Centuria grows with Telstra data centre buy

Centuria Capital’s John McBain and Jason Huljich. Picture: Hollie Adams
Centuria Capital’s John McBain and Jason Huljich. Picture: Hollie Adams

Funds manager Centuria Capital has taken its property empire close to $10bn, with its listed industrial fund snapping up a Telstra data centre for $416m.

Meanwhile its office fund, which focuses on suburban buildings, has turned in strong results.

The company, headed by John McBain and Jason Huljich, is backing the two areas, which could benefit from the coronavirus crisis as more people work from home or in suburban offices rather than in CBDs.

The pair said that the company’s major sale and leaseback transactions with Arnott’s and now Telstra showed its ability to partner with iconic Australian businesses.

The purchase of the Telstra data centre in Melbourne “represents a significant investment in telecommunications infrastructure timed to coincide with a major upswing in demand for data storage”.

The deal also shows data centres are set to become a much bigger part of the property sector with Centuria Industrial REIT, which had focused on industrial parks, leading the way.

The move was backed by a near $341m rights issue handled by investment banks UBS and JPMorgan, and marks a major step-up for the property fund.

The race for the Melbourne data centre, handled by UBS, also drew in UniSuper, Charter Hall and Dexus before Centuria sealed the deal.

Industrial property has been one of the few areas to come through the coronavirus crisis almost unscathed, although there have been outbreaks at distribution centres in Melbourne.

Data centres, however, are in unprecedented demand as working from home and streaming services dramatically increase data usage.

Big corporates are also selling off real estate and over the past year Telstra has sold about $1.5bn in assets in a program to strengthen its balance sheet.

Centuria Industrial will pay $416.7m for the data centre in the Melbourne suburb of Clayton.

The deal includes a 30-year leaseback arrangement where Telstra will retain ownership of IT and telecommunications equipment. Telstra will become CIP’s largest tenant.

The acquisitions will be partially funded by the $340.8m entitlement offer and $151.1m of existing debt facilities.

The fully underwritten equity raising is via a 1-for-3.7 accelerated non-renounceable pro rata entitlement offer to raise about $340.8m at a price of $3.15 per unit, a 4.8% to the last close.

Centuria also bought two smaller properties, one in Smeaton Grange in Sydney’s south west, and another in Tullamarine near Melbourne’s airport.

It is also in due diligence to buy three more industrial assets for $45m.

Shares in the Centuria Office Fund jumped by 8.7% in morning trade as the company beat expectations and said June quarter rent collection was very strong at 92% and occupancy was at 98.1%.

The office trust produced guidance ahead of expectations and said lease expiries should be addressed as more tenants stayed put as a result of the crisis.

This article originally appeared on www.theaustralian.com.au/property.