CPA profit tumbles in FY

The REIT says it faces a challenging office market after announcing a sharp fall in full-year profit.

The Commonwealth Property Office Fund says it faces short-term challenges in a weaker officer market after posting a steep fall in full-year net profit. 

Net profit dropped to $145.4 million, from $256.4 million in the prior year, largely on a downward revaluation of $40.1 million on properties and associates.

Funds from operations (FFO), however, rose 3.1% to $207 million from the same time last year. 

The group achieved its distribution guidance of 6.55 cent per unit and has tipped the same payout for the current year. It comes as CPA assesses a a proposal from Commonwealth Bank of Australia to internalise its management.

Chairman Richard Haddock said the group faced short-term leasing challenges, particularly in Melbourne, and remained cautious about business sentiment (see David Gilmour's A-REITs find favour, but what about those vacancy rates?).

"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," Mr Haddock said.

"We are, however, encouraged by some positive economic indicators such as rising global stock markets, a lower Australian dollar and stabilising business confidence."

CPA's net property income increased 5.1% in the period to $255.9 million.

Shares in the company fell 1.3% to $1.18 at lunch.

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