CENTURIA INDUSTRIAL REIT — Interim / Quarterly Report 2020

Feb 4, 2020

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Centuria Industrial REIT and its subsidiaries

ARSN 099 680 252

Interim Financial Report For the half year ended 31 December 2019

Centuria Property Funds No. 2 Limited ABN 38 133 363 185 is the Responsible Entity for Centuria Industrial REIT.

Centuria Industrial REIT Table of contents

For the half year ended 31 December 2019

	Page
Directors' report	1
Auditor's Independence Declaration	5
Interim financial report	6
Directors' declaration	22
Independent auditor's review	23

Directors' report

For the half year ended 31 December 2019

The directors of Centuria Property Funds No. 2 Limited, the Responsible Entity of Centuria Industrial REIT ('CIP') present their report, together with the interim consolidated financial report of the Trust and its subsidiaries ('the Trust') for the half year ended 31 December 2019 and the independent auditor's review report thereon.

Directors of the Responsible Entity

The directors of Centuria Property Funds No. 2 Limited during or since the end of the half year are:

Name	Appointed	Directorship of other listed companies
Peter Done	26 Jun 2017	Centuria Capital Limited
Darren Collins	26 Jun 2017
Matthew Hardy	26 Jun 2017
Nicholas Collishaw	01 Oct 2017	Centuria Capital Limited; and
		Redcape Hotel Group Management Limited
Roger Dobson	01 Oct 2017

The company secretary of Centuria Property Funds No. 2 Limited during or since the end of the half year is:

Name	Appointed
Anna Kovarik	05 Jul 2018

No director holds any units in the Trust.

No director holds a right or option over interests in the Trust. No options over any issued or unissued units in the Trust have been issued to any director.

There are no contracts to which any director is a party to under which a director is entitled to a benefit and/or confers a right to call for or be delivered interests in the Trust.

Principal activities

The Trust is a registered managed investment scheme domiciled in Australia.

The principal continuing activity of the Trust was investment in industrial properties within Australia. There have been no significant changes in the nature of the Trust's activities since the date of the Trust's establishment.

The Trust did not have any employees during the half year.

Significant change in the state of affairs

In the opinion of the Responsible Entity there were no significant changes in the state of affairs of the Trust that occurred during the half year.

Review of operations

Results

The results of the operations of the Trust are disclosed in the consolidated interim statement of profit or loss and other comprehensive income of the interim financial report. The Trust's profit for the half year ended 31 December 2019 was $31,493,000 (31 December 2018: $46,106,000 profit).

As at 31 December 2019, the Trust's Net Tangible Assets ('NTA') have increased 10.0 cents per unit ('cpu'), or 3.7%, to $2.83 per unit since 30 June 2019.

Investment property valuations

The total value of the Trust's portfolio as at 31 December 2019 was $1,552.3 million representing an increase of 2.3% from 30 June 2019 on a like for like basis, excluding new acquisitions.

The weighted average capitalisation rate for the portfolio, on a like for like basis, has firmed 11 basis points to 6.35% as at 31 December 2019. The weighted average capitalisation rate for the portfolio including new acquisitions is 6.19%.

Centuria Industrial REIT 1 31 December 2019

Directors' report

Review of operations (continued)

Leasing and occupancy

The Trust secured 63,395 square metres ('sqm') of leases across 14 transactions for the half year ended 31 December 2019. This represented 6.8% of the portfolio’s gross lettable area.

At 31 December 2019 the Trust’s portfolio was 95.8% occupied and the remaining lease expiry for the year ending 30 June 2020 represent less than 1.1% of portfolio income. During the half year period the Trust has acquired several assets that have a long weighted average lease expiry ('WALE') and these have increased the Trust's WALE to 7.1 years (30 June 2019: 4.3 years).

Capital management

As at 31 December 2019, the Trust had drawn borrowings of $585.0 million with a weighted average expiry of 3.8 years. The drawn debt was 78.6% hedged reducing the interest rate exposure of the Trust.

The Trust’s gearing at 31 December 2019 was 35.5% (30 June 2019: 37.4%).

Outlook

The Responsible Entity’s strategy and ongoing focus remains unchanged. Management continues to focus on portfolio leasing to ensure occupancy and income are maximised, active asset management, risk mitigation and repositioning strategies. Management are also focused on acquiring quality assets in order to enhance existing stable and secure income streams.

The Responsible Entity confirms distributable earnings guidance for the year ending 30 June 2020 is expected to be in the range of 19.6 - 19.9 cpu. The distribution guidance for the year ending 30 June 2020 is 18.7 cpu which will be paid in equal quarterly instalments.

