of $50 million in new liquidity. This strategic move provides COF with increased financial flexibility, with no debt expiries until FY26. The Weighted Average Debt Expiry (WADE) has also been extended to 3.2 years, maintaining a diverse pool of six lenders. COF’s proactive capital management and the quality of its portfolio, including a high occupancy rate of 97.3% and an average building age of 17 years, contributed to the successful refinancing. While the refinancing comes with increased interest rates, they align with the assumptions used in FY23 earnings forecasts. COF anticipates higher all-in debt costs compared to previous periods, which is expected to continue into FY24.

Grant Nichols, COF Fund Manager and Centuria Head of Office, commented on the debt refinancing, stating, “Well supported lender appetite for COF is reflective of the REIT’s high-quality portfolio composition, including its high 97.3% occupancy, staggered 4.1-year WALE, and young average building age of around 17 years. As a result of this proactive capital management, COF benefits from a longer-term debt expiry profile with immaterial change to debt margins.”

In addition to the debt refinancing, COF has exchanged contracts for the divestment of 54 Marcus Clarke Street in Canberra, ACT, for a sale price of $23.0 million. The sale price represents a slight discount of approximately 1.7% to the property’s book value as of 31 December 2022. COF initially acquired the property in 2015 for $14.2 million, and its divestment is a strategic move to enhance the overall quality and age profile of COF’s portfolio. The proceeds from the sale will be used to repay debt, with the settlement expected to occur in 2024.

“This divestment demonstrates solid ongoing investment demand for quality assets that are of an accessible size, enabling a wider pool of potential investors. COF is well positioned with a diversified portfolio of quality and affordable accommodation solutions,” said Grant Nichols, COF Fund Manager and Centuria Head of Office.

Nichols further emphasised the positive impact of the strategic sale, adding, “COF’s overall portfolio asset age and quality will improve as a result of this strategic sale, aligning with our commitment to enhancing the portfolio composition and optimising the long-term value for our investors.”

These developments signify Centuria Office REIT’s commitment to optimising its capital structure and portfolio composition, ultimately strengthening its position in the market.