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Centuria reports strong growth across alternatives

By Rhea Nath
4 minute read

The ASX-listed specialist investment manager has announced its half-year results.

Centuria Capital Group has announced operating net profit after tax (NPAT) of $49.4 million for HY24, down from $58.5 million for the corresponding period the year before.

In an ASX announcement on Tuesday, it said total operating revenue stood at $149.6 million which reflected lower performance fees and development profit and restrained transaction volumes.

In HY24, the group reported $831 million in total real estate activity. Net operating cash inflows of $56 million covered operating NPAT of $49.4 million and there was a $50 million extension of the group’s revolving loan note to FY27, strengthening its balance sheet flexibility.

Over $255 million of cash and undrawn debt was available at the end of HY24 and there was a realisation of $184 million in cash from the sale and recycle of balance sheet assets, which contributed to operating gearing of 13.9 per cent.

“Centuria is proud of the diversity which has been built into the group over the past years. The need for this diversity has been highlighted by recent pandemic and financial market disruptions,” said John McBain, Centuria joint chief executive officer.

“The entire management team has worked diligently to expand into the financing and agriculture sectors and this has been a major factor in our ability to forecast reliable earnings to our securityholders.”

He highlighted strong interest from wholesale investors for its finance funds, which benefit from upward interest rate movements and provide short-term investment periods.

“These unlisted funds have become attractive, counter-cyclical investment options,” Mr Bain added.

Assets under management (AUM) expanded to $21.1 billion, largely driven by growth within its real estate finance business, Centuria Bass Capital ($1.58 billion AUM, up 41 per cent year-on-year), industrial platform ($5.92 billion), and focus on agricultural real estate ($0.55 billion, up 31 per cent year-on-year).

Commenting on the results, Jason Huljich, Centuria joint chief executive, said alternative real estate markets provided “strong growth” through the period, benefitting from “unlisted wholesale and retail investor appetite for emerging market investment opportunities”.

“We believe these sectors, in particular, will continue to expand in the near to mid-term driven by constrained lending criteria from traditional finance markets and Australia’s expanding population increasing demand for fresh produce,” he said.

Centuria also noted the strengthening of its $2.1 billion institutional AUM with a new $500 million mandate from US private investment firm Starwood Capital, of which $147 million has been deployed.

Across its industrial and office REITs, the Centuria Industrial REIT (CIP) saw re-leasing spreads of 51 per cent, with 37 per cent in the second half of 2023, while maintaining a 97.2 per cent portfolio occupancy.

The Centuria Office REIT, meanwhile, maintained a 96.2 per cent portfolio occupancy and secured over 28,600 square metres in total leasing activity during the period.

Mr Huljich added: “Centuria continued to harness tailwinds from the outperforming industrial real estate sector by securing the Starwood mandate, in addition to CIP identifying a significant development pipeline, which aims to capitalise on historically low domestic vacancy rates and limited supply within urban infill industrial markets.”

The $2.3 billion development pipeline looked to capitalise on strong supply-demand imbalances within select commercial markets.

Moreover, $1 billion has been earmarked for the outperforming industrial sector, which benefits from constrained supply, outsized rental growth and continued high occupier demand, Centuria said.

“Australia’s growing population, driven by surging migration, provides strong tailwinds across the real estate sectors Centuria is exposed to. This extends to traditional sectors including decentralised offices, large format retail and daily needs retail as well as industrial, agriculture, healthcare and real estate finance,” the joint CEOs stated.

“Centuria maintains a conservative approach to capital management with substantial cash and undrawn debt, which enables us to support the continued growth of our business units. The group remains focused on creating long-term value for our securityholders.”