Centuria players’ new lease on life

A phone call from a real estate agent in early 2019 changed the course of Primewest co-founder Jim Litis’ plan to invest in a Perth office building.

When Adrian Fini – who was in a meeting with Mr Litis about The Rechabite in Northbridge when the call came – saw who was on the line, he asked what it was about.

“I said to Adrian ‘I’m going to see this agent’ and Adrian asked what for,” Mr Litis told Business News.

Mr Litis was set to put an offer on 342 Murray Street, now occupied by Saracen Properties, with his business partners John Bond and David Schwartz.

“[Adrian] told me he had already made an offer on that building; I said I am ready to buy it and [suggested] we buy it together,” Mr Litis said.

“And that was it, the deal was done in about five seconds.”

Quaypoint Holdings Pty Ltd, an entity held by Primewest founders John Bond, Jim Litis and David Schwartz, and Hesperia director Adrian Fini purchased the Murray Street asset for $7.45 million from Lorrel Ann Apthorp in April 2019.

Jim Litis, John Bond, David Schwartz and Adrian Fini bought 342 Murray St in 2019. Photo: David Henry

Parallels can be drawn between this transaction and the deal that brought together the three Primewest founders in 1992.

The trio formed the property funds management group as a result of competing bids for Gwelup Plaza.

The shopping centre, purchased for $5.9 million in December 1992, signalled the formation of Primewest, which would grow its assets to $5 billion in the following 28 years.

“When I was looking to buy the shopping centre in Gwelup, Jim [Litis] was looking to buy it too … we decided to combine and buy it together,” Mr Bond told Business News.

Mr Bond added that the same thing happened with an office asset at 1060 Hay Street, formerly known as the IBM Centre, which David Schwartz wanted to buy, while Mr Bond and Mr Litis were also considering the property.

“We still own both of those assets,” Mr Bond said.

The men bought the Hay Street asset in October 1995 for $11.25 million.

Primewest formed in 1995 and merged with Sydney-based funds management giant Centuria Capital in June 2021.

The merger finalised this month, as Primewest rebranded to Centuria and its Western Australian employees moved into newly refurbished offices at 140 St Georges Terrace.

Speaking from the 28-storey building, jointly owned by Centuria and BlackRock, the Primewest founders explained they would still play an active part in the business.

“Our roles had already changed; we used to run parts of the business, and we don’t do that now,” Mr Bond said.

“We are here to make sure our investors are looked after, in the way that we always looked after them in the Primewest days.”

In a statement to the ASX detailing the rebrand, Centuria joint chief executives John McBain and Jason Huljich told investors that Mr Bond, Mr Litis and Mr Schwartz would “continue to lead our WA colleagues for the foreseeable future”.

Formally, Mr Bond and Mr Schwartz are directors of the Primewest business within Centuria and Mr Litis acts in a mentoring capacity, mainly for the retail component of the company.

“We’re not going anywhere … we are here to provide support and advice, but eventually we will have a lesser and lesser role as time goes on,” Mr Bond said.

Since the merger, Centuria has grown its workforce in WA by 37 per cent to 85 staff and its local assets under management to $4.2 billion.

As Primewest merged with Centuria, its WA assets were valued at about $3 billion of its $5 billion national portfolio.

At the time, Centuria’s portfolio was worth $15 billion.

Today, Centuria’s assets are worth $19.8 billion, while its WA properties comprise 22 per cent of its national portfolio.

“We had a huge growth spurt after that,” Mr Bond said of the merger.

History

Primewest’s ASX-listing in 2019 preceded the company’s diversification into agriculture and its formation of a listed trust with properties from Perth and Brisbane.

Mr Bond told Business News the initial intention leading up to the merger was for Primewest to acquire other groups.

“When you’re a listed company, you’ve really got to grow … there’s no point in being listed and not growing,” he said.

“Our aim when we listed was to actually go out and find other smaller syndicators primarily to buy, and we went around to the market a lot.

“We got close with a couple of private syndicators to buy them and grow our business that way, but we didn’t find anyone that was a cultural fit for us.”

Mr Bond said his connection with John McBain ultimately led to the merger.

“I told [Mr McBain] we were keen to expand but just hadn’t found the one with the right culture,” he said.

“He [McBain] said ‘we really get on well, would it make any sense for us to talk about it?.’ “Instead of being the acquirer we became the acquiree.”

