Australian Unity Office Fund has seen its statutory net profit drop by 50 per cent in the first half of FY19, becoming $13.1 million from $26.3 million in 1H18.
Despite the plunge in profit, the fund managed by Australian Unity Investment Real Estate saw its funds from operations (FFOs) increase to $14.2 million from $13.1 million in 1H18.
Distributions were raised to $12.9 million for the half, increasing by 9 per cent from the prior year.
Four properties had been revalued as at the end of last year, contributing to an increase in the portfolio’s book value to $641 million, a modest increase from the portfolio’s previous book value, the firm said.
The cap rate for the portfolio remained at 6.5 per cent, indicating the firm is at peak of the current cap tightening cycle, or close to it.
“AOF is continuing to deliver on its investment objective of providing investors with sustainable income returns and the potential for capital growth,” Mark Lumby, fund manager of AOF said.
Occupancy increased to 95.1 per cent, from 94.4 per cent in 1H18.
AOF also experienced gearing of 30.5 per cent, down from 33 per cent.
Approximately 4,600 square metres of new leases were completed in the half via 19 separate transactions, representing approximately 4.2 per cent of AOF’s portfolio by area.
Approximately 3,000 square metres of this leasing was vacant in the prior half, contributing to the portfolio occupancy increasing by 0.1 of a percentage point to 95.1 per cent.
Mr Lumby said: “Unprecedented infrastructure programs, improved amenity and cost advantages for those markets in which AOF is invested should provide good future rental growth and underpin values.”
The fund is also further along in its plans for a proposed development of a building between 25,000 and 28,000 square metres in Parramatta, saying that the area is a tight office market, and is expected to hold its vacancy rate of 3.9 per cent.
Barring unforeseen changes to conditions, AOF has reconfirmed its FFO guidance for full year 2019 of between 17.2 and 17.4 cents per unit.
Distribution guidance for the full year has also been confirmed at 15.8 cents per unit.
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