Centuria picks Sundrop Farms in $70m agriculture play

The purchase of SA’s largest tomato glasshouse assets continues the property fund manager’s strategy of diversifying holdings away from the under-pressure office sector.

The 246-hectare Port Augusta SA site is the second agri asset for Centuria.

Property funds house Centuria Capital Group has lifted its agricultural holdings to more than $400m with the purchase of one of South Australia’s largest glasshouse assets, Sundrop Farms, for $70m.

It picked up the asset from Morrison & Co Growth Infrastructure Fund with the move lifting the manager’s agricultural empire to about $421m, and diversifying its holdings away from the now under-pressure office sector.

Morrison & Co bought Sundrop Farms from private equity giant KKR in May 2019 and it will sell both the operations and the property asset to Centuria. The manager bought the operations separately and plans to run the tomato glasshouse for a short period.

Rural real estate has traded at a rapid clip this year, with their incomes supported by high commodity and livestock prices.

A mix of wealthy private farmers and institutional players buying have kept the market active when other property sectors are quiet.

“Agricultural real estate throughout Australia continues to experience strong tailwinds resulting from increasing global demand for Australian agricultural products and technological innovations,” Centuria joint chief executive Jason Huljich said.

Mr Huljich said the company was partnering with Sundrop, which had developed world-first, integrated sustainable farming technology, resulting in more predictable volumes of produce arising from the protected nature of its farming activities.

The glasshouse focuses on sustainable practices for tomato growing.

“Centuria will continue to partner with experienced operators with a strong track record in agricultural innovation and this is one of a series of agricultural acquisitions we intend to deliver throughout fiscal 2023 and beyond, with the aim of growing CAF (Centuria Agriculture Fund) into one of Australia’s largest unlisted, sector-specific agriculture funds,” he said.

The Centuria-run Centuria Agriculture Fund will hold the property, which has strong leasing covenants, including a 20 year triple-net lease to Sundrop Farms with CPI-linked annual rental reviews.

Sundrop Farms will be the second agricultural asset for the open-ended, unlisted Centuria Agriculture Fund.

In June, Centuria secured CAF’s seed asset – a $177m glasshouse estate in Warragul, Victoria, and following the acquisition, the fund will have a near 20-year lease term.

The 246-hectare Port Augusta SA site has four five-hectare glasshouses, a 1.4-megalitre reverse osmosis plant, a 1ML desalination plant that processes up to 600ML of seawater annually, a 25ML storage dam, a packaging warehouse and a 12.5-hectare solar system, which makes sustainable onsite renewable energy.

The sustainability features are a key drawcard for investors in property and agriculture.