Distributions

Distributions paid or payable in respect of the half year were:

September quarter December quarter Total	31 December 2019 31 December 2018 Cents per unit $'000 Cents per unit $'000 4.675 14,086 4.60 11,424 4.675 16,225 4.60 12,271
	9.350 30,311 9.20 23,695

Key dates in connection with the December quarter distribution are:

Event	Date
Ex-distribution date	30 Dec 2019
Record date	31 Dec 2019
Distribution payment date	24 Jan 2020

The Funds From Operations ('FFO') for the half year ended 31 December 2019 were $30.0 million. This was a 25.3% increase to the prior period.

Centuria Industrial REIT 2 31 December 2019

Directors' report

Review of operations (continued)

Distributions (continued)

The following table provides a reconciliation from the consolidated interim statement of profit or loss and other comprehensive income to the funds from operations for the half year:

Net profit for the half year t Adjustments: Net (gain) on fair value of investment properties Straight-lining of rental income Amortisation of incentives and leasing fees Rent free and abatement Net loss on fair value of derivative financial instruments Loss on fair value of financial assets held at fair value through profit or loss after transaction costs Loss on sale of investment property Other transaction related costs Funds from operations

31 December 2019 $'000 31 December 2018 $'000 31,493 46,106 (4,338) (30,395) (1,017) (947) 1,883 2,659 1,863 1,073 126 735 - 3,107 - 326 - 1,284

30,010 23,948

The Trust issued 76.2 million units in the September and December quarters to assist with the acquisition of new properties. These units were entitled to a distribution for the full quarter, however as the properties acquired were not owned for the entire period, the income received from these properties was less than the distribution paid for these periods. Accordingly, this has resulted in total distributions for the period being higher than the funds from operations.

Distribution reinvestment plan

Distribution Reinvestment Plan (‘DRP’) remains activated during the half year. Unitholders may elect to have all or part of their distribution entitlement reinvested by the issue of new units rather than being paid cash.

Events subsequent to balance date

On 16 January 2020, the Trust settled on the acquisition of 24 West Link Place, Richlands, QLD for $8.0 million.

There are no other matters or circumstances which have arisen since the end of the period and the date of this report, in the opinion of the Responsible Entity, which significantly affect the operations of the Trust, the results of those operations, or the state of affairs of the Trust, in future financial years.

Auditor's independence declaration

The auditor’s independence declaration required under Section 307C of the Corporations Act 2001 is set out on page 5 and forms part of the Directors' report for the half year ended 31 December 2019.

Rounding of amounts

The Trust is an entity of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191 and in accordance with that Instrument amounts in the Directors' report and the interim financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

Centuria Industrial REIT 3 31 December 2019

Directors' report

This report is made in accordance with a resolution of Directors.

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Darren Collins Director

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Matthew Hardy Director

Sydney 5 February 2020

Centuria Industrial REIT 4 31 December 2019

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of Centuria Property Funds No. 2 Limited, the Responsible Entity of Centuria Industrial REIT

I declare that, to the best of my knowledge and belief, in relation to the review of Centuria Industrial REIT for the half-year ended 31 December 2019 there have been:

• i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

• ii. no contraventions of any applicable code of professional conduct in relation to the review.

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KPMG

Peter Zabaks

Partner Sydney 5 February 2020

5

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Centuria Industrial REIT Interim Financial Report

For the half year ended 31 December 2019

Contents

Contents	Page
Consolidated interim statement of profit or loss and other comprehensive income	7
Consolidated interim statement of financial position	8
Consolidated interim statement of changes in equity	9
Consolidated interim statement of cash flows	10
Condensed notes to the interim financial report	11
A About the report	11
A1 General information	11
A2 Significant accounting policies	11
A3 Segment reporting	12
B Trust performance	13
B1 Distributions	13
B2 Rental income	13
B3 Finance costs	13
C Trust's assets and liabilities	14
C1 Other assets	14
C2 Investment properties	14
C3 Investment properties classified as held for sale	18
C4 Borrowings	18
C5 Issued capital	18
D Other notes	19
D1 Fair value of financial instruments	19
D2 Related parties	19
D3 Commitments	21
D4 Events subsequent to reporting date	21
Directors' declaration	22

Centuria Industrial REIT 6 31 December 2019

Consolidated interim statement of profit or loss and other comprehensive income

For the half year ended 31 December 2019

Note Revenue Rent and recoverable outgoings B2 Total revenue Other income Interest income Net gain on fair value of investment properties C2 Other income Total other income Total revenue and other income Expenses Rates, taxes and other property outgoings Finance costs B3 Management fees D2 Other expenses Loss on fair value of derivative financial instruments Loss on sale of investment property Loss on fair value of financial assets held at fair value through profit or loss after transaction costs Total expenses Net profit for the period Other comprehensive income Other comprehensive income for the period Total comprehensive income for the period	31 December 2019 $'000 31 December 2018 $'000 53,121 44,149
	53,121 44,149
	50 112 4,338 30,395 - 397
	4,388 30,904
	57,509 75,053
	12,624 10,820 8,136 9,405 3,869 3,226 1,261 1,328 126 735 - 326 - 3,107
	26,016 28,947
	31,493 46,106
	- -
	31,493 46,106

