Centuria acquires key assets for $150 million; announces capital raising
Centuria Metropolitan REIT purchases Perth and Melbourne commercial properties as part of growth strategy
Centuria Property Funds today announced that its listed office fund, Centuria Metropolitan REIT (ASX: CMA), has made three major acquisitions in Perth and Melbourne. The acquisitions mark Centuria’s first foray into the Perth office market, and strengthen CMA’s lead as the largest pure-play metropolitan fund manager in the market.
In Perth, Centuria has acquired two new commercial assets: The Hatch Building at 144 Sterling Street, and 42-46 Colin Street, for a combined sum of $91.8 million. Combined with Centuria’s acquisition of the Target Head Office at Williams Landing late last month, the deals are valued at $150 million, and will increase Centuria Capital Group’s (ASX: CNI) entire funds under management to $4.15 billion.
CMA Trust Manager, Nicholas Blake, said the group is always looking for opportunities that will benefit from CMA’s active management approach and thereby deliver strong returns to shareholders.
“We are asset-driven investors, and have purchased these properties on the basis that they are highly complementary to CMA’s current portfolio and our active management strategy. Centuria’s approach is to pay the fee and to take over the management from the agent, freeing them up to work on the next property, which enables us to generate income returns alongside the potential for capital growth.
“The two Perth assets are 100% leased, with the major occupiers being WA Police, Insurance Australia Group Ltd, and consulting firm Hatch. This diverse range of high-quality tenants, from government-owned and listed companies to international firms, means shareholders can feel confident in securing attractive and stable yield. Looking to Victoria, the new Target HQ at Williams Landing will be 100% leased and stands to benefit as the Williams Landing population grows, alongside ongoing infrastructure improvements in the area.”
The combined WALE of the three properties is 6.5 years and their fixed rental reviews sit between 3.25% and 3.75%.
The acquisitions have been partially funded by a $90 million equity raising, which will see CMA extend its lead as the market’s largest listed metropolitan market office fund, and the leading specialist manager within the space. The REIT’s property portfolio will increase in value by 25% to $760 million. It will see the trust’s market capitalisation increase from approximately $430 million to more than $520 million, improving its potential for S&P/ASX300 index inclusion (based on securities prices at 12 July 2017).
In addition, CMA has entered exclusive due diligence to acquire a development site for the construction of an A-Grade commercial office building in South West Sydney, expected to be valued at around $75 million.
Mr Blake said the Perth metro market was beginning to show excellent fundamentals, while AREITs in general are proving attractive to risk-averse investors, informing his approach and pipeline of deals.
“At CMA, we believe a truly quality property can provide unitholders with returns and yields over time in any market. CMA’s west-coast expansion, in line with our asset-driven and active management approach, will see shareholders benefit from the significant east/west pricing disconnect in the office market.
“Looking to AREITs in general, the transparency and certainty of earnings from solid property portfolios are perennially attractive to investors, particularly in light of continuing uncertainty in the global markets. We are confident these latest additions to our portfolio will meet investor appetite, via a complementary mix of income streams from long-term leases, high-quality tenants and the potential for value creation via CMA’s active management.”
 $150M asset valuation is on completion of the construction of the Target Head Office, Williams Landing, VIC, expected in Q1 2019 ($2.9M initial payment, with a $55.3M final payment on completion).