Centuria chases new real estate fields as interest rates bite
Healthcare, farms and debt could hold up even as property deal-making slows, according to Centuria, which boasts a $20bn property empire.
Property funds house Centuria has flagged it will switch into recession proof areas including healthcare, agriculture and real estate debt to expand its $20bn property empire.
Listed real estate funds managers have come under pressure due to the fall off in deal-making in traditional sectors including offices, large shopping centres, and even the once hot warehouse sector.
But the company believes it will be able to pull through and keep expanding into sectors which are less hit by rising rates and lower consumer confidence.
Joint chief executives John McBain and Jason Huljich said the company would grow strongly in the alternative healthcare, agriculture and non-bank lending sectors, “which are receiving strong investor demand”.
Centuria will also chase core and value-add real estate opportunities across our traditional asset classes as opportunities are thrown up by any dislocation.
Although the company’s listed funds have been hit on the share market the manager also has a large business with institutional clients.
Centuria rode last year’s commercial property boom and acquired $3.1bn of real estate and grew its funds business and it hit its upgraded operating earnings per security guidance of 14.5c a security.
The company will pay a distribution per security of 11.0c per security, a lift of 10 per cent per security, and it gave flat earnings guidance but will lift the distribution by 5.4 per cent this year.
Despite its share price fall off this year, Centuria said its balance sheet it set up to ensure maximum flexibility “together with the capacity to take opportunities it believes will become available in the near term whilst maintaining strong financial covenant ratios”.
Mr McBain said the company’s run of corporate acquisitions in previous years had significantly increased the size of the platform with correspondingly high increases in both management fee revenues and transaction fee revenues.
“These acquisitions allowed the group to diversify across several additional asset classes as well as the West Australian and New Zealand geographies, delivering strong growth. This has occurred despite the backdrop of rising inflation, Covid lockdowns and geopolitical events,” he said.
“This diversification has provided new revenues streams in alternative asset classes such as healthcare and agriculture as well as expanding our traditional asset classes to include daily needs retail and large format retail.”
Morgan Stanley estimates there are $179m of latent underlying performance fees are estimated to be on the platform, although the crystallisation period, and sensitivity to cap rate/asset valuation moves, are not disclosed.
“Our positive thesis on Centuria is somewhat driven by its alternative property strategy, and Centuria is looking to double its agricultural assets under management,” the bank‘s analysts said.
This would see hit its agriculture holdings hit $800m and health rise up to about $2bn of holdings.
JPMorgan analysts said Centuria’s reported profit after tax of $114.5m, was below its expectations, and net tangible assets were down 8.5 per cent to $1.75, given a $167m fair value loss on investments and derivatives.
Centuria shares were up 3.2 per cent to $1.92 in a flat market around lunchtime.
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