ESR considers sale of Centuria stake

29 September 2019

The emergence last year of ESR in the industrial property market in Australia was widely proclaimed to be the start of a major competitor to Goodman, however progress to date has been challenging.


ESR successfully completed the $723m acquisition and privitisation of the Propertyllink REIT in early 2019 and acquired the Commercial & Industrial Property in a $102.5m deal with Charter Hall and its other co-owners giving ESR a ready-made development platform in Australia.


In securing Propertylink, ESR also acquired a strategic stake in Centuria Capital to help leverage Centuria who held a 19.5% interest in Propertylink. At the same time, Propertylink launched an unsuccessful takeover the whole of the Centuria Industrial Fund securing a 12% stake in the process.


The battlelines were drawn and the parties ultimately called a truce with Centuria selling its interest in Propertylink to ESR, no doubt in return for commitments from ESR in relation to CIP and CNI.


Those commitments likely included the sale of the Propertylink interests in CIP which traded in June 2019 (about 1 week after the Propertylink ESR settlement) at around 3.02cents per share (vs 2.99 per share at acquisition).


Having digested those deals, ESR is now looking to redeploy it's capital out of Centuria Capital. ESR's stake has likely been diluted since its' original holding as a result of subsequent capital raisings but their position in Centuria is now being offered to the market.


Centuria has a market capitalisation of approx $936m and generates revenues from $6.5bn of assets under management in its listed and unlisted funds, via it bonds business and from co-investments. In the year ending June 2019, it grew funds under management by 26% and achieved a total securityholder return of 34%.


The group has one of the few pure play REITs in the Industrial sector and also in the Office sector and has recently launched a new unlisted Healthcare fund.


One of ESR's competitors in the Australian market has been Logo, which has been mooted as a possible contender for the Centuria stake, however the business as a more diversified business, Centuria is more likely to suit a large offshore diversified investment group seeking immediate exposure to Australia as opposed to anyone seeking to establish a platform.