Centuria's industrial asset at 310 Spearwood Avenue in Bibra Lake contains four warehouses valued at $75 million. Photo: Centuria

Mr Schwartz said Centuria was an ideal fit for the business, given there was very little overlap between the types of assets each group owned.

“The reality was that they were essentially only in industrial and office [and] had recently acquired healthcare, but we had a big focus on retail and large format and had just started with agriculture,” he said.

“They saw that as a great fit.”

Mr Bond added that Centuria’s debt arm added a new dimension to the business.

“The banks aren’t that keen to invest in development areas … at the moment, they have a fund that invests in that area [and] it’s an offering we’re now able to offer to our investors,” Mr Bond said.

Market strength

Centuria’s purchase last month of Allendale Square with MA Financial Group for $223 million from Mirvac Group strengthened the fund’s position as the largest commercial property owner in Perth.

The building was purchased on a 5.8-year weighted average lease expiry and 7.25 per cent capitalisation rate.

Mr Bond said the 31-storey office tower was about 88 per cent occupied, but some tenants were looking to move out early next year.

Centuria and MA Financial Group bought Allendale Square for $223 million this year. Photo: Centuria

He said the asset appealed because of its location and the fact Mirvac had already spent $62 million on refurbishments.

“We like it because of its location near Elizabeth Quay [and] there’s no capital to spend,” Mr Bond said.

“Really, the game plan is the leasing exercise.”

Mr Schwartz said he was starting to see the office sector pick up, with increasing volumes of leasing deals after a lull.

“We’ve seen quite a lot of activity in the WA office market,” he said.

“With inflation in the market, people look for places where they can put money and it will be protected.”

An inflationary market meant older buildings were better value, because the chances of new buildings being constructed were less than in more stable conditions, Mr Bond explained.

Mr Schwartz added that 140 St Georges Terrace, which Centuria purchased with BlackRock last year for $254.86 million, was bought at about 40 per cent less than its replacement value.

Premium makeup retailer Sephora’s new store at Centuria’s building at 1 Forrest Place would add vibrancy to the CBD, Mr Bond said.

Sephora opened at Centuria's Forrest Place building this month. Photo: David Henry

Centuria has continued its investment in retail, as well as expanding its presence in industrial, healthcare and agriculture sectors this year.

Within the past 12 months, the real estate group has bought Geraldton’s Northgate Shopping Centre for $71 million and Byford Village Shopping Centre for $34 million.

Its industrial Real Estate Investment Trust has a WA portfolio valued at $256 million, with a four-year weighted average lease expiry and 100 per cent occupancy across 166,660 square metres.

Its WA assets account for 6 per cent of the trust’s entire portfolio, which benefited from a $34.2 million valuation gain during 2021-22.

Centuria’s agricultural assets include a $54 million almond orchard in Hillston, NSW, and a $177 million state-of-the-art glasshouse in Warragul, Victoria.

Mr Schwartz said the company believed there was significant growth potential in the agriculture sector, as well as in WA’s property market more generally.

“We will still continue acquiring in the WA market, we see a lot of growth to come in WA, and we have over the years built an expertise in the market [and] we understand it better than most people,” he said.

CBD revival

Primewest’s founders also own a range of properties at the western end of the CBD, including the company’s former headquarters at 307 Murray Street (occupied by Country Road until earlier this year).

Business News understands that luxury retailers Fendi and Cartier intend to move into the space.

Mr Litis also owns 352 Murray Street, along with several heritage-listed buildings on King and Queen streets.

These include buildings occupied by Pirate Life Brewing and the Flour Factory, Cox Architecture and Hugo Boss.

Mr Litis told Business News he had a passion for reviving the CBD through injecting new life into existing buildings in the Murray and King streets precinct.

“I started my career in the city, and that’s why I have a deep connection to the CBD,” he said.

“The city was abuzz, back in the 1970s, ’80s and ’90s and then we went through a terrible period.

“When we bought the Country Road building in 2007, apart from the fashion component, the cafe at the rear was always packed, everybody was there, and you had to queue up. Where do you queue up now?”

Many of the assets that Mr Litis and his associates acquired in the western end of the city were bought in entities separate to Primewest and Centuria, as they had a riskier profile.

“You buy it without a budget; it’s empty, you don’t know what it’s going to cost to fix up, which is normally a lot,” Mr Litis said.

“You don’t know what tenant you’re going to get, and how long it’s going to take to get them.”