Centuria Property Funds has supported ASIC’s initiative to improve disclosure in the unlisted property sector with the property group leading the industry in implementing internal benchmarks to protect the rights of its investors.
The ASIC Consultation Paper 163: Unlisted Property Schemes sets out eight benchmarks to improve the level, comparability and consistency of disclosure for retail investors in unlisted property.
In providing feedback on each of these benchmarks in its submission to ASIC, Centuria noted that it had already identified and instituted a series of initiatives to improve investor understanding and rights.
“We welcome ASIC’s initiative to develop benchmarks that will hopefully become an industry wide norm,” Centuria Property Funds CEO Jason Huljich said. “We have led the way having already implemented what we regard as best practice benchmarks by which our retail investors can measure our performance.”
Centuria has now implemented these internal benchmarks across all of its new funds along with those benchmarks that improve the way in which we disclose and communicate with existing investors. These benchmarks are:
- Gearing: Financial gearing levels, and specific risks associated with the level of gearing, are set for each fund and disclosed in each PDS. Gearing is actively monitored and managed and, most importantly, investors are updated on gearing levels and debt covenant compliance quarterly.
- Income: Specific risks to regular income distributions are disclosed in each PDS and cash flows are actively managed and monitored to identify any changes to distribution expectations as early as possible. Investors are updated on distribution expectations quarterly.
- Liquidity: For fixed term trusts, the initial term must be defined and disclosed; the trust should provide for majority unit holder vote in favour of continuing a first term beyond the initial term and a unanimous vote required in favour of continuing for a second term.
- For open ended property trusts, while it is important that investors view such trusts as illiquid investments, they also shouldn’t be locked into such investments for unreasonable periods of time. Accordingly, a strategy to provide liquidity at specified times must be defined along with the risks to this strategy. Investors must be updated on this facility quarterly.
- Related party transactions: Responsible entities should maintain and apply written policies on related party transactions and conflict management. The existence of material related party transactions or engagements must be disclosed along with commentary on why they are in the interests of investors.
Centuria has also implemented a fifth benchmark on Investor Rights. The industry-leading campaign, supported by the peak industry body, the Property Funds Association of Australia, introduced a series of initiatives including: improving voting rights of investors; setting hurdle rates before performance fees are payable; eliminating ‘poison pill’ provisions; improved communication and transparency; and clarifying liquidity provisions for investors.
“Investors are at the centre of everything we do as a property funds manager,” Mr Huljich said. “Our investor rights initiative is aimed improving outcomes for our investor base through greater transparency and increasing the control an investor has over these outcomes.”
“The current market environment offers great opportunities for retail investors in unlisted property and we hope consistent and enforceable benchmarks will help retail investors confidently take advantage of these opportunities.”
Following the consultation period, ASIC are expected to release proposed disclosure benchmarks before the end of the year.