Investors should have more rights in unlisted property
Poor management among unlisted property funds needs to be addressed in order for the sector to repair its image problem, according to Centuria Property Funds.
In particular excessive and unfair fees, lack of investor control over even the responsible entity, ‘poison-pill’ provisions and poor governance all need to be addressed, according to Centuria chief executive Jason Huljich.
If these problems aren’t addressed advisers and investors may miss out on current pockets of genuine opportunity in commercial property as well as benefits such as steady returns, low volatility and genuine diversification. These are particularly appealing in the current environment of low equity growth, according to Centuria.
Centuria has announced that to address these issues it has launched a major investor rights initiative that includes four core amendments to management practice for its new funds, and is calling on other managers to do likewise.
Included in the initiative is a reduction in the number of votes required to change the responsible entity from 50 to 35 per cent, allowing for that fact that many investors don’t vote. At least 50 per cent of actual voting units are still required to support a change for it to be effective.
The fee structures have been changed in a way that Centuria said further aligns interest between manager and investor. A performance fee will be charged only when there is a minimum 10 per cent internal rate of return after all costs have been recovered.
So-called ‘poison pill’ provisions requiring the relevant fund to pay the responsible entity even if they are removed by a vote before the fund’s conclusion have been removed. The manager has also attempted to improve transparency around liquidity by requiring a 75 per cent majority vote to extend a fund past five to six years, and a unanimous vote to extend it past seven to eight years, Centuria stated.
“Once practices have been changed to ensure that investor rights are at the centre of the management model, we believe that the sector will be able to deliver investors the full degree of its considerable potential,” Huljich said.
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