Undervalued REITS
Thoughts please on Centuria Office REIT (ASX: COF) as an under valued REIT. Whilst MM and myself hold Dexus (ASX:DXS) I have just discoved COF with its high dividend rate. Thanks as always Geoff.
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Answer
Hi Geoff,
We do have some exposure to COF via our holding in Centuria Capital (CNI), who own 14.3% of COF (we hold CNI in the Income & Emerging Companies Portfolios). While the dividend yield (~10%) on COF is attractive, they have higher gearing (above 40%) than Dexus (DXS) and we don’t believe the quality of their assets are as high. They also have a lot of space to lease over the next 6 months or so, meaning occupancy levels will likely fall. Occupancy slipped to 96.2% from 97.1% at their last update, and Docklands is a challenge for them. They have about 3k sqm vacant and another 7.7ksqm expiring in the next 6-months. We think DXS is a safer play in todays challenging office environment.
