Welcome to our Autumn 2021 Newsletter
Throughout the March Quarter and into the final quarter of FY21, Centuria has undertaken significant real estate transactions, leasing transactions and corporate transactions. Joint CEO, John McBain, provides an overview of Centuria’s M&A activity – including our proposed merger with Primewest (ASX: PWG). Fellow Joint CEO, Jason Huljich, talks with our new Joint Venture partner, Bass Capital – a real estate debt fund provider. This edition also provides an overview of our new Listed Notes proposition, an update from our REITs’ Fund Managers and insights into some of our recent ESG initiatives. Our video articles also include text transcripts or subtitles for those who prefer to read our news.
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Centuria Management Team
Read Corporate News Article
Throughout the March quarter, Centuria continued to grow and we’ve started the final quarter of the 2021 Financial Year with some significant Corporate activity.
This includes the proposed merger with real estate fund manager, Primewest, which if successful, will see Centuria’s assets under management grow to $15.5 billion, a 52% increase.
This merger will be one of the largest real estate corporate transactions in this calendar year to date.
Primewest’s Board unanimously supports the proposed merger and recommends their securityholders accept Centuria’s offer. The Merged Group is well placed for inclusion in the ASX 200 index with an estimated market capitalisation of $2.2 billion.
The Merger will also increase Centuria’s exposure in Western Australia and allow expansion into new sectors including “daily-needs retail,” “large format retail” and investment-grade agriculture.
In mid-May, Centuria will formally lodge its offer to Primewest securityholders.
We also recently announced our 50% acquisition of real estate debt fund provider, Bass Capital, which has created a joint venture– Centuria Bass Capital. My fellow CEO, Jason Huljich, sat down with Bass’ founding partners, Nick Goh and Giles Borten, to talk about the new JV in the video below.
Finally, I would like to highlight the successful launch of our Listed Notes, which have begun trading on the ASX – Simon Holt our Chief Financial Officer and I explain the notes and how clients can invest in them in more detail below.
It’s been my pleasure to report Centuria’s successes throughout the 2021 calendar year to date. We are delivering on our dual strategy to expand through both real estate acquisitions and corporate acquisitions and I look forward to updating you further on our FY21 year end results.
Centuria Bass Capital
Centuria has secured a 50% investment in real estate debt fund provider, Bass Capital. Jason Huljich caught up with founding partners, Nicholas Goh and Giles Borten, to discuss the new Joint Venture.
In late March we announced our intentions to raise additional debt through a Listed Notes offer and we’re pleased to say that from 21 April 2021 these Notes began trading successfully on the ASX.
Read Listed Notes Article
In late March we announced our intentions to raise additional debt through a Listed Note offer and we’re pleased to say that from 21 April 2021 these Notes began trading successfully on the ASX.
We were overwhelmed by the appetite for this investment product and the support for our company.
Initially, we were targeting a $100m issue but investor appetite significantly surpassed this target with close to $350m worth of demand.
As a result, we upsized the offer to $190m, which allowed us to retire some more expensive wholesale notes with significant proceeds still available to help us continue to grow the business
Our Listed Notes are identical in structure to our existing Wholesale Notes. Similar to a corporate loan, Noteholders receive quarterly interest payments on their investment. The amount they lend, is subject to the amount of Notes they acquire. Like equity investors buy shares, debt investors buy Notes or Bonds. In this case, our Notes were issued at $100 each.
This is the first time we’ve offered Listed Notes, but Centuria has a strong track record in successfully issuing Wholesale, or unlisted Notes over the past five years.
Centuria made the decision to offer this type of product to provide our investors with another way to invest and support the Group – in this case allowing every day investors to access this type of liquid investment.
We believe the Listed Notes’ success can be attributed to Centuria’s growth and our business evolution as well as the product’s structure and fair pricing.
The Interest Rate for the first Interest Period is approximately 4.29% per annum, which will be paid on 20 July 2021. The Listed Notes provide a floating rate and quarterly interest payments.
