Centuria bumps agricultural interests to $1.3b in latest deal
Fund manager Centuria Capital is ramping up its exposure in the agriculture sector, taking control of a $444 million unlisted fund run by a boutique operator as it expands its holdings across alternative real estate investments.
Under the deal, Centuria has acquired agriculture fund manager Arrow Funds Management and management rights to its Arrow Primary Infrastructure Fund. The fund’s 22-asset portfolio includes poultry farms, a pork fattening facility, almond and macadamia orchards, mango orchards, dried fruit vineyards and an organic glasshouse.
The deal takes Centuria’s agricultural assets under management to around $1.3 billion – an 85 per cent jump in holdings since the start of the financial year after acquiring Australia’s biggest hydroponic glasshouse operation last week in a $168 million deal.
For ASX-listed Centuria, which has more than $20 billion in funds under management, the push into agriculture is part of a broader strategy of diversifying its exposure beyond the traditional areas of commercial real estate, such as office towers and shopping malls.
“Alternative asset classes are something that Centuria made a conscious decision to move into. The deals that we’re doing now are the result of four or five years of work,” Andrew Tout, Centuria’s head of agriculture, told The Australian Financial Review.
Within that expansion into agriculture, some clear investment themes are emerging as well, with assets that typically include more intense use of technology and infrastructure.
“My focus is on risk: we want to give solid cash return to our investors,” Tout said.
“I’ve had a real focus on controlled environment farming – from as simple as irrigation right through to the full glasshouse – that can give a cash return, but also have exceptional physical assets.
“We’ve made a very conscious decision to invest in systems or farms where a lot of the normal risks of agriculture are taken out by technology.”
That approach to risk means Centuria doesn’t get involved in day-to-day operations while collecting rent as the landlord. Outgoing costs are covered by the tenant under agreements known as triple net leases. The average lease expiry across the portfolio is close to 13 years. The unlisted fund has nearly 500 investors.
Some of the biggest names in Australian primary production – such as Baiada Poultry Group, Select Harvests, Nutrano Group, Pace Farms, and SunPork Group – are tenants of the Arrow assets.
“We’re trying to really focus on domestic production and domestic consumption, perishables that are moved quickly and regularly,” Tout said.
“So we’re getting away from that kind of risk you see in grain growing, which is your foreign currency risk and your export risk.”
