Centuria Grows its Agricultural Portfolio to over $0.4bn

15 December 2022

The Centuria Agriculture Fund (CAF or Fund) has secured one of South Australia’s largest glasshouse assets, Sundrop Farms for $70 million from the Morrison & Co Growth Infrastructure Fund, bringing Centuria’s total agriculture assets under management (AUM) to $421 million.

The off-market acquisition is supported by a lease covenants including a 20 year triple-net lease to Sundrop Farms with CPI-linked annual rental reviews. The facility was established to grow about 17,000 tonnes of truss tomatoes to supply a 10-year contract with Coles Australia.

Sundrop Farms will be the second agriculture asset for the open-ended, unlisted Centuria Agriculture Fund (CAF). In June 2022, Centuria secured CAF’s seed asset – a $177 million glasshouse estate in Warragul, Victoria and following the acquisition, CAF’s portfolio will have a 19.4-year WALE with 100% occupancy and $247 million AUM.

The Centuria fund has acquired the entire 246-hectare Port Augusta SA site including the four five-hectare glasshouses, a 1.4-megalitre (ML) 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 Concentrated Solar Energy System (CSP), which creates sustainable onsite renewable energy. The CSP generates 30,000 megawatts of heating, 45,700 kwh of electricity and facilitates seawater desalination. These ESG credentials resonate well with Centuria’s ongoing sustainability overlay within CAF.

The total facility cost about $200 million to build, with private equity firm Kohlberg, Kravis and Roberts (KKR) investing $100 million back in 2014. Morrison & Co acquired the asset in 2019 via a Fund which held a cornerstone investment of around $150 million from the CEFC. Today, Morrison & Co, confirmed that in addition to Centuria paying $70m for the property, Centuria have also paid an undisclosed sum for the operating business. According to sources, the operating business will be “warehoused” by Centuria until capital for a new operating Fund is established or the venture is sold.

David McKinnon, Investment Director at Morrison & Co, said, “We acquired the business in 2019 recognising its potential to deliver a step-change in the way food is produced. We’re proud to have worked with management over the years to turn the business into a mature and profitable one, being a key regional employer, and leader in sustainable food production.”

Centuria’s acquisition of the operating business places the Group as both Landlord and Tenant in the deal. Centuria may need to look to their existing relationship with Flavorite at Warragul to manage this exposure.

Jason Huljich, Centuria Joint CEO, said, “We are pleased to partner with Sundrop who has developed world-first, integrated sustainable farming technology, resulting in more predictable volumes of produce arising from the protected nature of its farming activities. 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 FY23 and beyond, with the aim of growing CAF into one of Australia’s largest unlisted, sector-specific agriculture funds.”

“Agricultural real estate throughout Australia continues to experience strong tailwinds resulting from increasing global demand for Australian Agricultural products and technological innovations. This acquisition is another clear example of Centuria executing against its strategy of providing our unlisted investors with access to high quality investment opportunities in the fragmented, agriculture sector and adding a new highly sought-after funds management vertical to the Centuria platform.”