Centuria Capital Group (ASX:CNI) talks 360 Capital acquisition


by Carolyn Herbert

Transcription of Finance News Network Interview with Centuria Capital Group (ASX:CNI) Group CEO, John McBain

Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from Centuria Capital Group (ASX:CNI) is Group Chief Executive, John McBain. John, welcome back.

John McBain: Thanks for having me.

Carolyn Herbert: For investors who aren’t familiar with the company, can you start by giving us an introduction to Centuria Capital?

John McBain: Centuria was formed in 1998; we’re a specialist investment manager. We have around $3.6 billion of funds under management and they comprise a range of property funds, which are around 18 unlisted funds, plus three real estate investment trusts. In addition, we have an investment bond business, which manages around $700 million.

Carolyn Herbert: Now to your acquisition of 360 Capital Group’s (ASX:TGP) real estate platform. Can you tell us about the platform and what it comprises?

John McBain: We’ve acquired the majority of 360 Capital’s real estate platform. It comprises an industrial REIT or real estate investment trust, an office REIT and in addition, the management of four unlisted funds. In addition to acquiring these management rights, we also purchased a significant co-investment stake in the real estate investment trusts. This was a major acquisition for us and it’s transitioned us in growth, from a market capitalisation of under $100 million, to well over $250 million.

Carolyn Herbert: What was the size of the transaction and how has it been funded?

John McBain: We’ve acquired the management rights and the co-investment stakes for a total of $270 million. That’s split up approximately $90 million for the management rights and around $116 million for the acquisition of the co-investment stakes, and their real estate investment trusts. That was a major acquisition. It was funded by a combination of available cash, some finance and a $150 million equity raising, which was completed and settled on the 9th of January 2017.

Carolyn Herbert: Taking a look at the 360 Industrial Fund and the 360 Office Fund in more detail. What assets do they hold and what are the values of the portfolios?

John McBain: Starting with the industrial fund, the industrial fund is renamed Centuria Industrial REIT, ASX code CIP. That has 37 properties throughout Australia with a combined value of just over $900 million. The office fund is called Centuria Urban REIT. It has three properties throughout Australia and it has total values of over $200 million. And in addition to the management of those two funds, we also acquired the management of four unlisted funds, which were valued as at June at just over $250 million.

Carolyn Herbert: How do these acquisitions complement Centuria Capital’s existing business?

John McBain: The transaction creates a leading real estate fund with three elements, being a dedicated industrial fund, two office REITs, which have the potential to combine and be a market leading metro office REIT, together with the existing very mature unlisted property funds management business. Recurring incomes get into the high 70 per cents and we’ve an attractive DPS yield of 7.5 per cent. We believe it’s a unique proposition.

Carolyn Herbert: Finally John. What’s your focus for the next 12 months and your outlook for the rest of the year?

John McBain: I think we’ve had a strong start to calendar 2017 and if we look at the entire year, we’ve had a very large acquisition, which we’re bedding down. Our unlisted division, it will perform very strongly this financial year, it’s already achieved half its budgeted fund growth target of 25 per cent. And our three listed real estate platforms will perform well in their own rights. Our new industrial fund will continue to acquire fit for purpose assets. And the two office REITs will have an opportunity, provided the market is suitable for its investors to vote to combine them, which will be very interesting, because it will mean that we’ll have a sector-leading metropolitan REIT.

And in addition, our investment bond business is maturing and it’s added on quite a lot of fund this year, in its own right. So finally I think what we can look for going forward, we’ve got a very scalable business model and we can expect considerable growth moving forward.

Carolyn Herbert: John McBain, thanks for the update on Centuria Capital.

John McBain: Thank you, it was a pleasure.


Carolyn Herbert

Finance News Network
Carolyn joined FNN in August 2015 as the Head of News and also presented the Market at Midday and the Market Wrap. With more than five years of broadcast journalism experience, Carolyn has worked as a finance anchor on the Sky News Business channel and as an anchor and reporter for ABC News. She is also a qualified corporate lawyer specialising in IPOs, takeovers and mergers and acquisitions.