Centuria Capital No. 2 Fund (Centuria) is a 100% owned subsidiary of Centuria Capital Group (CNI), an ASX-listed specialist investment manager with $7.3 billion in funds under management ($6.4bn in property) and a 37-year track-record. The business has two key areas of focus; Centuria Investment Bonds which offers investment products to clients and Centuria Property Funds which specialises in listed and unlisted property investments.
The issuer holds strategic equity investments in a number of listed and unlisted property investments divided amongst the following sectors:
Office Investments $2.1bn, Fixed Term Funds$1.8bn, Investment Bonds $0.9bn,
Industrial Property $1.6bn, Diversified property $0.2 and Healthcare Real Estate $0.7bn.
The primary assets of the issuer comprise holdings in ASX-listed entities and unlisted property syndicates. As of 31 March 2020, secured debt to total tangible assets stood at 28.3%.
Centuria currently has AUD90m of senior secured debt outstanding maturing in April 2021 (subject to the Exchange Offer) and AUD80 m maturing in April 2023.
Centuria is guaranteed by Centuria Group an ASX-listed specialist investment manager with AUD7.3bn in funds under management at the end of December 2019.
The notes have the benefit of a negative pledge and certain financial covenants as described in the information memoranda that sure up the position of bondholders within the Centuria Group capital structure.
Centuria Group is subject to the prevailing property market conditions. The ongoing value of properties held by funds managed may fluctuate due to a number of factors including rental levels, occupancy assumptions, vacancy periods, rental incomes and capitalization rates, all of which may change for a variety of reasons. The property assets managed by Centuria Group are, by their nature, illiquid investments. However, given the debt-to-assets ratio of 29%, bondholders need not be overly concerned about the asset backing behind the bonds until there is a 30% – 40% decline in the price of commercial office assets
The two risks of consequence are rental revenue reductions and adverse revaluations on property. Mitigating these risks is the strong tenant base with 25% of Centuria’s Office portfolio income being generated from government tenants and a further 50% being from listed or multinational corporations. Over 50% of Centuria’s Industrial income is derived from consumer staple production and distribution and pharmaceutic production and distribution related entities. The security for the note holders principally consists of residual equity stakes, ranking behind secured debt in underlying funds which has strengthened as the asset base of Centuria’s funds have increased.