The question on every investor, lender and developer’s lips right now is what is the impact on our investments following the recent news of Tier 1 building contractor Probuild appointing administrators. It is not surprising to see major builders go under within a background COVID-related supply chain delays, material cost increases and subcontractor shortages.  Combined with industry practice being low margins and fixed price contracts, this has conspired to push an industry giant to the brink of bankruptcy.

At Centuria Bass Credit (CBC), we are pleased to advise that across 46 loans which finance over $500m of property development, we have no exposure to Probuild or any subsidiaries in any investment. In fact, we have never had a builder go into receivership or even materially default. So on the face of it we are not directly exposed. However this event is symptomatic of a building industry under duress, and this event is likely to see multiple sub-contractors also pushed under and cost pressures hit many projects. To this end, all construction lenders are to an extent indirectly exposed. Our success in avoiding these events comes from building a ‘Rolls Royce’ loan management and due diligence regime to manage builder risk and maintain a high level of proactivity in our investments.  This system has ‘builder risk’ at the forefront of assessment in four phases for each project;

  1. Initial builder DD and assessment – who we approve as builder
  2. Buffering and contingencies – how we assess the quantum of risk and what funds are retained aside for problems
  3. Ongoing monitoring and quantity surveyor review – our fortnightly assessments of how performance is proceeding, onsite attendance, and interviews not just with the developer or builder, but project managers, consultants and major sub contractors
  4. Intervention and enforcement – how we detect issues early and secure additional commitments, collateral, and focus from all stake holders.

No lender is immune from this risk, but some lenders will manage this risk better than others. While there may be challenges along the way, CBC is confident in its processes, structures and experience to manage these risks to ensure optimal outcomes for our investors.

You should also appreciate by now that the tactical position of our fund has left us less exposed to the Probuilds. We focus on major project builders and developers who are not spread across multiple projects. If we are funding a developer and builder on their largest project, we understand that with our financing, we are funding and supporting their profitability. It’s a simple proposition, but we believe in it.

We have had huge enquiry in the last 24 hours from developers wanting to lock their finance down and work with a player backed by the strength of Centuria. The credit disturbance we’ve been patiently waiting for is upon us again now so we are expecting to see more deals which have the potential to out-perform the market.

Centuria Bass will continue to support all of our developers and investors in this challenging period for the industry.  Please reach out to my partners and management team if you have any concerns – we are here to help.

Regards,

Yehuda

CEO / Fund Manager

Centuria Bass

23.04.2024

Centuria secures $18m Wetherill Park industrial facility

Second asset for wholesale unlisted Centuria Select Opportunities Fund Off-market acquisition provides value-add opportunity to capitalise on near term rent reversion opportunity Currently under-rented in a tightly held market, 0.9% vacancy1 Australasian real estate funds manager, Centuria Capital Group (ASX:CNI or “Centuria”), has secured a second asset for its wholesale unlisted fund Centuria Select Opportunities Fund (CSOF or “Fund”) with the acquisition of a $18 million warehouse facility in Sydney’s core central western infill industrial market of Wetherill Park.
20.06.2023

Centuria secures $16m Busselton Boulevard Shopping Centre, WA

Daily needs neighbourhood shopping centre, anchored by Coles Group 15 complementary specialty stores, 3.25 year WALE1, 99% occupancy2 Beachside Busselton City to benefit from major Federal and State urban regeneration projects Underpins a new single asset wholesale property trust; forecast initial 7.50% p.a. distribution yield. Australasian real estate funds manager,
11.01.2023

Centuria acquires $15m Margaret River Shopping Centre

Anchored by a strong performing Coles Supermarket, trading 10% above single supermarket benchmarks1 Margaret River has one of Australia’s fastest growing regional populations, 3.5% p.a. growth2 Underpins a new single asset wholesale property trust; forecast initial 5.75% p.a. distribution yield; monthly distributions. Australasian real estate funds manager, Centuria Capital Group (ASX:CNI),
23.09.2022

Centuria and MA Financial Secure $223m Allendale Square office tower

Counter-cyclical investment opportunity underpinned by strong local market tailwinds 50:50 joint venture in A-Grade office asset, Perth CBD location; 7.25% capitalisation rate 5.8 year WALE1, 85% occupancy2 provides opportunity for lease repositioning upside Acquisition underpins single asset wholesale unlisted property funds for both firms. Centuria Capital Group (ASX:CNI) and MA Financial Group have conditionally secured one of Perth’s well known A-Grade office towers,
29.08.2022

Centuria buys six Accolade Wines vineyards, SA

Centuria Capital Group (ASX: CNI) subsidiary, Primewest, has secured an off market portfolio of six vineyards across eight separate properties, totalling 113.74 ha, in addition to 223 Ml of water assets on a 10 year, triple-net sale-and-leaseback term to one of the world’s leading wine companies, Accolade Wines. The non-contiguous land acquisitions and water assets were secured for $8.2 million on behalf of the Primewest Agricultural Trust No.
02.03.2022

Are Centuria Bass exposed to Probuild?

The question on every investor, lender and developer’s lips right now is what is the impact on our investments following the recent news of Tier 1 building contractor Probuild appointing administrators. It is not surprising to see major builders go under within a background COVID-related supply chain delays, material cost increases and subcontractor shortages.  Combined with industry practice being low margins and fixed price contracts,
13.10.2021

Primewest secures $71.2m Northgate Shopping Centre, Geraldton

Major gateway centre in Western Australia Dominant shopping centre in the major WA gateway town of Geraldton; 4.7 year WALE1 Secured for a single asset, unlisted wholesale property fund, 7.25%p.a.2 two year initial forecast distribution, five year term Centuria Capital Group subsidiary, Primewest, has secured a $71.2 million shopping centre in Geraldton,
13.10.2021

Primewest secures Woolworths-anchored Potts Point retail

$14.3 million rare, prime inner-city Sydney daily needs retail asset; 5% initial passing yield 100% occupancy1, 8.2 year WALE2, secured for convenience daily needs institutional mandate Illustrates Centuria’s commitment to retail market and expanding Primewest’s retail property portfolio. Centuria Capital Group subsidiary, Primewest, has acquired the Woolworths-anchored daily needs retail precinct within Potts Point’s OMNIA mixed used development for $14.3 million on a 5% initial passing yield on behalf of its convenience daily needs institutional retail mandate.
07.09.2021

Primewest secures $34m Byford Village Shopping Centre, Perth

Coles-anchored daily needs retail asset secured for the Matrix Trust Centuria Capital Group subsidiary, Primewest, has acquired the Coles-anchored Byford Village Shopping Centre along with an adjoining vacant site in a $33.75 million transaction on behalf of its Matrix Trust, a pure-play daily needs retail (DNR) trust. The acquisition, located at 20 Abernethy Road, Byford WA,
08.07.2021

Alternative unlisted property funds

Often when people think of unlisted property funds, they consider an equity investment in a physical real estate asset. However, an alternative real estate vehicle is an unlisted debt fund, that provides the finance for developers to build a new property. While the risk profiles of debt funds differ from equity funds, so do the return profiles.