Basic and diluted earnings per unit Basic earnings per unit (cents per unit) 10.39 18.49

The above consolidated interim statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

Centuria Industrial REIT 7 31 December 2019

Consolidated interim statement of financial position

As at 31 December 2019

Note ASSETS Current assets Cash and cash equivalents Trade and other receivables Other assets C1 Investment properties held for sale C3 Total current assets Non-current assets Investment properties C2 Intangibles Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Distributions payable Total current liabilities Non-current liabilities Borrowings C4 Derivative financial instruments Total non-current liabilities Total liabilities Net assets EQUITY Issued capital C5 Retained earnings Total equity	31 December 2019 $'000 30 June 2019 $'000 23,002 9,348 6,909 7,029 23,415 2,115 11,400 11,400
	64,726 29,892
	1,540,884 1,209,850 10,501 10,501
	1,551,385 1,220,351
	1,616,111 1,250,243
	20,009 16,265 16,225 12,459
	36,234 28,724
	582,834 468,431 3,668 3,541
	586,502 471,972
	622,736 500,696
	993,375 749,547
	930,617 687,971 62,758 61,576
	993,375 749,547

The above consolidated interim statement of financial position should be read in conjunction with the accompanying notes.

Centuria Industrial REIT 8 31 December 2019

Consolidated interim statement of changes in equity

For the half year ended 31 December 2019

Note Balance at 1 July 2018 Net profit for the period Total comprehensive income for the period Units issued C5 Equity raising costs Distributions provided for or paid B1 Balance at 31 December 2018 Balance at 1 July 2019 Net profit for the period Total comprehensive income for the period Units issued C5 Dividend reinvestment plan ('DRP') C5 Equity raising costs C5 Distributions provided for or paid B1 Balance at 31 December 2019	Issued capital $'000 Retained earnings $'000 Total equity $'000 626,317 21,173 647,490
	- 46,106 46,106
	- 46,106 46,106 50,967 - 50,967 (1,273) - (1,273) - (23,695) (23,695)
	676,011 43,584 719,595
	687,971 61,576 749,547
	- 31,493 31,493
	- 31,493 31,493 245,418 - 245,418 3,476 - 3,476 (6,248) - (6,248) - (30,311) (30,311)
	930,617 62,758 993,375

The above consolidated interim statement of changes in equity should be read in conjunction with the accompanying notes.

Centuria Industrial REIT 9 31 December 2019

Consolidated interim statement of cash flows

For the half year ended 31 December 2019

Note Cash flows from operating activities Receipts from customers Payments to suppliers Interest received Interest paid Distribution received Net cash generated by operating activities Cash flows from investing activities Net proceeds from sale of investment properties Payments for investment properties Proceeds from sale of investments held at fair value through profit or loss Net cash used in investing activities Cash flows from financing activities Distribution paid Proceeds from borrowings Repayment of borrowings Payments for borrowing costs Proceeds from issue of units Equity issue costs Net cash generated by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of period	31 December 2019 $'000 31 December 2018 $'000 60,557 45,750 (20,898) (14,361) 50 112 (10,262) (8,654) - 1,722
	29,447 24,569
	- 11,375 (346,188) (128,943) - 46,229
	(346,188) (71,339)
	(23,069) (23,470) 177,051 68,796 (62,000) (43,748) (865) (285) 245,418 50,967 (6,140) (1,199)
	330,395 51,061
	13,654 4,291 9,348 21,177
	23,002 25,468

The above consolidated interim statement of cash flows should be read in conjunction with the accompanying notes.

Centuria Industrial REIT 10 31 December 2019

Condensed notes to the interim financial report

For the half year ended 31 December 2019

A About the report

A1 General information

Centuria Industrial REIT is a registered managed investment scheme under the Corporations Act 2001 and is domiciled in Australia. The principal activity of the Trust is disclosed in the Directors' report.

Statement of compliance

The interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134: Interim Financial Reporting and the Corporations Act 2001.

The interim financial report does not include all of the information required for the annual financial report, and should be read in conjunction with the annual financial report of the Trust for the year ended 30 June 2019.

For the purposes of preparing the financial report, the Trust is a for-profit entity.

