From the helm: Centuria Capital (ASX:CNI) Joint CEO, John McBain

Jessica Amir
August 24, 2020

In this instalment of our From the helm series, Bell Direct’s Jessica Amir speaks to Centuria Capital’s (ASX:CNI) Joint CEO, John McBain.

With the search for stability increasing, Centuria Capital Group might be worth a thought. The listed property fund manager has grown its earnings over the past six years, which has led to strong historical dividends. CNI exceeded its FY20 operating earnings per security guidance and has already acquired $600m in direct real estate in FY21.

In this video John discusses:

  • (0:42) CNI’s elevator pitch
  • (1:13) The highlights of its FY20 financial report
  • (1:55) Acquiring NZ fund manager, Augusta Capital – the key facts
  • (3:10) Future growth prospects: $900m funds growth in six months
  • (4:28) Strong rent collections despite the pandemic: CNI is collecting 90% of its rents, why?
  • (6:19) Centuria Capital is BIG… what makes up the group?
Read Transcript

Jess: Hello, I’m Jessica Amir, a market analyst with Bell Direct.

With the uncertainty of the pandemic, a lot of investors are searching for stability.

Companies that are growing their earnings and have a history of paying above market dividends.

With us today is a company that meets all of that criteria and has also paved out future growth and provided guidance for this financial year.

Centuria Capital Group (ASX:CNI) is a listed property fund manager and their CEO, their joint CEO, John McBain is with us today.

John, thanks so much for coming in.

John: Thanks. Thanks for having me.

Jess: So just give us a quick elevator pitch, Centuria Capital Group.

What do we need to know?

John: Yeah sure. We’ve been around about 20 years, so our code is CNI.

We’re a diversified funds manager, specializing in real estate.

We have just under $9.5 billion worth of assets under management, both in Australia and New Zealand spanning the commercial, industrial and health care fields.

Jess: Wonderful.

And you’ve just handed down a very strong financial year report card in line with market expectations, but above your own which was great.

What are the highlights?

John: Yeah FY20 was a funny year wasn’t it.

You know we had a very good first half.

So the first half of FY20 we acquired 1.2 billion of assets, quality assets.

Coming into FY21 you know we started that very strongly as well.

We distributed 12 cents in FY20 of EBS and 9.7 cents DPS distribution.

Jess: Moving to a major acquisition, so you’ve just snapped up officially an NZ fund manager, for those that don’t know called Augusta.

Tell us what this means for Centuria and also for shareholders.

John: Yes good question.

Centuria has a dual strategy of acquiring other real estate fund managers, platforms we call them.

Together with buying hard assets.

So over the last few years, you know we’ve bought the 360 Capital real estate platform, we’ve bought the Heathley Healthcare business and lately we’ve just moved to full ownership of the Augusta Capital Business in New Zealand, about a $2 billion funds manager.

You know we decided a few years ago to diversify firstly out of just commercial, industrial into healthcare.

And then we looked around and we thought New Zealand would be a great place to diversify as well and at least we’ve done it.

I think what this means is you know about a 25% increase in assets under management.

And you know much larger platform or base, far wider capital sources, to buy more property and grow more quickly, which is what funds management’s all about.

Jess: Definitely.

And you speak about growing very quickly, for UBS they’ve got Centuria Capital Group as a buy and UBS is actually predicting that funds under management will grow annually by $900 million.

Tell us about growth, future growth.

John: Well just looking back a little bit, you know in the 14 months since the start of FY20, we’ve grown our assets under management in excess of 50%, so you know we’re capable of putting on growth.

Obviously we want to buy quality investment assets for our shareholders and if we’re buying another business, a platform, we want that to be a quality platform.

But I think that’s good growth, so far already this financial period in FY21, we’ve bought a very large asset in our industrial trust, the Telstra data centre in Melbourne that was $417 million and we’ve brought about $600 million worth of assets and we’re not three months into the financial year.

So I think those sort of guidance, so there’s the analyst predictions of $800-$900 million.

I mean that would be a good target for us for six months, not a year.

Jess: So speaking about your industrial side of the business, across Australia and the world the industrial real estate market has been I guess teaming on the back of the shift to moving from home and CIP, that stock has outperformed the market and also the property sector.

So the office side though appears to be a bit of a bumpy road.

John: I think that’s the benefit of diversity Jessica.

So you’re right, I think the e-commerce has really thrived on the basis of people being at home and not at work and buying more things.

So there’s a lot of demand for logistics facilities.

CIP, our industrial REIT, so it’s its own listing, has done particularly well and the values that support industrial values are increasing during the pandemic.

You’re right on the office side, it’s not very fashionable to own a lot of offices at the moment.

But when you actually drill down into the core metrics that support office, we’re collecting you know in the mid-90% of our rent.

Basically the only rent we’re not collecting is if we’ve got a gymnasium or some cafes in an office block.

And one of the reasons for that is, most of our offices are decentralized.

So we don’t have a lot of core CBD offices where you might find large professional firms that’s firing thousands of people.

We’re more your Chatswood, St Leonards, St Kilda Rd type location.

Slightly smaller tenants in some case, COF which is our independent listed office REIT, 75% of its tenants though are government, semi-government or ASX50 tenants.

So you know, we are insulated to a large degree.

Office will come back into favor, we don’t believe that everyone will work from home forever, but we need a vaccine or some therapy to jolt the market, just to suddenly realize ‘hey this is a pretty good asset class’.

Jess: And John let’s just summarize your entities because you’ve got your fingers in a lot of pies which is great for diversification, so your headline stocks Centuria Capital Group (ASX:CNI) and then you’ve got other entities and other investments, just tell us how everything fits together.

John: Yeah no, thank you.

Look, this sometimes people need to understand Centuria Capital Group (ASX:CNI) is a real estate business and its business is controlling and creating these downstream funds.

They all create management fees, so COP, COF, our unlisted funds, our health care funds, all create management fees.

These all flow up to Centuria Capital and it’s that growth that accelerates the revenues at Centuria Capital and it’s that leverage and scalability that gives us the performance that we’re seeking in Centuria Capital or and hopefully in our case our performance.

Jess: John McBain, the joint CEO of Centuria Capital Group, thank you so much for coming in.

John: Thank you for having me.

Jess: And thank you for watching.

For more information about Centuria Capital Group (ASX:CNI) or the other listed stocks COF and CIP, head over to Bell Direct’s website.

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