Business Description:
Commonwealth Property Office Fund (CPA) is an office sector-specific A-REIT which invests in central business districts and major suburban markets in Australia.

Strategy Analysis:
CPA invests in commercial office assets in markets throughout Australia. It aims to increase the value of its portfolio through a development and refurbishment program, with the possibility of opportunistic acquisitions. CPA expects key markets to stabilise and improve over coming years. A high proportion of leases with fixed reviews support rental growth with upside from improving occupancy. Exposure to Sydney and Melbourne is high and both markets face headwinds from weakening white collar employment growth but limited new supply is supportive and means that a resurgence of demand should see it rebound strongly. CPA has development projects in Sydney, Melbourne and Brisbane. Recent sales and equity issues have the trust in good financial health, allowing it to explore growth options if desired. Commonwealth Property Office Fund reported NPAT up 73% to $197.7m for the year ended 30 June 2011. The Trust generated a profit, reflecting a general improvement in underlying office market fundamentals, and the execution of successful capital management and strategic asset initiatives. Revenues from ordinary activities were $373.2m, up 26% from last year. Diluted EPS was 8.70 cents compared to 5.78 cents last year. Net operating cash flow was $167.2m compared to $143.9m last year. The final dividend declared was 2.75 cents, taking the full year dividend to 5.5 cents compared with 5.55 cents last year. The Fund's focus for the year ahead will remain on reducing existing vacancies and upcoming expiries within the portfolio, and securing tenant pre-commitments for key developments as the Fund takes advantage of the expected stronger office market fundamentals.