The interim financial report was authorised for issue in accordance with a resolution of the board of directors of Centuria Property Funds No. 2 Limited, the Responsible Entity, on 5 February 2020.

Basis of preparation

The interim financial report has been prepared on the basis of historical cost, except for investment properties and financial instruments that are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Going concern

The interim financial report has been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The principal accounting policies adopted in the preparation of the interim financial report are consistent with those of the previous financial year and corresponding interim reporting period.

Rounding of amounts

The Trust is a scheme of the kind referred to in ASIC Legislative Instrument 2016/191, related to the 'rounding off' of amounts in the Directors' report and the interim financial statements. Amounts in the Directors' report and the interim financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated.

Functional and presentation currency

The interim financial report is presented in Australian dollars, which is the Trust’s functional currency.

Additional information

The registered office and principal place of business of the Trust and the Responsible Entity are as follows:

Registered office: Principal place of business: Level 41, Chifley Tower, 2 Chifley Square Level 41, Chifley Tower, 2 Chifley Square SYDNEY NSW 2000 SYDNEY NSW 2000

A2 Significant accounting policies

The principal accounting policies adopted in the preparation of the interim financial report are consistent with those of the previous financial year and corresponding interim period with the exception of the adoption of AASB 16 Leases .

AASB 16 Leases

The Trust has adopted AASB 16 at 1 July 2019. AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases.

Centuria Industrial REIT 11 31 December 2019

About the report

A2 Significant accounting policies (continued)

AASB 16 Leases (continued)

(a) Nature of change

AASB 16 was issued in February 2016. It has resulted in leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

The accounting for lessors has no significant change.

(b) Impact

The standard affects primarily the accounting for the Trust’s operating leases. As at the reporting date, two of the Trust's investment properties have non-cancellable operating lease commitments (refer to Note C2). However these have no material impact to the Trust’s financial position, profit and classification of cash flows.

(c) Transition

Changes in the accounting policies resulting from the adoption of AASB 16 has been applied retrospectively.

There is no material impact on the financial position previously reported as at 30 June 2019 and 31 December 2018 as a result of the adoption of AASB 16 and its retrospective application.

A3 Segment reporting

The Trust operates in one segment, being investments in Australian industrial property. The Trust has determined its one operating segment based on the internal information that is provided to the chief operating decision maker and which is used in making strategic decisions. The Responsible Entity has been identified as the Trust’s chief operating decision maker.

Centuria Industrial REIT 12 31 December 2019

B Trust performance

B1 Distributions

B1 Distributions
September quarter December quarter Total	31 December 2019 31 December 2018 Cents per unit $'000 Cents per unit $'000 4.675 14,086 4.60 11,424 4.675 16,225 4.60 12,271
	9.350 30,311 9.20 23,695

Key dates in connection with the December quarter distribution are:

Event	Date
Ex-distribution date	30 Dec 2019
Record date	31 Dec 2019
Distribution payment date	24 Jan 2020

B2 Rental income

B2 Rental income
Rental income Recoverable outgoings Straight-lining of lease revenue	31 December 2019 $'000 31 December 2018 $'000 43,321 36,623 8,783 6,579 1,017 947
	53,121 44,149

B3 Finance costs

Finance costs include interest expense and amortised borrowing costs. Interest expense is recognised in profit or loss as it accrues. Finance costs are recognised using the effective interest rate applicable to the financial liability.

Interest expense Finance agent fee Amortisation of borrowing costs	31 December 2019 $'000 31 December 2018 $'000 7,932 8,002 - 999 204 404
	8,136 9,405

Centuria Industrial REIT 13 31 December 2019

C Trust's assets and liabilities

C1 Other assets

C1 Other assets
Deposits on acquisitions GST receivables	31 December 2019 $'000 30 June 2019 $'000 615 2,115 22,800 -
	23,415 2,115

The acquisition of 46 Robinson Road East, Virginia QLD and 23-41 Galway Avenue, Marleston SA did not constitute a going concern for GST purposes and the Trust has paid $23.6 million of GST on settlement. The Trust is expecting to receive GST refund from the next GST return.

C2 Investment properties

Opening balance Acquisitions of investment properties Stamp duty and other transaction costs Capital improvements and associated costs Gain on fair value Change in deferred rent and lease incentives Change in capitalised leasing fees Less: Investment properties held for sale Closing balance^	31 December 2019 $'000 30 June 2019 $'000 1,209,850 999,000 297,356 147,118 21,267 8,868 7,263 7,879
	325,886 163,865 4,338 53,808 1,247 2,903 (437) 1,674
	5,148 58,385 - (11,400)
	1,540,884 1,209,850

^ The carrying amount of investment properties includes components related to deferred rent, capitalised lease incentives and leasing fees amounting to $25.2 million (30 June 2019: $24.4 million).

