Why this ASX REIT is a retiree's dream for 2027

I believe retirees should focus on ASX dividend shares that can provide stability and a good level of passive income. Real estate investment trusts (REITS) can provide that sort of resilience.

But, I wouldn't invest in just any REIT expecting reliability. Some sectors, like offices, face headwinds from working from home (and AI), while neighbourhood shopping centres face competition from online shopping.

However, I think it's a very different proposition from the industrial property space with Centuria Industrial REIT (ASX: CIP).

Growing distribution

REITs typically have some debt on their balance sheets. With how much interest rates have risen, that's a significant headwind for ASX REITs.

But the Centuria Industrial REIT is performing so well that it delivered payout growth to investors in FY26 and has provided guidance for growth in FY27.

The business grew its distribution by 3% in FY26 and has provided guidance that it will increase the payout by another 3%. Considering the current headwinds, I think that's a solid growth rate and helps investors maintain the value of their income amid a higher inflation environment.

Good distribution yield

Not only is the dividend growth appealing, but the distribution yield is also a compelling attribute of the ASX REIT.

It expects to pay an annual distribution of 17.3 cents per unit in FY27 (through quarterly payments).

At the time of writing, that translates into a distribution yield of 6.1%. Considering that's still noticeably above what term deposits offer, I think investors will be attracted by the size of the payout.

Big asset discount

If I wanted to go and buy a portfolio of commercial properties myself, I'd need to pay the asking price set by the commercial property owners at market valuations.

But with Centuria Industrial REIT, we can buy into the ASX REIT at a significant discount to the property business's supposed net value.

The business reported that its net tangible assets (NTA) per unit was $4.01 at 30 June 2026. That means that, at the time of writing, it's trading at a 30% discount, which is one of the reasons its yield is so attractive.

When interest rates eventually start to come down again, I expect this NTA discount to close, so now is an appealing time to invest for retirees.

Rising rent

A key driver of the business's success is strong rental income growth.

There are multiple drivers increasing the value of industrial land, such as distribution warehouses (with e-commerce), data centres and refrigerated facilities for food and medicine. All of these help increase the rental potential of the property.

In the first quarter of FY27, the business reaffirmed it expects its funds from operations (FFO – the net rental profit) to rise by up to 5.5%, which is excellent, in my view.

Impressively, its re-leasing spreads were 31% in the first quarter, meaning its new rental contracts are generating 31% more rent than the old contract for the same properties.

The business said its portfolio is still 17% under-rented on average, providing "a significant runway for future earnings growth beyond FY27".

Overall, there's a lot to like about this REIT for retirees. It's one of the ASX shares I'm close to buying next.

The post Why this ASX REIT is a retiree's dream for 2027 appeared first on The Motley Fool Australia.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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