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Treasury today

by Marshall Denning, Group Treasurer

The Group Treasury function is a critical component in the way a company manages its capital. For Centuria, this is true across both our corporate and funds management platforms. For a real estate property fund, the most significant treasury components are the debt facility, interest rates and risk management.

Prudent capital management is a core part of the Centuria business. As we have grown in scale and diversification, so have our relationships with investors and finance providers such as the major banks. The Group Treasury team’s role is to source the most optimal debt capital and maintain robust capital management. Centuria has been expanding its Treasury capability across our Sydney, Perth and Auckland offices. This expanded team allows Centuria to develop robust, on the ground relationships with key finance providers.

The Group Treasury function is involved throughout the life of a property fund – from inception and due diligence, through the fund’s term, to its expiry. The team is focused on managing all aspects of a fund’s debt facilities, including:

  • Lender relationship management and access to required liquidity
  • Sourcing debt (selecting lenders) and its terms
  • Refinancing or extending debt facilities at an appropriate time
  • Optimising the cost of debt whilst managing underlying risks such as interest rate risk.

As an example, at a fund’s inception, Group Treasury and Funds Management teams will discuss and assess interest rate strategies and the preferred risk tolerances with the objective of protecting and maximising investor returns. Various factors can impact these strategies including the number of assets in the fund, the real estate asset classes, anticipated rental revenue, duration of the fund and management’s view of other economic factors such as the interest rate outlook.

During the life of the fund, Group Treasury reviews the fund’s capital management strategy against its budget and objectives, including the fund’s interest rate assumptions and performance against debt covenants.

Centuria’s Australasian unlisted portfolio totals more than 150 funds encompassing:

  • $8.3 billion single-asset funds
  • $2.4 billion multi-asset funds
  • $2.3 billion open-ended funds.

Across these funds, approximately 50% of the floating interest rate exposure is hedged for 2.4 years as at June 2022. The Group has expanded its banking network to 21 lenders (domestic and international) across Australia and New Zealand to support the business and ensure optimal debt pricing for our funds.

In the current rising interest rate environment, the investment Centuria has made into the Group Treasury capability has never been more important. The team is assessing the interest rate sensitivity, fund hedging and overall cost of debt across every Centuria property fund, on a daily basis. The aim is to ensure we optimise the capital structure of each fund and deliver the highest distribution rates to investors in the prevailing market conditions.