Centuria Industrial REIT 14 31 December 2019

Trust's assets and liabilities

C2 Investment properties (continued)

C2 Investment properties (continued)
	Fair value			Capitalisation rate		Discount	rate
									Last
Property	31 Dec 2019	30	Jun 2019	31 Dec 2019	30 Jun 2019	31 Dec 2019	30 Jun 2019	31 Dec 2019	independent
	$'000		$'000	%	%	%	%	Valuer	valuation date
NSW
2 Woolworths Way, Warnervale NSW	81,500		81,250	7.00%	7.00%	7.75%	7.75%	Directors	Sep 2018
10 Williamson Rd, Ingleburn NSW	53,400		49,000	5.50%	5.75%	6.75%	6.75%	Independent	Dec 2019
92-98 Cosgrove Rd, Enfield NSW	50,300		50,000	5.75%	5.75%	6.50%	6.50%	Directors	Jun 2019
29 Glendenning Rd, Glendenning NSW	47,500		45,700	5.25%	5.50%	6.75%	7.00%	Directors	Sep 2018
12 Williamson Rd, Ingleburn NSW	40,000		39,200	6.00%	6.00%	6.50%	7.25%	Independent	Dec 2019
74-94 Newton Rd, Wetherill Park NSW	37,000		36,750	5.50%	5.75%	6.50%	6.50%	Directors	Jun 2019
37-51 Scrivener St, Warwick Farm NSW	36,750		36,750	6.50%	6.50%	7.00%	7.00%	Directors	Jun 2019
457 Waterloo Rd, Chullora NSW	34,000		29,500	5.25%	5.75%	6.50%	6.75%	Independent	Dec 2019
6 Macdonald Rd, Ingleburn NSW	25,100		25,000	5.50%	5.50%	6.50%	6.50%	Directors	Jun 2019
8 Penelope Cres, Arndell Park NSW	21,750		21,700	5.50%	5.50%	6.50%	6.75%	Directors	Jun 2019
30 Clay Pl, Eastern Creek NSW	19,100		19,000	5.50%	5.50%	6.50%	6.75%	Directors	Sep 2018
52-74 Quarry Rd, Erskine Park NSW	18,000		17,600	5.50%	6.00%	6.50%	6.75%	Independent	Dec 2019
75 Owen St, Glendenning NSW	9,700		8,600	5.50%	6.00%	6.50%	7.00%	Independent	Dec 2019
QLD
46 Robinson Road East, Virginia QLD	211,800		-	5.00%	-%	6.75%	-%	Independent	Dec 2019
22 Hawkins Cres, Bundamba QLD	47,250		47,000	6.50%	6.50%	7.50%	7.50%	Directors	Sep 2018
1 Ashburn Rd, Bundamba QLD	38,500		38,250	6.50%	6.50%	7.25%	7.25%	Directors	Sep 2018
136 Zillmere Rd, Boondall QLD	32,300		31,600	6.50%	6.75%	6.75%	7.00%	Directors	Sep 2018
33-37 Mica St, Carole Park QLD	31,750		30,250	6.25%	6.50%	7.25%	7.50%	Directors	Sep 2018
69 Rivergate Pl, Murarrie QLD	31,000		31,000	6.25%	6.25%	7.00%	7.00%	Directors	Sep 2018
149 Kerry Rd, Archerfield QLD	30,600		30,600	6.00%	6.00%	6.75%	6.75%	Directors	Nov 2018
680 Boundary St, Richlands QLD	19,750		-	6.75%	-%	7.50%	-%	Directors	Jun 2019
46 Gosport St, Hemmant QLD	17,600		17,000	7.75%	7.75%	8.75%	7.75%	Directors	May 2019
616 Boundary Rd, Richlands QLD	16,600		16,500	7.00%	7.25%	7.25%	7.25%	Directors	Sep 2018
21 Jay St, Mount St John, Townsville QLD*	11,000		11,000	7.50%	7.50%	7.75%	7.75%	Directors	Sep 2018
43-45 Mica St, Carole Park QLD	1,850		1,850	6.00%	6.00%	-%	-%	Directors	Sep 2018

Centuria Industrial REIT 15 31 December 2019

Trust's assets and liabilities

C2 Investment properties (continued)

