The Commonwealth Property Office Fund (CPA) has reported a 43 per cent fall in net profit to $145.4 million for the year, in what it said was a tough market, but the result was affected by property revaluations.
The more accurate earnings measure for real estate investment trusts recommended by the Property Council of Australia is funds from operations, with CPA on this measure rising 3.1 per cent to $207 million, up from $200.8 million.
Analysts said the FFO accounting measure was a new global standard recommended by the PCA with most REITs undertaking to report on that basis.
CPA's annual distribution was 6.55¢ per unit for the full year, up 7.6 per cent on the previous year, and reflected a 74.3 per cent payout ratio of FFO. This was in line with expectations and the dividend will be paid on August 28.
CPA, the subject of a proposed internalisation by its manager, the Commonwealth Bank, forecast an unchanged distribution of 6.55¢ for the 2014 year.
The managing director, property, at Colonial First State Global Asset Management, Angus McNaughton, said on the internalisation that "given it's a matter for the independent board committee and the robust governance controls in place ... it's difficult to answer any questions regarding the topic". He also declined to comment on the option DEXUS Property holds over 14.9 per cent of CPA.
The fund manager of CPA, Charles Moore, said the past year had been one of "execution" with the acquisition of a further 25 per cent in the Sydney CBD office building at 201 Kent Street for $77.3 million, taking its ownership to 50 per cent.
On the leasing front, the fund said it had signed a contract for 15,000 square metres at 385 Bourke Street, Melbourne, which agents speculated was for Tru Energy/Energy Australia, boosting the fund's national portfolio to 96.2 per cent occupancy.
In Sydney, CPA was in discussions for some of the 12,000 square metres of empty space at Grosvenor Place and had signed a lease with lawyers Ashurst at 5 Martin Place.
"Notwithstanding a solid 2013 financial year performance, we remain cautious about the year ahead," Mr Moore said. "While signs are emerging that the global economic environment is improving, this is yet to translate into business confidence which, upon its return, will drive stronger office leasing demand in many of the major Australian office markets. We are encouraged by positive indicators such as rising global stockmarkets, a lower Australian dollar and stabilising business confidence."