Centuria’s unlisted property funds slash redemptions

Nick Lenaghan

Two property funds run by ASX-listed Centuria Capital Group have drastically cut the amount of redemptions they are paying out to their investors after recent requests exceeded the unlisted vehicles’ withdrawal thresholds.

The move to limit, or “scale”, the redemption payouts is the latest sign of pressure emerging in the country’s unlisted property funds sector, as it comes to grips with the challenges that have already sent ructions through the broader commercial property market over the past 18 months.

The Perth Clinic in West Perth, one of the assets in Centuria’s unlisted healthcare fund. 

Within the space of a few weeks, a $2.5 billion unlisted fund run by Charter Hall informed its investors it would need to satisfy their redemption requests through staggered payments over time as it weathers a choppy commercial property market.

As well, MA Financial has put withdrawals from its $1.5 billion unlisted Redcape hotels fund on pause until at least the end of the year. Another Centuria-run single-asset property has stopped distributions to its investors this financial year.

The disruption has now embroiled in two more funds on the Centuria platform, both of them run as open-ended funds that typically offer their investors regular withdrawal periods.

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The Centuria Healthcare Property Fund (CHPF) operates a $530 million, 23-asset portfolio of short-stay hospitals, medical centres, specialist medical facilities and other healthcare property.

The fund has told its investors that it received withdrawal requests in excess of the redemption cap of $10 million per annum for the June quarter.

“In these circumstances, when withdrawal requests exceed the cap, the manager will scale back requests on a pro rata basis,” it said.

“As a result of the redemption requests, the quarterly cap has been met and the quarterly withdrawal facility has been scaled by 89.9 per cent for the June 2023 quarter.”

The scaling back on payouts in the CHPF fund effectively means an investor would get just over 10 per cent of what they had requested.

Requests that are not satisfied during the quarter roll over to the next quarter. They are not given priority but simply join the next pool of withdrawal requests.

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A second fund, the Centuria Diversified Property Fund (CDPF) – it has a $241 million portfolio invested across direct property, other Centuria unlisted funds, A-REITs and cash – has also scaled its June quarter redemption offering by 84 per cent. The fund has a liquidity cap of $1.5 million.

Both funds are still paying distributions. Over the 2023 financial year, the diversified fund received redemption requests equating to 9.3 per cent of its units, while the healthcare fund had requests for 10 per cent. Redemptions were met for 48 per cent of CDPF requests and 32 per cent for CHPF requests.

Taking a broader view of the unlisted funds sector, veteran analyst Dugald Higgins, head of responsible investment at Zenith Investment Partners, said liquidity squeezes were to be expected from time to time and could be handled by experienced managers.

“It is perfectly to be expected that during times of market turmoil, sometime those funds that are less liquid are not going to be able to get everybody out at the same time. That should be expected, not unexpected,” he said.

“Every asset class has tough periods. We all know this, although it can be tempting to get caught up in the heat of the moment. The takeaway is that this is not the time to panic. It is not the GFC, based on what we know right now.”

Nick Lenaghan edits the property section, which covers all aspects, from residential real estate and housing and construction to commercial property – office, retail, industrial – and major ASX-listed developers and real estate investment trusts. Connect with Nick on Twitter. Email Nick at [email protected]

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