C2 Investment properties (continued)
	Fair value			Capitalisation rate		Discount	rate
									Last
Property	31 Dec 2019	30	Jun 2019	31 Dec 2019	30 Jun 2019	31 Dec 2019	30 Jun 2019	31 Dec 2019	independent
	$'000		$'000	%	%	%	%	Valuer	valuation date
VIC
207-219 Browns Rd, Noble Park VIC	45,200		44,300	6.25%	6.25%	7.50%	7.50%	Directors	Jun 2019
1 International Drive, Westmeadows VIC	43,750		43,500	6.75%	6.75%	7.25%	7.25%	Directors	Jun 2019
324-332 Frankston-Dandenong Rd, Dandenong
South VIC	33,700		33,500	6.00%	6.00%	6.75%	7.00%	Directors	Sep 2018
24-32 Stanley Dr, Somerton VIC	31,700		31,500	6.25%	6.25%	7.00%	7.00%	Directors	Jun 2019
102-128 Bridge Rd, Keysborough VIC	31,200		30,700	7.00%	7.00%	7.50%	7.50%	Directors	Sep 2018
75-79 and 105 Corio Quay Rd, North Geelong
VIC	27,500		-	6.00%	-%	7.00%	-%	Independent	Dec 2019
2 Keon Pde, Keon Park VIC	26,700		25,500	5.50%	5.75%	6.75%	7.00%	Directors	Sep 2018
69 Studley Ct, Derrimut VIC	23,000		21,500	6.25%	6.50%	6.75%	7.50%	Independent	Dec 2019
500 Princes Hwy, Noble Park VIC	22,250		21,000	7.00%	7.25%	7.25%	7.50%	Directors	Sep 2018
14-17 Dansu Ct, Hallam VIC	21,600		21,500	6.50%	6.50%	7.00%	7.00%	Directors	Sep 2018
12-13 Dansu Ct, Hallam VIC	19,100		18,000	5.50%	5.75%	6.75%	7.00%	Directors	Jun 2019
49 Temple Dr, Thomastown VIC	13,500		13,000	6.50%	6.75%	7.25%	7.25%	Directors	Sep 2018
9 Fellowes Ct, Tullamarine VIC	5,100		4,500	6.50%	6.75%	7.00%	7.00%	Independent	Dec 2019
WA
310 Spearwood Ave, Bibra Lake WA	55,200		54,750	7.50%	7.50%	7.75%	7.75%	Directors	Sep 2018
Lot 14 Sudlow Rd, Bibra Lake WA	34,400		33,800	7.50%	7.50%	8.00%	8.00%	Directors	Sep 2018
23 Selkis Rd, Bibra Lake WA	20,300		20,200	7.50%	7.50%	7.50%	7.50%	Directors	Sep 2018
103 Stirling Crescent, Hazelmere WA	16,000		15,400	6.75%	6.75%	7.25%	7.25%	Directors	Nov 2018
16-18 Baile Rd, Canning Vale WA	18,100		18,100	7.00%	7.00%	7.00%	7.00%	Directors	Sep 2018
92 Robinson Rd, Belmont WA	10,900		11,400	7.00%	7.25%	7.50%	7.75%	Directors	Sep 2018
155 Lakes Road, Hazelmere WA	8,800		8,700	6.75%	6.75%	7.00%	7.00%	Directors	Nov 2018
ACT
54 Sawmill Cct, Hume ACT*	16,100		16,100	6.75%	6.75%	6.75%	6.75%	Directors	Sep 2018

Centuria Industrial REIT 16 31 December 2019

Trust's assets and liabilities

C2 Investment properties (continued)

Property SA 23-41 Galway Avenue, Marleston SA 32-54 Kaurna Avenue, Edinburgh Park SA 9-13 Caribou Dr, Direk SA	Fair value Capitalisation rate Discount rate 31 Dec 2019 $'000 30 Jun 2019 $'000 31 Dec 2019 % 30 Jun 2019 % 31 Dec 2019 % 30 Jun 2019 % 31 Dec 2019 Valuer Last independent valuation date 24,384 - 7.25% -% 8.00% -% Independent Dec 2019 19,500 - 7.00% -% 8.00% -% Directors Jun 2019 8,800 7,800 7.25% 8.50% 7.75% 8.75% Independent Dec 2019 1,540,884 1,209,850 312.50% 286.50% 341.50% 309.25%

• The Trust holds a leasehold interest in 21 Jay St, Mount St John, Townsville QLD and 54 Sawmill Cct, Hume ACT.

During the period, the Trust acquired 680 Boundary Road, Richlands QLD, 75-79 and 105 Corio Quay Road, North Geelong VIC, 32-54 Kaurna Ave, Edinburgh Park SA, 46 Robinson Road East, Virginia QLD and 23-41 Galway Avenue, Marleston SA.

The Trust's weighted average capitalisation rate as at 31 December 2019 is 6.19% (30 June 2019: 6.46%).

Centuria Industrial REIT 17 31 December 2019

Trust's assets and liabilities

C3 Investment properties classified as held for sale

C3 Investment properties classified as held for sale
99 Quill Way, Henderson WA	31 December 2019 $'000 30 June 2019 $'000 11,400 11,400
	11,400 11,400

Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.

