1 00:00:01,000 --> 00:00:03,640 Speaker 1: You're listening to a Sharesis podcast. 2 00:00:04,559 --> 00:00:07,840 Speaker 2: Today, we will hear some bonus clips from our chat 3 00:00:07,880 --> 00:00:11,680 Speaker 2: with Jason Hewletch, co CEO of Centuria. These are something 4 00:00:11,720 --> 00:00:13,680 Speaker 2: that didn't make it to the final episode, but we 5 00:00:13,760 --> 00:00:16,520 Speaker 2: really wanted to include them for you to listen to. 6 00:00:17,000 --> 00:00:20,560 Speaker 2: And our first clip. Most people assume big institutions make 7 00:00:20,640 --> 00:00:23,800 Speaker 2: the best investors, but Jason share is here about how 8 00:00:23,840 --> 00:00:27,040 Speaker 2: important a broad and loyal retail shareholder base has been 9 00:00:27,080 --> 00:00:27,800 Speaker 2: for Centuria. 10 00:00:28,240 --> 00:00:31,080 Speaker 1: How would you sort of characterize the benefits of that 11 00:00:31,120 --> 00:00:37,000 Speaker 1: sort of cheesy style retail investor versus institutional capital in 12 00:00:37,120 --> 00:00:40,760 Speaker 1: terms of stickiness, in terms of willingness to follow you 13 00:00:40,840 --> 00:00:43,120 Speaker 1: through the journey. What's been your experience there. 14 00:00:43,120 --> 00:00:45,040 Speaker 3: I think it's interesting. We talked to some of our 15 00:00:45,080 --> 00:00:47,559 Speaker 3: peers that just have institutional investors, and they might have 16 00:00:48,840 --> 00:00:52,279 Speaker 3: eighty institutional investors around the world, and they look at us, 17 00:00:52,280 --> 00:00:55,480 Speaker 3: and we've got fifteen thousand on our unlisted real estate side, 18 00:00:55,520 --> 00:00:59,000 Speaker 3: we've got thirty thousand listed investors, we've got eighty thousand 19 00:00:59,040 --> 00:01:02,080 Speaker 3: our bonds business. And they're like, that must be so 20 00:01:02,080 --> 00:01:05,400 Speaker 3: so difficult to manage that many people. But I think 21 00:01:05,440 --> 00:01:08,200 Speaker 3: what we've learned is and what I think we're really 22 00:01:08,240 --> 00:01:10,480 Speaker 3: good at is if you, as I said, treat them properly, 23 00:01:11,120 --> 00:01:15,000 Speaker 3: set up the right systems and processes. They're very sticky. 24 00:01:15,120 --> 00:01:16,520 Speaker 3: You know, if you do the right thing by them, 25 00:01:16,560 --> 00:01:18,319 Speaker 3: they'll keep investing. As I said, you know, some of 26 00:01:18,360 --> 00:01:21,080 Speaker 3: invests for thirty years. We've got a lot of investors 27 00:01:21,120 --> 00:01:25,120 Speaker 3: that now the children are investing with us, So they're 28 00:01:25,160 --> 00:01:27,440 Speaker 3: extremely sticky. Once they trust you and you do the 29 00:01:27,520 --> 00:01:29,880 Speaker 3: right thing, they'll continue to invest. So we've got. 30 00:01:31,319 --> 00:01:31,360 Speaker 1: You. 31 00:01:31,560 --> 00:01:33,480 Speaker 3: I think more than ten cent of our investors are 32 00:01:33,480 --> 00:01:36,959 Speaker 3: in more than three funds. We've got a lot of 33 00:01:36,959 --> 00:01:39,480 Speaker 3: investors in more than ten funds. We've got some investors 34 00:01:39,480 --> 00:01:42,639 Speaker 3: in more than forty of our funds. So I think 35 00:01:43,440 --> 00:01:47,120 Speaker 3: they are actually a really good invested pace to have 36 00:01:48,080 --> 00:01:51,880 Speaker 3: because also they you know, if we make a recommendation 37 00:01:51,920 --> 00:01:54,480 Speaker 3: on in particular investment and say we think we should 38 00:01:54,480 --> 00:01:56,080 Speaker 3: hold a free extra two years because of this, so 39 00:01:56,160 --> 00:01:57,640 Speaker 3: we think we should sell early because this is the 40 00:01:57,640 --> 00:02:00,000 Speaker 3: window in the market. You know, if you've got sound low, 41 