Centuria Industrial REIT (ASX:CIP) Upgrades Earnings- Is It a Buy at 18% Below Asset Value?

Centuria Industrial Trades at a Big Discount, Despite an Earnings Upgrade

Centuria Industrial REIT (ASX: CIP) has delivered something investors don’t often see: a property trust that is growing its earnings, increasing its forecast, and still trading at a discount. The company has raised its expected earnings (FFO) for FY26 to 18.2-18.5 cents per unit, which is up to 6% higher than last year. That means the business is improving and making more money.

However, the unit price is A$3.24, while the value of its properties (NTA) is A$3.95 per unit. In simple terms, the market is pricing the trust about 18% below what its assets are worth. We believe this discount does not fully reflect the stronger performance and upgraded outlook. Most analysts also see value here. The consensus rating is Buy, with an average price target of A$3.63, which suggests potential upside from current levels.

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44% Re-Leasing Spreads Reveal a Built-In Growth Engine

Here’s the number that tells the real story. When CIP signed new leases during the half, tenants agreed to pay an average of 44 per cent more than the previous occupants. That’s not a minor bump; it signals the portfolio has been sitting well below market rents for years. As those older, cheaper leases gradually expire, the REIT collects significantly more income from the same buildings without buying anything new.

This is already flowing through to results. Like-for-like net operating income rose 5.1 per cent, and management expects around 5 per cent annual growth ahead. One deal captures the opportunity nicely: a new 10-year lease to Tesla in Derrimut, Melbourne, came in at more than double the previous rent.

Supply is helping too. Building a new warehouse now costs 10 to 25 per cent more than what landlords can charge, so developers aren’t building. We believe this embedded rental growth is one of the strongest parts of the investment case, an earnings tailwind that doesn’t depend on deals or market conditions.

CIP’s Data Centre Push Could Reshape Its Valuation

Beyond traditional warehousing, CIP is building exposure to data centres. The REIT already manages over AUD 450 million of these assets, picked up two more in the past half with tenants including Telstra and Fujitsu, and has lodged a development application for a new facility.

Data centres earn higher rents and lock in longer leases than standard warehouses. If Centuria Industrial scales this segment, the market could view it less as a plain industrial landlord and more as an infrastructure platform with AI and cloud exposure. That re-rating potential isn’t in the price yet.

Management’s balance sheet moves reinforce the story. Centuria Industrial has sold roughly AUD 270 million of non-core properties since FY23 at an average 8 per cent premium to book value, while buying back its own units at a steep NTA discount. When a team sells assets for more than they’re worth on paper and uses the proceeds to buy back stock for less, they’re showing you where they see the value.

The Investor’s Takeaway for Centuria Industrial

The case boils down to a mismatch between what CIP’s properties are worth and what the market is charging. Management’s actions- selling above book, buying units below NTA, upgrading guidance, all point in one direction. The consensus target of A$3.63 implies around 12 per cent upside, and distribution guidance of 16.8 cents per unit adds a forward yield of roughly 5.2 per cent.

There are risks to consider. Higher interest rates mean increased borrowing costs. Vacancy rates could rise slightly in early to mid-2026. The data centre expansion strategy also comes with execution risk.

Still, with units trading at an 18 per cent discount to NTA, earnings growing, and possible upside from data centres not fully reflected in the price, Centuria Industrial stands out as a strong value opportunity in the ASX property sector. It may not appeal to short-term traders chasing momentum, but for patient income investors, the balance of yield, growth, and downside protection looks attractive.