Centuria Plots $1bn Agriculture Portfolio as Market Pumps

Real estate funds manager Centuria Capital Group is digging into agricultural real estate assets as it diversifies away from the challenged office sector. 

The Centuria Agriculture Fund (CAF) experienced a 33 per cent increase in value to $530 million after acquiring glasshouse agriculture real estate assets across Australia and New Zealand.

The diversification to alternative real estate has proved to be a deft move and one that Centuria joint chief executive John McBain is keen to pursue further, targeting a $1-billion portfolio in the next 12 to 18 months. 

“I think frankly agricultural real estate really excites us,” McBain told The Urban Developer. 

“I think it’s a very immature market and we’re at the thin end of the wedge at the moment. We’re pleased to be one of the first to be looking at it.”

McBain said they were the only pure real estate investor in the agricultural sector. Other players in the sector tended to buy the business in addition to the real estate assets. 

The Centuria agricultural fund is focused on glasshouse farming, predominantly tomatoes, because it was less exposed to climate risk. McBain said blueberries and mushrooms were other products they were looking at investing in, but it needed to be at scale. 

“For us it needs to be an established player at a scale of assets between $20 million and $50 million with 15 to 20-year leases,” he said. 

“We’ve built that fund where we can have up to 25 per cent operational risk, but we don’t have any.”

▲ Centuria Capital Group joint chief executives John McBain and Jason Huljich.

McBain said the real estate funds manager acquired its first agriculture asset as part of its PrimeWest acquisition two years ago. 

“When we’re trying to merge with a new business we look to slightly different things than what you would expect,” McBain said. 

“Obviously we like things that are accretive and positive on our P&L. But we also look at whether they are invested in areas we are not.”

McBain said he believed FY24 would be “tricky trading conditions” following a slew of interest rate rises in FY23. 

About one-third of Centuria’s portfolio is exposed to the challenged office market. McBain said he believed there were some markets where there would be “quite a good outcome”.

“We’re quite exposed to Brisbane, and also the Adelaide market, for a reason,” he said. 

“We’re actively looking at office at the moment. I’ve got 13 people in my capital transactions team that spend all day looking. 

“The last thing we bought was in Perth with a return of 7 per cent, and we thought that was quite a good buy.”

The group’s real estate credit increased 59 per cent to $1.27 billion last financial year, capitalising on increasing demand for non-bank lending. 

McBain said the group’s unlisted funds also made up two-thirds of its portfolio with $13.8 billion of assets under management, while about $6.4 billion was in listed funds. 

McBain acknowledged the challenging market for REITs to attract capital but said he expected things would even out.