00:02:00,440 --> 00:02:02,120 Speaker 3: you know they'll go with you and they'll vote the 42 00:02:02,160 --> 00:02:04,440 Speaker 3: right way and be a bit more flexed exactly that 43 00:02:04,560 --> 00:02:06,760 Speaker 3: flexible were. But whereas if you've got one or two 44 00:02:06,760 --> 00:02:09,120 Speaker 3: big institutions as your investors, and they have a change 45 00:02:09,200 --> 00:02:13,799 Speaker 3: up in Singapore or New York and they pivot. Then 46 00:02:13,880 --> 00:02:15,400 Speaker 3: all of a sudden, they can make these decisions that 47 00:02:15,440 --> 00:02:17,720 Speaker 3: you'd never think would happen. So it's a very different 48 00:02:17,760 --> 00:02:21,240 Speaker 3: it's actually a more rational investor and sometimes the bigger. 49 00:02:20,960 --> 00:02:23,040 Speaker 2: Guys and in our second club we do get a 50 00:02:23,080 --> 00:02:25,760 Speaker 2: little bit more technical, but it is an interesting insight 51 00:02:25,840 --> 00:02:29,720 Speaker 2: into how property generates returns. Behind the scenes, we talk 52 00:02:29,760 --> 00:02:32,640 Speaker 2: about what it means when a portfolio is under rented 53 00:02:32,840 --> 00:02:35,440 Speaker 2: and how that can create built and upside over time. 54 00:02:35,800 --> 00:02:38,120 Speaker 1: One of the points, and it's a little bit technical, 55 00:02:38,200 --> 00:02:40,280 Speaker 1: so you might need to step us through it. From 56 00:02:40,280 --> 00:02:45,320 Speaker 1: the Centuria Industrial result was that across the portfolio the 57 00:02:45,400 --> 00:02:50,120 Speaker 1: average sort of under rented amount is twenty percent. That 58 00:02:50,120 --> 00:02:52,959 Speaker 1: feels like a pretty big opportunity there in terms of 59 00:02:53,040 --> 00:02:56,440 Speaker 1: future earnings. Can you explain what that means and then 60 00:02:56,480 --> 00:02:59,520 Speaker 1: also how do you go about closing that gap with. 61 00:03:00,320 --> 00:03:04,160 Speaker 3: Yeah, there's two factors. There's releasing spreads and there's overall 62 00:03:04,200 --> 00:03:07,680 Speaker 3: portfolio under renting. So on the releasing spreads, what we 63 00:03:07,720 --> 00:03:09,840 Speaker 3: look at is during the period, the six month period, 64 00:03:09,919 --> 00:03:12,840 Speaker 3: every lease that came up in the portfolio, so a 65 00:03:12,880 --> 00:03:15,079 Speaker 3: tenant moved out or the tenant came to the lease 66 00:03:15,120 --> 00:03:16,919 Speaker 3: came to an end, and we released it to them. 67 00:03:17,639 --> 00:03:20,440 Speaker 3: What was the difference in rent from the day before 68 00:03:20,480 --> 00:03:23,800 Speaker 3: the lease goart to the day after. And I think 69 00:03:23,919 --> 00:03:26,680 Speaker 3: the fact that the number for this period was forty 70 00:03:26,720 --> 00:03:30,440 Speaker 3: four percent. So on average, if someone was paying million 71 00:03:30,440 --> 00:03:33,200 Speaker 3: dollars a year, the lease came up and they resigned, 72 00:03:33,240 --> 00:03:35,240 Speaker 3: they're paying one point four four million dollars a year, 73 00:03:35,280 --> 00:03:38,080 Speaker 3: So it was a huge increase. If you look at 74 00:03:38,080 --> 00:03:41,960 Speaker 3: our overall portfolio or ninety odd buildings, the twenty percent 75 00:03:42,040 --> 00:03:45,440 Speaker 3: number comes into place. That's saying across all the portfolio, 76 00:03:45,640 --> 00:03:48,320 Speaker 3: some have just had leases resigned, some have got long 77 00:03:48,400 --> 00:03:51,880 Speaker 3: term leases that haven't been resigned for five to eight 78 00:03:52,080 --> 00:03:54,680 Speaker 3: nine years. It's twenty percent under in it. So if 79 00:03:54,720 --> 00:03:57,000 Speaker 3: you look at all that portfolio and the values would 80 00:03:57,000 --> 00:04:01,760 Speaker 