Centuria to put rocket under listed property funds

Centuria wants to grow two property funds which specialise in logistics and offices, after strong first-half performances.

Centuria Capital Group CEOs John McBain and Jason Huljich. Picture: Hollie Adams

Funds manager Centuria Capital has flagged plans to grow two ­listed property funds specialising in the logistics and office sectors after they turned in strong first-half performances.

The trusts — the Centuria Metropolitan REIT and the Centuria Industrial REIT — are riding the wave of interest in the sectors and, after a series of takeovers, are pitched as the only pure-play listed trusts in their areas.

Centuria Capital last week signalled it was on the road to managing a $10bn property empire after striking a deal to take over one of New Zealand’s largest listed real estate funds management platforms, Augusta Capital Limited, for $NZ180m ($174m).

The deal will result in the ­aggressive platform boosting ­assets under management by $1.9bn to $9.2bn, with Centuria’s joint chief executives, John McBain and Jason Huljich, indicating that more properties are in their sights.

Centuria Metropolitan’s portfolio hit $2.1bn after it struck a ­series of property purchases in a busy half culminating in a December raising.

It delivered funds from operations of 9.6c per unit, in line with guidance, and reiterated fiscal 2020 FFO guidance of 19c per unit, with distribution guidance of 17.8c per unit. The office fund completed 224 leasing transactions over 28,721sq m in the half and faces expiry over just 3.7 per cent of space this financial year and 12 per cent in the next year.

Centuria Metropolitan fund manager Grant Nichols said the trust executed several significant leasing and capital transactions, enhancing its asset quality, tenant covenants and lease expiry.

“Along with delivering funds from operation and distributions in line with guidance, CMA has generated an 8c-per-unit increase in net tangible assets while maintaining a solid capital position, with gearing of 33.2 per cent and significant debt covenant headroom and undrawn debt capacity,” Mr Nichols said.

The office fund snapped up $636.5m worth of buildings, ­including a stake in 8 Central ­Avenue in Sydney’s South ­Eveleigh, William Square in Perth and Canberra’s Nishi complex.

“We continue to assess select transaction opportunities that will complement the fund’s strategy and further improve the portfolio,” Mr Nichols said.

He added that the outlook for Australian office markets was solid, with demand supported by low or falling vacancy rates evident in most major markets, coupled with a shift to lower interest rates throughout 2019.

Centuria Industrial generated FFO per unit of 9.9c and also ­reiterated its fiscal 2020 FFO guidance of 19.6-19.9c per unit and ­distribution guidance of 18.7c per unit.

The portfolio jumped to $1.6bn as the fund bought $300m and fund manager Jesse Curtis said ­acquisitions and portfolio leasing drove the strong first-half ­result.

The fund is being positioned as the country’s largest domestic pure-play industrial REIT and is focused on assets in infill markets. Centuria said the fund’s balance sheet “remains well positioned to capitalise on future growth initiatives” to add to its 48 assets.

The fund agreed leases for more than 63,300sq m, representing 6.8 per cent of the portfolio, as key occupiers sought more space. It significantly increased its weighted average lease expiry to 7.1 years, underpinned by the ­purchase of ultra-long leases to ­Arnott’s.

The fund also kicked off development on a Townsville asset that will have a new 12-year lease to Woolworth on completion and repositioning other properties.