APN Industria REIT (ASX:ADI)

Tim Slattery
CEO
Market Cap (AUD): 523.53M
Sector: Real Estate
Last Trade (AUD): 2.87 -0.02 (-0.69%)
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1. About

APN Industria REIT™ (“Industria”) is a listed Australian Real Estate Investment Trust (ASX code: ADI) which owns interests in office and industrial properties that provide functional and affordable workspaces for businesses. Industria’s $692 million portfolio of 24 properties located across the major Australian cities provides sustainable income and capital growth prospects for security holders over the long term. Industria has a target gearing band of 30 – 40%, providing flexibility for future growth without compromising the low-risk approach to capital management. Industria is managed by APN Property Group, a specialist real estate investment manager established in 1996, and governed by a majority independent board.

2. Business model

 

The Company has the following revenue segments:[1]

 

Divisions

Revenue  ($’000)

% of Revenue

% of Profit (before Tax)

Profit drivers[2]

Rental Income

$51,677

74.40%

100%

Statutory Net Profit was $48.2 M, largely attributable to revenue from contracted leases with fixed rent reviews being boosted by $20.2 M of valuation uplifts. This result is down on FY17 by $53.4 M, largely due to valuation gains being lower than the prior year when the entire portfolio was independently valued

Other Income

$17,778

25.60%

3. Strategy

 

APN Industria REIT™ (“Industria”) Strategy is to grow through investing in office and industrial assets:[3]

 

  • Providing businesses with attractively priced and well-located workspaces
  • Proactively approaching innovation and alternative initiatives that deliver improved tenant satisfaction and retention
  • Producing sustainable income and capital growth returns

4. Markets

 

The Group operates in markets including:[4]

 

Industry (Australia)

Industry Revenue (2018)

Growth Rate (annual 13-18)

Commercial and Industrial Building Construction

$39 billion

5.0%(Annual 14-19)

Funds Management Services

$8 billion

3.8%

Office Property Operators

$43 billion

11.3%

Retail Property Operators

$23 billion

6.0%

Industrial and Other Property Operators

$17 billion

13.2%

5. Competition

 

Major competitors include:[5]

 

  • Centuria Industrial REIT (ASX:CIP)
  • Goodman Group (ASX:GMG)
  • Propertylink Group (ASX:PLG)

6. History

 

2013[6]   

Founded and Listed on ASX

 

2014   

Sale of 53 Brandl Street, Brisbane Technology Park

 

2015   

360 Capital Total Return Fund has acquired an 8.37% interest in Industria REIT for total consideration of $20.5 million.

 

2016   

Acquisition of WesTrac Newcastle and $85 million fully underwritten equity raising

 

2017   

Growthpoint Properties Australia (“Growthpoint”) has acquired an 18.2% interest in Industria REIT (“IDR”) for approximately $68.1 million, representing $2.30 per IDR security.

 

2018   

Industrial warehouse acquisition and FFO upgrade

Settlement of West Park Drive, Derrimut

7. Team

 

Board of Directors[7]

 

Geoff Brunsdon – Independent Non-Executive Chairman

Michael Johnstone – Independent Non-Executive Director

Jennifer Horrigan – Independent Non-Executive Director

Howard Brenchley – Independent Director

Michael Groth – Executive Alternate Director for Howard Brenchley

Chantal Churchill – Company Secretary

 

Management Team

 

Alex Abell – Fund Manager

David Avery – Senior Portfolio Manager

Gordon Korkie – Senior Analyst

Jessie Chen – Head of Accounting Managed Funds

Shirley Lim – Senior Fund Accountant


read more

8. Financials

 

2018 Full Year Results Presentation

 

Financial Year 2017/18 (ended 30 June):[8]

 

Divisions

Revenue  ($’000)

% Change

Profit (before Tax) ($’000)

% Change

Rental Income

$51,677

6.59%

N/A

N/A

Other Income

$17,778

(77.05%)

N/A

N/A

Total

$69,455

(44.86%)

$48,205

(54.08%)

9. Risk

 

Major risks include:[9]

 

Credit Risk

The Group is subject to credit risk (the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group) Predominantly through its trade and other receivables, derivatives and cash exposures. The maximum exposure to credit risk at a reporting date is the carrying value of each financial asset as disclosed in the applicable note to the financial statements. Credit risk is managed by ensuring that at the time of entering into a contractual arrangement or acquiring a property, counterparties or tenants are of appropriate credit worthiness, provide appropriate security or other collateral and/or do not show a history of default. Industria REIT’s treasury policy also requires that derivatives and cash transactions are limited to financial institutions that meet minimum credit rating criteria.