3: put a market rent on every building. If the market 81 00:04:01,760 --> 00:04:04,280 Speaker 3: rent for all that portfolio is one hundred million, well actually, 82 00:04:04,320 --> 00:04:06,360 Speaker 3: if you're in release, the whole thing tomorrow be one 83 00:04:06,400 --> 00:04:08,240 Speaker 3: hundred and twenty million. So there's a lot of upside 84 00:04:08,240 --> 00:04:11,080 Speaker 3: in the portfolio just from under renting. And you get 85 00:04:11,120 --> 00:04:13,640 Speaker 3: to undernting because a lot of industrial leases are longer term, 86 00:04:13,720 --> 00:04:15,760 Speaker 3: so it might be a ten year lease and the 87 00:04:15,800 --> 00:04:18,119 Speaker 3: rent's gone up by say three percent or four percent 88 00:04:18,160 --> 00:04:21,280 Speaker 3: a year, whereas industrial markets have doubled and tripled over 89 00:04:21,279 --> 00:04:24,000 Speaker 3: the last sort of six years. So the rent, the 90 00:04:24,040 --> 00:04:26,400 Speaker 3: tense painting, just gets behind what the actual market is 91 00:04:26,440 --> 00:04:28,760 Speaker 3: and you don't get access to get that rent up 92 00:04:28,800 --> 00:04:31,240 Speaker 3: until the lease comes to an end. Normally, some leases 93 00:04:31,279 --> 00:04:33,960 Speaker 3: will have a mid term market review where you can 94 00:04:34,000 --> 00:04:35,880 Speaker 3: go back look at what the market rent is and 95 00:04:35,920 --> 00:04:37,920 Speaker 3: then from the it's a ten year lease, from the 96 00:04:38,000 --> 00:04:40,040 Speaker 3: year five you can start up in the rent back 97 00:04:40,120 --> 00:04:42,480 Speaker 3: up to market. But most leases will wait to the 98 00:04:42,560 --> 00:04:44,719 Speaker 3: end of the lease term and then you can reset 99 00:04:44,720 --> 00:04:46,400 Speaker 3: the rents to what the market rates. 100 00:04:46,920 --> 00:04:49,680 Speaker 1: And I suppose with a lot of those tenants they're 101 00:04:49,760 --> 00:04:52,919 Speaker 1: quite sticky because of the fit out and you know 102 00:04:52,960 --> 00:04:54,880 Speaker 1: the cost to move those. 103 00:04:55,080 --> 00:04:57,200 Speaker 3: There's a few things that are there. So one what 104 00:04:57,240 --> 00:04:59,880 Speaker 3: we've seen, particularly in the last five years is the kit 105 00:05:00,200 --> 00:05:03,200 Speaker 3: or the equipment going into the shed is a lot 106 00:05:03,200 --> 00:05:05,080 Speaker 3: of time worth more than the shed. It' speed like 107 00:05:05,160 --> 00:05:11,440 Speaker 3: data centers with more robotics and automation. These groups are 108 00:05:11,440 --> 00:05:13,760 Speaker 3: spending hundreds of millions within a shed that might be 109 00:05:13,760 --> 00:05:15,479 Speaker 3: a forty to fifty million dollars shed. So if you 110 00:05:15,480 --> 00:05:17,600 Speaker 3: look at some of them, particularly the coals and Distribution 111 00:05:17,680 --> 00:05:20,520 Speaker 3: O Coals and Willie Distribution Centers, as it's like that, 112 00:05:20,800 --> 00:05:22,800 Speaker 3: there is so much tech going into it now. The 113 00:05:22,800 --> 00:05:25,200 Speaker 3: good thing about that is they want longer leases. So 114 00:05:25,279 --> 00:05:29,160 Speaker 3: where industry used to be shorter term leases, particularly as 115 00:05:29,200 --> 00:05:31,559 Speaker 3: more tech has gone into them, they want longer term leases, 116 00:05:31,600 --> 00:05:35,000 Speaker 3: which is a real benefit of what's happening within these sheds. 117 00:05:35,800 --> 00:05:38,440 Speaker 2: Investing involves the risk you might lose the money you 118 00:05:38,480 --> 00:05:41,760 Speaker 2: start with. We recommend talking to a licensed financial advisor. 119 00:05:42,480 --> 00:05:46,320 Speaker 2: We also recommend reading product disclosure documents before deciding to invest.