April 19, 2021

By Lynda Kiernan, Global AgInvesting Media

Australian listed investment firm Centuria Capital has entered into a bid implementation deed (BID) with fund manager Primewest for an off-market takeover offer of Primewest for A$600 million (US$462.5 million). 

If all conditions are met, once the transaction is complete the merger of the two complementary investment platforms will result in a single entity with AUM exceeding A$15 billion (about $11.7 billion), and will position the new merged group for index inclusion on the S&P/ASX200 with a market cap of A$2.2 billion (US$1.7 billion). 

Just recently, in February of this year, Primewest more than tripled its funding target for its newly launched Primewest Agricultural Trust No 1 to A$350 million (US$268 million), and stated it may list the fund, but did not specify a timeframe for such action. 

The move followed the launch of an A$55 million (US$41.75 million) equity raising, which was also surpassed, earning A$60 million (US$45.5 million) to be used by Primewest to fund key investments made by its unlisted agricultural trust, which was to possibly act as the starting point for Primewest’s proposed REIT, and another of its property income funds.

Primewest entered the Australian agricultural space in April of last year with the launch of its inaugural ag investment fund with an initial funding target of A$100 million (US$76 million) and its first ag acquisition. 

Already with a presence in commercial, industrial, retail, residential, and tourism, Primewest launched the Primewest Agricultural Trust No 1 to “provide Investors with an opportunity to acquire high quality agricultural investments leased to strong tenant covenants well positioned to benefit from the anticipated improvement in the Australian agricultural Industry,” according to the firm’s website. 

This newly established trust deployed its first capital, paying A$4.8 million (US$3.13 million) for “Pinegatta” in New South Wales. Located in the Riverina region, the 425-hectare (1050-acre) Pinegatta has been growing carrots and potatoes, supplying PepsiCo subsidiary Smith Snack Food Company. With the acquisition, Primewest has entered into a lease agreement with Kagome, the largest tomato producer in Australia.

Only two months later in June 2020, Primewest agreed to acquire GoFARM Asset Management Pty Ltd – the manager of Vitalharvest Freehold Trust in a A$10 million (US$11.27 million) deal. 

Through this deal, Primewest also acquired an 11.8 percent stake in Vitalharvest Freehold Trust (VFT), and a further first right of refusal over another 6.2 percent in the externally managed real estate investment trust (REIT) that currently holds a portfolio of properties valued at $275 million with a market capitalization of approximately $143 million. It is also, notably, the owner of the largest berry and citrus farm aggregation in Australia, which is 100 percent leased to Costa Group, one of the country’s largest horticultural companies.

However… by November of last year, global alternative asset manager Macquarie Infrastructure and Real Assets (MIRA) announced that one of its managed agricultural funds had made a cash offer of A$300 million for Australian REIT Vitalharvest Freehold Trust (VTF). 

This offer laid two all-cash options on the table. The first proposal, was a scheme to acquire 100 percent of the units in the trust at A$1 each, reflecting a total valuation of Vitalharvest of A$300 million. The second was an option for the outright purchase of the portfolio at a value of A$300 million, representing a 7 percent premium to the fair market valuation of the assets as of June 30, 2020.

Primewest had intended to use Vitalharvest as a platform for the launch of a Long WALE (Weighted Average Lease Expiry) diversified farmland REIT… but,  MIRA’s offer changed that.

This new unlisted, and much expanded fund, will be used by Primewest to fill the void that the sale of Vitalharvest created in its strategy. 

But, since MIRA’s original bid, there has entered a new player into the ring. ROC Private Equity stepped up, making a rival bid of A$314.8 million (US$245 million) for Vitalharvest, placing MIRA in the position of having to raise their bid. 

This certainly put pressure on MIRA. However, its position isn’t completely threatened. Costa and MIRA are no strangers. Costa has existing relationships with MIRA via its leasing of multiple avocado farms from the manager, structured as fixed rental agreements over a 20-year time period.

And now, to add another dimension to an already very multidimensional situation, we have news of Primewest merging with Centuria.

Primewest founders John Bond, David Schwartz, and Jim Litis will enter into two-year employment contracts as senior executives with Centuria, and will enter into two-year escrow arrangements for their Centuria holdings upon the merger’s completion. 

Likewise, Centuria plans to retain Primewest’s existing employee team, noting their strong expertise across a range of geographies and sectors which are complementary to Centuria.

“The Merger represents an exciting opportunity to combine two highly complementary real estate platforms that share similar philosophies and strong track records,” said John McBain, joint CEO, Centuria.

“Joint CEO Jason Huljich and I will be delighted to welcome the Primewest executives to the Centuria group and look forward to working closely with them to grow the combined platform. We believe the merged group will be strategically poised for further growth in the healthcare and agricultural sectors in particular, as well as the traditional real estate sectors.” 

Centuria Chairman Garry Charny added, “Primewest is a high quality, well established fund manager and the Centuria board looks forward to the successful completion of the merger and building on Centuria’s position as a leading Australasian property fund manager.”

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan@globalaginvesting.com.