Centuria expands into property debt funds

Debt funds growing in popularity as an alternative investment

With demand for quality investment products at unprecedented levels, Centuria has moved into the emerging market of real estate debt investment to meet a growing investor appetite for higher returning investments.

Traditionally the domain of Australia’s major banking institutions, real estate debt investment involves the provision of senior lending, mezzanine-level debt funding and preferred equity to property developers and owners.

Tightening lending standards introduced by APRA last year, along with changing credit exposure limits by the banks and the introduction of Basel rules, have slowed down loan growth within the banking sector. This – combined with a desire from property developers to better leverage capital – has forced a structural shift in the market, with growing demand for alternative sources of funding.

The funding is often for shorter periods of time and at higher interest rates, acting like a bridging loan for developers and owners.

This has opened up opportunities for non-bank lenders to enter the market, including Centuria, which has recently established three separate debt funds and has a significant pipeline of future opportunities.

Jason Huljich, Centuria’s Head of Real Estate and Funds Management explains Centuria is well placed to capitalise on the growing demand for this alternative source of funding.

“One key advantage of Centuria is its flexibility and ability to move quickly in comparison with traditional lending institutions, placing us in an ideal position to move into debt funds.”

“This structural shift in debt lending seen high levels of demand for short-term senior and mezzanine debt from reputable property developers and owners. This has created the potential for outsized, equity-type returns that have significant risk mitigation.

“At the same time, we are seeing unprecedented interest from our high net worth investors who are seeking secure and attractive returns over a short period. As a result, early results have proven fruitful, with all three funds launched to date being oversubscribed within days.”

“We also have a solid pipeline of transactions currently underway, and see this asset class having a growing presence alongside our unlisted and listed property funds.”

Centuria’s debt funds are limited to wholesale investors and offer an attractive 10% to 15% return, depending on the type of fund. The terms for these investment opportunities usually range from 12 to 24 months. Centuria currently offers three types of debt funds:

• Development finance: these funds provide debt for the land, building and construction of a project. The Centuria Woden Green Development Fund, launched in 2016, was Centuria’s first foray into debt funds. A 16-month fund, it is now complete and delivered 15% annualised returns for investors⁽¹⁾.
• Residual stock: these funds provide bridging finance as developers sell off remaining apartments in completed developments, but is downside protected with first ranking mortgage security and guarantees. The Centuria Bottleyard Debt Fund was launched late February to provide senior debt finance for a developer to sell down 45 recently completed high-quality residual apartments. The fund offered a forecast 10% investor rate of return⁽²⁾ and was oversubscribed in two days.
• Property finance: This offers debt funding to support proposed future developments sitting alongside reputable developers, often with an income producing asset as part of the lender’s security pool.

The funds are backed by Centuria’s 20-year track record in the property business and experienced management team. Centuria Capital Group’s co-investment strategy also provides balance sheet support and alignment to investors at the group level.

To find out more about Centuria’s debt funds, please email our investor relations team at contactus@centuria.com.au or call (02) 8923 8923.

Disclaimer

⁽¹⁾ Historical performance of closed or completed funds is not indicative of performance that can be obtained in any other fund offered by Centuria. Past performance is not indicative of future performance.
⁽²⁾ Forecasts are subject to assumptions and risks set out in the February 2018 Centuria Bottleyard Fund Investor Memorandum.

• Centuria holds Australian Financial Services License 231 149
• No personal financial product advice for the purposes of section 766B of the Corporations Act 2001 (Cth) (Act).
• Intended solely for use by Wholesale and Institutional clients within the meaning of section 761G of the Act, sophisticated investors pursuant to section 708(8) of the Act, professional investors pursuant to section 708(11) of the Act, and/or otherwise persons to whom a disclosure document is not otherwise required to be given under Chapter 6D of the Act.
• Only intended to be used or viewed by persons in jurisdictions where Centuria products and services may lawfully be offered
• General advice warning: To the extent any recommendations or statements of opinion or fact made by Centuria constitutes financial product advice, they constitute general advice and not personal financial advice in any form. As such, any recommendations or statements do not take into account the financial circumstances, investment objectives, tax implications, or any specific requirements of the recipient.
• Recipients should not act on any recommendation without first reviewing the relevant information memorandum for the relevant product, consulting their investment advisor in order to ascertain whether the recommendation (if any) is appropriate, having regard to their investment objectives, financial situation and particular needs.