 

Liquidity Risk

The Group is subject to liquidity risk (the risk that the Group will not be able to meet its contractual or other operating obligations).

Liquidity risk is managed by continuously monitoring forecast and actual cash flows, maintaining appropriate head room under debt facilities and matching the maturity profiles of financial assets and liabilities. To help reduce liquidity risks the Group :

  • Has a liquidity policy which targets a minimum and average level of cash and cash equivalents to be maintained
  • Has readily accessible standby facilities and other funding arrangements in place
  • has a debt maturity policy which targets a maximum percentage of total debt maturing in any one 12-month period
  • Has a loan covenant target to ensure that the Group can withstand downward movement in valuations, a reduction in income and/or an increase in interest rates without breaching loan facility covenants

 

Market Risk (Interest Rate  Risk)

The Group is subject to market risk (the risk that borrowings or derivatives are repriced to different interest rate margins on refinance or renewal arising from changes in the debt markets) and interest rate risk (the risk of a change in interest rates) that may impact the Group’s profitability, cash flows and/or financial position predominately through its borrowings, derivatives and cash exposures.

References

  1. ^ Annual Report 2018, P. 42
    https://www.listcorp.com/asx/idr/industria-reit/news/2018-annual-report-1963011.html
  2. ^ Annual Report 2018, P. 02
    https://www.listcorp.com/asx/idr/industria-reit/news/2018-annual-report-1963011.html
  3. ^ Annual Report 2018, P. 01
    https://www.listcorp.com/asx/idr/industria-reit/news/2018-annual-report-1963011.html
  4. ^ https://www.ibisworld.com.au/industry-trends/market-research-reports/construction/building/commercial-industrial-building-construction.html
    https://www.ibisworld.com.au/industry-trends/market-research-reports/financial-insurance-services/funds-management-services.html
    https://www.ibisworld.com.au/industry-trends/market-research-reports/rental-hiring-real-estate-services/office-property-operators.html
    https://www.ibisworld.com.au/industry-trends/market-research-reports/rental-hiring-real-estate-services/retail-property-operators.html
    https://www.ibisworld.com.au/industry-trends/market-research-reports/rental-hiring-real-estate-services/industrial-other-property-operators.html
  5. ^ https://www.investsmart.com.au/shares/asx-idr/industria-reit
  6. ^ https://www.asx.com.au/asxpdf/20131203/pdf/42lbyz8jsqn8wl.pdf
    https://www.asx.com.au/asxpdf/20140923/pdf/42sd4d4n3kf7n7.pdf
    https://www.asx.com.au/asxpdf/20150922/pdf/431hnh1jxpns4q.pdf
    https://www.asx.com.au/asxpdf/20160901/pdf/439vwfpbys2h36.pdf
    https://www.asx.com.au/asxpdf/20170711/pdf/43kl0cw4b1hr7m.pdf
    https://www.listcorp.com/asx/idr/industria-reit/news/industrial-warehouse-acquisition-and-ffo-upgrade-1966859.html
    https://www.listcorp.com/asx/idr/industria-reit/news/settlement-of-west-park-drive-derrimut-1971964.html
  7. ^ http://www.industriareit.com.au/about/board-of-directors/
    http://www.industriareit.com.au/about/management/
  8. ^ Annual Report 2018, P. 42
    https://www.listcorp.com/asx/idr/industria-reit/news/2018-annual-report-1963011.html
  9. ^ Annual Report 2018, P. 64-65
    https://www.listcorp.com/asx/idr/industria-reit/news/2018-annual-report-1963011.html