Centuria Capital Group today announced its 2021 Financial Year end results, which revealed the external funds manager doubled (+98%) its assets under management to $17.4billion, driven by significant direct real estate transactions as well as expansion via corporate acquisition of New Zealand’s Augusta Capital, Perth-based Primewest and a 50% investment in debt property fund manager, Bass Capital.
Centuria also more than doubled is property platform to $16.5billion. Most significantly, its unlisted funds increased 175% to $11billion and the listed platform grew 37% to $5.5billion.
The Group collectively acquired 50 assets worth $2.5billion, eclipsing the prior period by 108% ($1.2billion, FY20). Record leasing activity during FY21 totalled 437,000sqm across 215 transaction, which accounted for 17% of the Group’s GLA. The Australasian business now manages 340 assets with 2,280 tenants.
Importantly, Centuria’s development division grew to a $1.9 billion development pipeline during FY21, providing its listed and unlisted funds with modern, sustainable A-Grade assets. This includes delivering 41,500sqm of new real estate worth $127million during FY21 and the division has a further $1.15billion in committed projects and $758million in pipeline projects.
Jason Huljich, Centuria Joint CEO, said, “FY21 was a record year of growth across our listed and unlisted platforms. Decentralised office, industrial and healthcare remain the backbone of our real estate platform, however, we have further diversified our asset classes, expanding into three compelling new sectors – Agriculture, Large Format Retail and Daily Needs Retail, resulting from our merger with Primewest.
“During the financial year, the strength of our in-house transactional capabilities was demonstrated with record acquisitions and leasing, delivering on our development pipeline and active asset management, exemplified with platform rent collection of 98.8%.
“It’s has been a transformational year for our real estate division, both in terms of scale and value created. We remain focused on sourcing quality real estate investment opportunities, utilising our deep real estate expertise and leveraging our platform to create value for our investors.”
Additionally, Centuria has a collective $2.3 billion in institutional mandates across four funds, which it have yet to be fully satisfied. These mandates extend to healthcare, office and daily needs retail.
Centuria delivered a 62% 12-month total shareholder return, outperforming the S&P/ASX 200 A-REIT Index (33.2%). More specifically, it achieved a Compound Average Growth Rate (CAGR) of 46% throughout the past five years.
John McBain, Centuria Joint CEO, said “FY21 has been a period of continued, strong performance particularly in view of persisting COVID-19 conditions. Real estate and corporate acquisitions substantially increased AUM, distribution capacity and earnings momentum. These growth initiatives aided Centuria’s increasing market presence, culminating in Centuria Capital’s S&P/ASX 200 Index inclusion.
“In particular, each of the three businesses we merged with throughout FY21 brings its own set of opportunities, which contribute to the Group’s earnings profile, provide access to new sectors as well as distribution channels and markets. Importantly, these mergers provide us with quality, talented staff that are highly experienced in their field. The welcome additions of Primewest, Centuria New Zealand and Centuria Bass Credit add substantial diversity to our geographic footprint, capability and investment opportunities.
“Centuria will continue to grow its platform throughout FY22 and beyond to consolidate its position as a leading Australasian real estate funds manager.”
Throughout FY21, Centuria exceeded its Operating Earnings Per Security (EPS) guidance by 9.1%, delivering 12.0 cents per security (cps) while distributions increased 17.6% to 10.0cps.
Centuria has provided FY22 Operating EPS guidance of 13.2cps and distribution guidance of 11.0cps
Centuria Capital was not on our Top Picks List however following the growth in FUM in 2021, and the potential increase in revenue to be delivered through the growth in the platform, we have now added the REIT to the list.
The REIT commenced the year with a security price of $1.79 against a NAV of $1.44 (24% premium to NAV) and closed the year at $2.78. The REIT provided a 10c distribution for FY21, equating to a 5.6% yield, which together with a 55% lift in unit price would provide investors with a total return of 61%.
Centuria are now well positioned with low gearing and strong cash reserves which the group will use to seed acquisitions and develop new fund opportunities. The Group also has a Development Pipeline which will add further value to the Group.
Key financial and operational highlights for the period are:
Financial highlights:
- Operating earnings of $70.2 million, or 12 cpu with no change in cpu on the prior corresponding period (pcp)
- Statutory profit of $149.6 million, up from $22.1m in pcp
- Distributions of 10 cpu, up 3.1% on pcp
- NAV of $1.92, up 55% from $1.44 at 30 June 2020
Operating highlights:
- Gross acquisitions: $2.5bn, 50 assets
- Record Leasing Activity of 437,000sqm across 215 transactions
- FY21 valuation increase: $1.5bn
- $0.4bn completion of Centuria’s two largest single asset funds – Visy (NZ), Footscray (AU)
- $2.3bn of institutional mandates, $1.2bn executed to date
- FTSE EPRA Nareit Index: COF well positioned for potential inclusion
- S&P/ASX200 Index inclusion (July 2021)
- GICS re-classification to Diversified Real Estate (September 2020)
- MSCI small cap index inclusion (November 2020)
Growth
As mentioned above, Centuria more than doubled is property platform to $16.5billion, mostly through its unlisted funds, which increased 175% to $11billion, with the listed platform growing 37% to $5.5billion. This includes
- Acquisitions across the Group + $2.5bn
- Improvements in valuations + $1.5bn
- The takeover of Primewest + $5.6bn
- The acquisition of Bass Capital $0.2bn
- Reductions in AUM of Vital Harvest (-$0.3bn)
- Divestments (-$0.4bn)
The Group also achieved record leasing activity during FY21 totalled 437,000sqm across 215 transaction, which accounted for 17% of the Group’s GLA. The Australasian business now manages 340 assets with 2,280 tenants.
Strategy
Centuria will continue to leverage platforms and access to capital to grow funds under management with a strong focus on earnings growth.
In examining the markets, Centuria believe;
- Industrial and healthcare property markets outperformance expected to continue into FY22 and beyond
- De-centralised office portfolios underpinned by government, global and ASX tenants have maintained strong cashflow
- Continued strong investor demand for unlisted funds with high quality income streams
- Equity markets – wide consensus that AREITs remain favoured in FY22
- Strong interest in Large Format Retail and Agriculture sectors expected
- Positive outlook for NZ commercial, industrial and healthcare markets through FY22
- Tight property debt markets offer potential to grow Centuria Bass book
With this background, Centuria will seek to
- Build out our six major real estate asset classes – healthcare, large format retail, agriculture, office, industrial and daily needs retail
- Utilise expanded Capital Transactions team to identify and execute on opportunities
- Service and further unleash potential of our market-leading retail investor base from across WA, eastern states and NZ
- Grow high-fee unlisted platform in Australia and NZ at parity – (over 60% of total AUM)
- Maintain strong A-REIT presence (COF/CIP market cap c.$3.3billion) – potential to initiate new vehicle/s on basis of sector attractiveness, potential scalability and market suitability
- Growth through select corporate acquisitions where accretive
FY22 Guidance
The REIT reconfirms that based on information currently available and barring any unforeseen events or further COVID-19 impacts, FY22 Operating EPS guidance of growth of no less than 10% over FY21 Operating EPS of 12 cents and a distribution of 11 cents. This equates to a forecast FY22 distribution yield of 3.5% based on the closing price as at 11th August 2021 of $3.12.
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