The Listed Notes further diversify Centuria’s sources of capital and provide an alternative listed investment product to our clients. Funds raised from the Listed Notes have so far enabled us to repay $73m of existing Wholesale Notes.
This subsequently extended our debt duration while bolstering the Group’s cash reserves enabling the business to continue co-investment in our listed REITs and unlisted funds, as well as providing further debt capital for expansion.
Centuria recommends prospective investors should read and consider the C2FAH’s Prospectus in full and obtain professional advice before deciding whether to acquire the Notes.
For further information, visit our Centuria Capital No.2 Fund (ASX:C2FHA) page.
CIP Quarterly Update
Read CIP Quarterly Update Article
Centuria Industrial REIT’s Fund Manager, Jesse Curtis, explained that during the FY21 March Quarter the REIT acquired a $27 million distribution centre in Arndell Park, which is a key infill industrial market in Central West Sydney.
The 9,400 square metre modern industrial property is fully let to civil and construction infrastructure supplier, Jaybro, and is just a stone’s throw away from our existing asset in Arndell Park.
This property exemplifies the high-quality acquisitions the REIT secured throughout the quarter. CIP secured four industrial assets for $90 million during Q3, which brings total transactions for FY21 to $784 million.
CIP’s portfolio now includes 62 industrial properties worth $2.6 billion.
Complementing portfolio growth is a $196 million valuation uplift or 8.6% increase. This is based on independent valuations on 58 of CIP’s now 62 properties.
CIP’s portfolio Weighted Average Capitalisation Rate firmed by 47 basis points to 4.95%. Pro-forma Net Tangible Assets increased from $2.99 to $3.32 per unit.
The REIT has also been busy on the leasing front, securing more than 56,000 square metres of space, which increased portfolio occupancy to nearly 99%, and maintain a 9.7 year weighted average lease expiry.
A scarcity of investment grade industrial stock means CIP has implemented several value-add initiatives to existing asset, delivering great outcomes for our investors.
- Construction of a 10,400 square metre industrial facility in Bundamba Queensland, due for practical completion next quarter.
- Completing refurbishment works and a successful leasing campaign, for its Hemmant Queensland asset, which resulted in a 50% valuation uplift.
- Commencing repositioning of the recently acquired Bella Vista NSW asset to leverage its ‘last mile’ location.
CIP has delivered strong results for the quarter, while holding a healthy balance sheet that continues to provide headroom to pursue opportunistic acquisitions
Funds From Operation (FFO) guidance was reaffirmed at no less than 17.6cpu and distribution guidance of 17.0cpu.
COF Quarterly Update
Read COF Quarterly Update Article
Centuria Office REIT’s Fund Manager, Grant Nichols, commented that during the FY21 March Quarter, the REIT experienced strong leasing activity resulting in the tightening of its guidance range.
Approximately 16,500 sqm of new leases and tenant renewals were secured across 12 separate deals. This represents 5.8% of portfolio Net Lettable Area. Subsequently, COF’s Funds From Operation (FFO) guidance tightened to between 19.7 and 19.9 cpu, and its FY21 distribution guidance was reiterated at 16.5cpu. This represents a distribution yield of almost 8% (as at 20 April 2021).
Some of our key leasing deals include:
- A new lease over 4,900 sqm at Robina Town Centre in Queensland
- c.2,800 sqm leased at Grenfell Street in Adelaide, which increased building occupancy to 100%,
- And more than 1,800 sqm was leased at 100 Brookes St in Fortitude Valley, which also increased that building’s occupancy to 100%.
Across the entire REIT’s portfolio, occupancy rose to 92.3%.
Leasing activity continues to improve as more organisations return to the office, as it is becoming increasingly apparent that many organisations recognise the productivity results from in-person collaboration cannot be replicated virtually, and the detrimental impact employee isolation has on an organisation’s culture and staff wellbeing.
COF is generating solid performance across its portfolio and has achieved positive leasing outcomes throughout FY21 to date. With Australia experiencing a strong economic recovery, labour markets could continue to surprise on the upside, which would continue to improve tenant demand for office space throughout the nation.