This article is from the Australian Property Journal archive
Centuria Capital Group is putting its faith in AI factories and real estate finance to propel its growth strategy, while it believes people will be “very surprised” at the rapid clip its unlisted funds business recovers as the commercial real estate market hits an inflection point.
It also said it is looking to float three new vehicles in calendar 2025.
Centuria reported half-year operating earnings per security of 6.2c, 1.6% higher than the prior corresponding period, and distributions of 5.2c, up 4%.
Alternative real estate assets accounted for 24% of the group’s $20.5 billion of assets under management, almost half of which comprises real estate finance through the Centuria Bass Credit division. Centuria boosted its investment in Centuria Bass to 80%, and Centuria Bass grew its assets under management by 21% and is on track to expand its EBIT by more than 20% across the entire FY25 year.
“It was something that our investor base wanted to invest into,” Centuria joint CEO Jason Huljich told Australian Property Journal.
“Over the three and a half years since we invested, we went from $250 million to now $2.3 billion of loans. We have two open-ended vehicles and then we have about 44 single loan vehicles.
“The high net-worth investors have loved it, they’ve piled in, they’ve really supported that growth. It gives them yield, and shorter terms – most of these loan funds are 12 to 18 months. Plus, we’ve got the opening diversified vehicles as well.
“Up until recently, all the capital’s been coming from high-net-worths. We’re now trying to expand the capital pools where we do get the money from.”
UBS has upsized its commitment to $200 million as part of Centuria Bass’ $285 million warehouse debt facility.
Centuria is aiming to launch a listed real estate credit investment trust, alongside two property funds.
“We’re still working them up and putting assets together. They’ll be in that $500 million-plus range. We expect to launch them both by the end of the calendar year,” Huljich said.
Unlisted funds recovery
“We believe the Australian commercial real estate markets have troughed and are at an inflection point. One of these factors is the RBA’s recent 25-basis point cash rate reduction, and market expectation of further monetary easing policies,” Huljich and joint CEO John McBain said.
“Unlisted real estate fund returns are improving relative to fixed interest returns. The lower term deposit trajectory has re-activated high-margin unlisted fund business across both our Australia and New Zealand operations. Already we have experienced greater deal flow and large deal sizes.
Centuria New Zealand has just closed the oversubscribed equity raise for a single-asset fund underpinned by the redevelopment of Woolworths’ largest South Island distribution centre, which has an end value of $90 million.
“We could have raised double of what we needed to raise. And that’s a really good sign,” McBain told Australian Property Journal.
“Obviously, New Zealand’s had a number of interest rate cuts over the last few months. So they’re well ahead of Australia on that curve. But the investors are really flowing back into unlisted property.
“I think people will be very surprised at the speed with which our core unlisted property trust business recovers.
“Jason and I have been working together for almost 30 years. For 25 of those years, we spent most of our time writing apology emails to people for returning their money because we had oversubscribed. And that’s what’s coming real quick.”
In Australia, Centuria just launched a new unlisted fund which is buying the Logan Supercentre, a large format retail centre south of Brisbane for $115 million. Centuria is undertaking a $71 million raise.
“But we’ve already got initial interest over $50 million. So it’s moving really fast. We’re starting to see the Australian investors come on board as well.
“When the investors are looking to invest into unlisted property and our flows are strong, it’s really good for us as a platform.”
AI factories growth story
Amid skyrocketing demand for AI and cloud storage solutions, Centuria is eyeing off growth in its innovative data centre portfolio.
In August it bought 50% of ResetData, an operator of liquid immersion data centres which require a fraction of the space of traditional data centres due to cooling efficiencies. Centuria is currently building at it calls an “AI factory” within unused space at the 818 Bourke Street office building in Melbourne’s Docklands, which will be up and running by the end of June.
“There will be one of the biggest supercomputers in Australia with the most powerful H200 chips from Nvidia,” Huljich said. Centuria is the only Australian-owned cloud partner of the AI computing giant.
“We’ve got a pipeline of potential of 10 to roll out across the country. We’re really excited about it,” Huljich told Australian Property Journal.
He said the 10 sites are existing assets, “office and industrial facilities that we can turn into these AI factories”. Mostly these are one to five megawatts, compared to new data centres at 50- to 100-plus.
“But they have very, very powerful computing with the Nvidia chips.”