C4 Borrowings

Non-current Secured loan Borrowing costs	31 December 2019 $'000 30 June 2019 $'000 585,000 469,949 (2,166) (1,518)
	582,834 468,431

As at 31 December 2019, the Trust had the following secured debt facilities:

Secured loan facility Debt facility limit Undrawn amount Drawn amount Hedged amount	31 December 2019 $'000 30 June 2019 $'000 650,000 520,000 (65,000) (50,051)
	585,000 469,949
	460,000 360,000
	460,000 360,000

As at 31 December 2019, the Trust had $250.0 million (30 June 2019: $150.0 million) of fixed rate loan and $210.0 million (30 June 2019: $210.0 million) of interest rate swaps hedged against its drawn debt. At the end of the reporting period, the Trust's total debt facilities that are on a fixed interest basis is $460.0 million (30 June 2019: $360.0 million).

All facilities are interest only facilities and are secured by first mortgages over the Trust's investment properties and a first ranking fixed and floating charge over all assets of the Trust.

The secured loan has covenants in relation to Loan to Value Ratio ('LVR') and Interest Coverage Ratio ('ICR') which the Trust has complied with during the period.

C5 Issued capital

C5 Issued capital
Opening balance Units issued Distribution reinvestment plan ('DRP') Equity raising costs Closing balance	31 December 2019 30 June 2019 Units '000 $'000 Units '000 $'000 270,847 687,971 248,357 626,317 75,122 245,418 18,400 50,967 1,086 3,476 4,090 12,270 - (6,248) - (1,583)
	347,055 930,617 270,847 687,971

All units in the Trust are of the same class and carry equal rights to capital and income distributions.

Centuria Industrial REIT 18 31 December 2019

D Other notes

D1 Fair value of financial instruments

The directors of the Responsible Entity consider that the carrying amount of the financial assets and financial liabilities approximate their fair value in the financial statements. All financial instruments are measured at amortised cost with the exception of the derivative financial instruments. Derivative financial instruments are measured at fair value and have a level 2 designation in the fair value hierarchy. There were no transfers between levels of the fair value hierarchy during the period.

Independent valuations are obtained from third parties to support the fair value measurement of financial instruments at each reporting date to meet the requirements of International Financial Reporting Standards.

Valuation techniques

The fair value of financial assets and financial liabilities are determined as follows:

• The fair value of interest rate swaps are determined using a discounted cash flow analysis. The future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contracted interest rates, discounted at a rate that reflects the credit risk of various counterparties.

The Trust classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1: derived from quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust can access at the measurement date.

• Level 2: derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgement by the Responsible Entity. The Responsible Entity considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

D2 Related parties

Key management personnel

The Trust does not employ personnel in its own right. However it is required to have an incorporated Responsible Entity to manage the activities of the Trust which has been identified as key management personnel.

No compensation is paid directly by the Trust to any key management personnel of the Responsible Entity.

Key management personnel loan disclosures

The Trust has not made, guaranteed or secured, directly or indirectly, any loans to key management personnel or their personally related entities at any time during the reporting period.

Responsible entity fees and other transactions

The Responsible Entity is entitled to a management fee which is calculated at 0.65% of the gross value of assets held plus GST, in accordance with the Trust's constitution. The Responsible Entity has elected to charge 0.60% per annum.

Custodian fees are paid to the custodian. Custody fees paid to Centuria Property Funds No. 2 Limited are calculated in relation to some of the Trust's assets and in accordance with the constitution at a rate of 0.05% of the Trust’s gross assets.

Centuria Industrial REIT 19 31 December 2019

Other notes

D2 Related parties (continued)

Responsible entity fees and other transactions (continued)

At reporting date an amount of $698,924 (31 December 2018: $671,962) owing to the Responsible Entity and its related parties was included in trade and other payables. The payables are non-interest bearing with payment terms and conditions consistent with normal commercial practices.

The following fees were paid and/or payable to the Responsible Entity and its related parties from the Trust and all subsidiaries during the period:

Management fees Property management fees Facility management fees Custodian fees Leasing fees Project management fees Due diligence acquisition fees	31 December 2019 $'000 31 December 2018 $'000 3,869 3,226 771 596 324 220 285 233 271 361 224 93 50 25
	5,794 4,754

Under the previous property management agreement, related party and external agent property management fees were billed and paid directly by the Trust. The revised agreement provides that Centuria Property Services Pty Limited ('CPS') as the manager, will pay all external agent property management fees on behalf of the Trust, and will recover these costs from the Trust as part of their billing process. As a result of this change, property management fees are higher compared to the prior period given it includes both external agent and related party property management fees.

All transactions with related parties are conducted on arms-length commercial terms and conditions. From time to time Centuria Property Funds No. 2 Limited, its directors or its director-related entities may buy or sell units in the Trust. These transactions are on the same terms and conditions as those entered into by other Trust investors.

Units in the Trust held by related parties

At 31 December 2019, the following related parties of the Responsible Entity hold units in the Trust:

31 December 2019 Centuria Capital No. 2 Industrial Fund Centuria Capital No. 5 Fund Centuria Property Funds No. 2 Limited Centuria Growth Bond Fund Centuria Balanced Fund 30 June 2019 Centuria Capital No. 2 Industrial Fund Centuria Capital No. 5 Fund Centuria Property Funds No. 2 Limited Centuria Growth Bond Fund Centuria Balanced Fund	Closing units held Closing interest held 48,898,176 14.09% 16,999,400 4.90% 2,181,086 0.63% 704,725 0.20% 382,501 0.11%
	69,165,888 19.93%
	45,136,934 16.67% 16,999,400 6.28% 2,181,086 0.81% 704,725 0.26% 382,501 0.14%
	65,404,646 24.16%

No other related parties of the Responsible Entity held units in the Trust.

Centuria Industrial REIT 20 31 December 2019

Other notes

D2 Related parties (continued)

Other transactions within the Trust

No director has entered into a material contract with the Trust since the end of the previous year and there were no material contracts involving directors’ interests subsisting at period end.

D3 Commitments

The Trust has committed to a 5,500 sqm expansion of 21 Jay St, Mount St John, Townsville QLD with a total cost capped at $14.0 million plus GST. Woolworths, the current tenant of this property, will reset the existing lease to 12 years from completion of the expansion.

D4 Events subsequent to reporting date

On 16 January 2020, the Trust settled on the acquisition of 24 West Link Place, Richlands, QLD for $8.0 million.

There are no other matters or circumstances which have arisen since the end of the period and the date of this report, in the opinion of the Responsible Entity, which significantly affect the operations of the Trust, the results of those operations, or the state of affairs of the Trust, in future financial years.

Centuria Industrial REIT 21 31 December 2019

Directors' declaration

For the half year ended 31 December 2019

The Directors of Centuria Property Funds No. 2 Limited, the Responsible Entity of Centuria Industrial REIT, declare that:

• (a) in the directors' opinion, there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they become due and payable;

• (b) the attached financial statements and notes thereto are in compliance with International Financial Reporting Standards, as stated in Note A1 to the financial statements; and

• (c) in the directors’ opinion, the attached financial statements and notes A1 to D4 are in accordance with the Corporations Act 2001, including compliance with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and giving a true and fair view of the Trust's financial position as at 31 December 2019 and of its performance for the half year ended on that date.

This declaration is made in accordance with a resolution of Directors.

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Darren Collins Director

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Matthew Hardy Director

Sydney 5 February 2020

Centuria Industrial REIT 22 31 December 2019

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Independent Auditor’s Review Report

To the unitholders of Centuria Industrial REIT

Conclusion

We have reviewed the accompanying Interim Financial Report of Centuria Industrial REIT (the group). Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the Interim Financial Report of Centuria Industrial REIT (the group) is not in accordance with the Corporations Act 2001 , including:

• [giving a true and fair view][of the ] Group’s financial position as at 31 December 2019 and of its performance for the half-year ended on that date; and

• [complying with ] [Australian Accounting ] Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

The Interim Financial Report comprises:

• [Consolidated interim statement of financial position ] as at 31 December 2019

• Consolidated interim statement of profit or loss and other comprehensive income, Consolidated interim statement of changes in equity and Consolidated interim statement of cash flows for the half-year ended on that date

• Notes A1 to D4 comprising a summary of significant accounting policies and other explanatory information

• [The Directors’ Declaration. ]

The Group comprises Centuria Industrial REIT and the entities it controlled at the half-year’s end or from time to time during the half-year.

The Interim Period is the 6 months ended on 31 December 2019.

Responsibilities of the Directors for the Interim Financial Report

The Directors of the Centuria Property Funds No.2 Limited (the Responsible Entity) are responsible for:

• the preparation of the Interim Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

• such internal control as the Directors determine is necessary to enable the preparation of the Interim Financial Report that is free from material misstatement, whether due to fraud or error.

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KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Auditor’s responsibility for the review of the Interim Financial Report

Our responsibility is to express a conclusion on the Interim Financial Report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the Interim Financial Report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 31 December 2019 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of Centuria Industrial REIT, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year Financial Report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

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KPMG

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Peter Zabaks

Partner

Sydney

5 February 2020

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